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 now your attention is focusing on potential growth for 2021. Most companies are looking for modest tweaks to their current practices and some investment in new equipment. Well, 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:
- 1. People
- 2. Communications
- 3. Pricing
- 4. Equipment
Client, “Todd, what area do you think we should focus on to garner the best ROI?” TDC, “All of them. Rarely is it ever one area that needs refinement and improvement. And quite frankly, the areas that you may 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. And absolutely yes, 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. For more information about potential improvement concerning personnel, see my recent articles, “Basic Principles for Effective Employee Attraction and Retention” and “Better Profits with Effective Employee Retention and Growth.”
Communications – So many companies are using outdated methods to communicate that they have no idea how much time (person-hours) and project errors that are being created, because they are still using verbal communications and emails as their primary means to communicate. 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 are still reliant on making phone calls or confirming a slow email response for critical need-it-right-now project information. It does not have to be this way. TDC has 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, all project information is accessible via a cellphone or a computer using a web browser. For more details on this topic, see my articles, “Small Investments Can Garner Huge Gains for Productivity for Your Sales Team” and “Mistake Proofing the Communication Quote and Order Process.”
Pricing – TDC has witnessed many companies gaining more than 3 points to net profit by merely changing to better pricing methods than the cost markup so widely used 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. For more information about improving your pricing methods, see my article, “Change Your Pricing Formula for 2018 and Make More Net Profit.”
Equipment – Without a doubt, new equipment purchases are the primary focus for most component manufacturer executives 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. TDC has 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 to use 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, just maybe you are not getting the best advisement. See my article, “Vendor Loyalty and Sales Pitch Can Lead You Astray,” for more about this topic.
If you truly want to maximize your company’s possible gains, then continuous improvement in all areas of your operation is what is needed. Believe it all not, throwing money at it does not always solve the problem. Sometimes it is simply refining how it is done with better processes.
Whether it is employee issues or manufacturing improvement, change that usually takes months and years can be accomplished in weeks and months with TDC’s assistance. TDC is your best source for learning about proven and practical lean manufacturing best practices combined with industrial engineering principles to keep your company at the leading edge of competitiveness. The implementation of the suggestions produces an average gain of three to six points in net profits. With over 30 years of experience, TDC has proven real-world expertise that goes far beyond what many expect. Included in TDC’s services are proven wood truss labor time standards (Man-minutes, R.E. or S.U.) that have been refined over almost two decades and used in over one hundred different companies. Many save tens of thousands of dollars by trusting TDC for unbiased vendor and equipment recommendations because TDC does not receive referral fees from any equipment or plate vendors, which are formed only by customer experiences. Please don’t take my word about TDC’s services, though. Read the public testimonials many current and past clients with decades of expertise and experience have been willing to give: https://todd-drummond.com/testimonials/.
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