Did you know the average net profit for a truss component manufacturer (CM) owned by LBMs is 5-10 points lower than that of independents? Yet, according to one former LBM CEO of 17 lumberyards with two component manufacturing plants, his two CM plants made up only 10% of their sales while contributing about 30% of his net profits. He wished he had given the CM division more focus and resources.
Here are three often repeated mistakes by LBM-owned CMs that significantly contribute to lower-profit results.
Unit Measurement. Using board footage (BF) to gauge capacity and schedule production, or worse, for pricing, is a common mistake for roof truss manufacturers. Ask any production foreman whether they believe BF units are a reliable unit of measurement, and every one of them will tell you “no.”
For example, compare an order of AG trusses with 2×8 members with one assembly setup to a hip roof truss system with 2×4 members and many configurations. The bigger lumber AG truss group’s BF count would be through the roof compared to the other assembly’s constant setup runs of the smaller lumber hip system, although both worked at the same efficiency rate.
As a long-time practitioner of time and motion studies and roof truss lumber creation, I can state with certainty that there is no correlation between man-minutes efficiency and using BF units for roof truss manufacturing.
Now, if your company is using BF to price your projects, how do you think pricing will go? Just an aside, your competition loves the idea of you using Bf for pricing, and they know how to best you because of it. Maybe it’s time to update your company’s scheduling units to the far more reliable man-minutes, developed using time and motion practices of industrial engineers, which can be used for better pricing and an effective incentive program to enhance total output.
Capital Investment. Too many LBM-owned CMs are set up with the wrong type and mix of equipment. I cannot emphasize enough that one size does not fit all for truss manufacturing equipment.
There are companies spending millions on new equipment and getting less total output. How can this happen? When you focus on the wrong units of measurement, such as BF per man-minute, your company can be misled into investing in the wrong equipment.
Investment in the correct mix and type of truss equipment is no different than having different sizes and types of trucks to deliver the various products you offer to your customers. Why would you think one size fits all applies to roof truss equipment for the variety of work needing to be manufactured? Besides, new equipment, too many are blind to simple practices that can significantly enhance the total manufacturing output.
Communications. It is truly difficult to understand how some companies can still operate effectively using cell phones and emails as their primary means of communication. If your salespeople must call different department managers or other personnel within the departments to learn about any particular project information or status, they are wasting countless hours for all involved every week.
LBMs repeatedly try to implement their expensive POS system to communicate and manage all departments, such as installed sales, delivery, and component plants. Still, in the end, the salespeople must rely on phone calls and emails to manage their projects. There is always the promise that their expensive POS will work as promised in the very near future. However, some key features are usually missing, and more training needs to happen, meaning the promised benefits fail to materialize.
No matter the size of your company, whether it is multiple locations or a single location, all project information, status, and history of all written communications, such as emails linked with each project, should be instantly available via the web-browser on the salespeople’s cell phone without having to contact anyone else. No matter the department, such as delivery, component plant, doors, and specialty, all project information should be at the salesperson’s fingertips using any web browser.
There are very cost-effective plugin software solutions to bridge the gap between your accounting software and all departments to properly communicate and manage every project. You can reduce the workload, mistakes, and the time needed to process every project by installing a much better communication system to manage your projects.
There are two points critical for solving all these headaches. First, admit that what worked in the past was good, but it is time to evolve to a higher level. In other words, you must change and improve your current practices. Second, admit it is okay to ask for help and not allow price your pride to be an impenetrable obstacle. Having someone show your you how to improve your processes is not a sign of weakness, but confidence. So, if your company is making the three mistakes mentioned above, maybe it is time for your company to take that step and ask for assistance.
