Despite all the turmoil of the skyrocketing lumber prices, pandemic, and elections, the building industry is doing very well. Hopefully, your company is doing very well and your attention is now focusing on potential growth for 2021. Most companies are looking for modest tweaks to their current practices and some investment in new equipment. Quite frankly, there is a lot of money being invested in new equipment and not enough emphasis on other areas for improvement.
When looking for potential growth opportunities, it can be helpful to categorize the areas of your business into four main groups:
- People
- Communications
- Pricing
- Equipment
Clients often ask where they should focus to generate the best return on investment. My response: All of them. Rarely is it ever one area that needs refinement and improvement. And quite frankly, the areas that you think are doing just fine may be the most in need of refinement.
People. What most do not realize is that your managing, training, and staffing can be vastly improved upon and simplified using lean principles. Too many companies are making the implementation of the lean tenets too intangible and too complex for everyday use. Lean principles can and should be used for proper managing, training, and staffing of company personnel.
For example, the training of the needed skills for any area for the vast majority of companies is far too slow with information that overwhelms most new hires. If a company wants to shorten or flatten the learning curve drastically, there are many tools in the lean practices toolbox that can have an almost immediate positive effect. Most management teams are poorly taught how to use lean tools or understand that the lean tools are far more than just for the manufacturing areas. I covered areas for improvement concerning personnel in a recent article for ProSales.
Communication. So many companies are using outdated methods to communicate—such as verbal communication and emails—that they have no idea how much time (person-hours) and project errors are being created. For most companies, the next communication level is utilizing an MRP or other POS software offered by the accounting software. The component manufacturers will most often use the truss plate vendor’s management software for some project scheduling and additional information sharing via the web. However, no matter the promises made by these software vendors, the sales team and every other department is still reliant on making phone calls or confirming a slow email response for critical need-it-right-now project information.
It doesn’t have to be this way. I have witnessed a productivity gain of greater than 10% for sales, design, and admin by creating a far superior communication system that links every department with accounting. In other words, a better idea is to use a hub and spoke-type system that, no matter which department accesses it, has all project information available via cell phone or computer using a web browser. I provide further details in two recent articles: “Small Investments Can Garner Huge Gains for Productivity for Your Sales Team” and “Mistake Proofing the Communication Quote and Order Process.”
Pricing. I have witnessed many companies gaining more than three points to net profit simply by changing to better pricing methods than the cost markup used widely in the building industry. Updating the pricing method can be done without risking current or future sales. It can be proven while using current markup methods. Once implemented, it will increase the daily total margin dollars, while reducing the total labor dollars. I provide further information on pricing method improvements in a recent article on ProSales.
Equipment. New equipment purchases are without a doubt the primary focus for most component manufacturer executives at this time of the year. It seems all too easy to take large sums of money and invest in new equipment to increase total output. However, too many companies underutilize their existing equipment and buy into the vendor’s sales pitch for new equipment to solve their capacity constraints.
I have yet to perform a consultation where the current company’s equipment could not be improved for total output while also improving quality. For the vast majority of markets, a reasonable recommendation on equipment needs is using a blend of equipment types to obtain the best results. Beware of the one-size-fits-all approach offered by any vendor. If a vendor is promising that one type of equipment setup is best for all conditions, vastly reduces labor, and magically improves total profits, you’re just maybe not getting the best advisement. I cover more on this topic in two articles: “Is a Linear Saw Pair with Each Roof Truss Assembly Table a Magic Cure for the Best Lean System?” and “Strong Cautionary Words for a Popular Linear Saw System Investment.”
If you truly want to maximize your company’s possible gains, then continuous improvement in all areas of your operations is what is needed. Believe it or not, throwing money at a problem does not always solve it. Sometimes, it is simply refining how it is done with better processes.
