In the past three years my associates and I have worked with more than 40 builders and over 900 suppliers and trades conducting “Lean Kaizen” sessions to reduce costs by finding and eliminating waste in product and process. We have had many revelations on the way to identifying over $100 million in waste and have truly seen the good, the bad, and the ugly. There is
one category of discoveries though, that I simply call the “headscratchers.” That classification is for things that are so obvious, so endemic, and such continual money wasters that we just can’t figure why no one is paying attention. If I held a competition among our staff members about which discovery has been the most puzzling of all, there would be plenty of nominations from home builders. Mine, however, would be about the suppliers and trades and what they are not paying attention to that is killing them. I’ll explain with an example of a supplier who does it right.
We were about half way through our “LeanBlitz” week with a large, very successful private builder when it was the lumber company’s turn to participate. Leading the supplier presentation was a young man in charge of trim. His company worked with more than 50 builders in the large metro area. He announced that the builder could save $800 per house, which had the 10-person team from the builder sit straight up in their seats. He quickly ran through $300 of easy stuff, including the elimination of $10.40 per foot flex-trim that was on the inside of a closet under the stairs. No customer would ever know or care. After finishing his product ideas he moved on to the hard stuff—process. He told the builder team that his firm averaged seven trips per unit for trim delivery. Right now most of you are shaking your head and chuckling, thinking no way could it be that high. This was exactly the response of the heads of construction and purchasing. Their skepticism vanished quickly, however, when the lumber company manager opened a folder and passed around copies of a report listing in full detail each delivery trip by load number, truck, driver, site code, lot number, plan name, superintendent, time depart yard, time arrive on site, delivery completion time, and if not able to deliver, return time.
The data was inarguable, and he went on to explain that he had at least two similar home builders with which they averaged just over two deliveries per site. Then he presented a challenge. The lumber company’s trip cost calculations showed a very conservative cost of $125 per wasted trip, and it proposed a goal of reducing that to three trips over the next six months. It would not be easy, but if achieved, the lumber company would drop its package price to the builder by $500 per unit. The builder team members’ eyes got big, and they resolved to get to work.
So what is the big headscratcher? As noted in my May column, “The $10 Billion Secret,” every supplier and trade is ruthlessly impacted by wasted trips. Along with plans and specification issues, wasted trips are the biggest robbers of margins for suppliers and trades, and the major source of controllable costs for home builders. Thus wouldn’t we expect that suppliers and trades, as well as builders, would track these wasted, unnecessary, or avoidable trips that we have documented cost an average of $10,000 per house? In the past 20 years we have had thousands of suppliers and trades in workshops, and those that track this critical business factor with any level of detail number less than 1 percent. And even among the most progressive builders, I have yet to find a single one that tracks this data. Consider the implications. Consider the costs. Consider the lost profit for all. Are you scratching your own head as well?