Cut Cycle Time and Cut Your Costs
Long cycle times are liabilities. They delay closings and stymie cash flow. They extend payments for labor, lot mortgages, and other costs. And, as delivery dates stretch like rubber bands, customers wonder if they’ll ever move in.
By Jill Tunick
Even if your projects come in on schedule, your cycle time could probably use a tune up. It’s a sure-fire way to help trim your hard and soft costs. “Most of the builders I’ve talked to tell me their cost is $150 a day for every day they don’t close a house,” says Dean Potter, director of quality programs for the NAHB Research Center in Upper Marlboro, Md. “That represents economic opportunity lost, too, because they could have used that staff time to build and sell more homes.”
It’s one thing to build quickly, but it’s another thing to build efficiently and effectively so that you don’t sacrifice quality for speed. “There are certain things you can do to reduce cycle time, but it will cost you money to maintain quality,” Potter says. Case in point, one of the home building companies he’s worked with installs the furnace as soon as they put the deck on the foundation. It costs more to run the furnace that early, but doing so allows drywall to cure in half the time it usually takes and none of the company’s homes have nail pops.
How can you tell when your cycle time needs improvement? “When you don’t have a plan; when you say ‘we build houses in four to five months,’ ” says Potter. “It’s harder for custom builders to pinpoint their exact cycle times because they homes they build vary so much, but production builders should know exactly how long it takes them to build a home.”
Systemization is the key to standardizing cycle time and maintaining the quality of the homes you build. In 1993, the NAHB Research Center produced a report called “Cycle Time Reduction in the Residential Construction Process” after studying six Atlanta home builders’ business systems and building practices. The report’s findings are still relevant today. Here are some pointers from the Research Center and from builders and industry consultants on reining in cycle time.
Establish a consistent work flow. “Even flow production is all about organizing your production so that you can bring down cycle time,” says Potter. Veridian Homes in Madison, Wis., slashed its cycle time to an astonishing 65 days by implementing that strategy. Starting and finishing a house each working day gives its trades a routine, dependable schedule. Previously, the company built homes in 75 to 80 days.
If your volume’s not large enough to warrant a new start every day, starting homes on certain days of the week (Mondays, for example) will make your production cycle more regular and will help tighten up trade contractors’ schedules.
 Remove bottlenecks. Troubleshoot your construction process and you won’t need safety nets for late pours, misplaced framing, unscheduled demo work, and the like. You’ll have fewer glitches, too.
“We did focus groups with our trades to find out how to do the job right the first time,” says Jeff Simon, vice president of operations at Veridian Homes. “We took out variables we’d put in for delays in the interest of better building practices.”
Make sure your sites are ready. If a trade contractor comes over for nothing, that’s called a dry run. “We’ve measured dry runs as high as 60 percent,” says Emma Shinn, a business consultant with the Lee Evans Group in Littleton, Colo. “That’s a killer for trades and they won’t show up on time.”
San Diego-based Hallmark Communities had that problem until Joe Lawn, director of construction and customer service, set up exacting site prep and clean up procedures. That move, and giving trades production schedules a month in advance, cut about 16 days from the company’s cycle time.
Share info upfront. “Know your song well before you start singing it,” Lawn says. “Otherwise, if you aim at nothing, you’re sure to hit it.” During pre-construction meetings, Hallmark’s trades go over the schedule, receive plot plans and cut sheets, and discuss what worked—and what didn’t—on plans they’ve built before. The trades are expected to scope out sites beforehand so they have all dimensions and other information they need to hit the ground running.
Document your process. You have written specs, right? Write down your production processes, too. Don’t rely on your memory. You may get lucky and produce a great home this time, but if you forget a step or forget to pass on some information to a superintendent on the next one, you won’t do it again. The next home will probably take longer, too.
Get trade contractors on board. “Trades often want you to keep your schedule as loose as possible so that they can fit you into their schedule,” Potter says. “They may add an extra day or two to the time it takes them to complete their tasks for ‘comfort.” But that ‘comfort’ doesn’t help your production schedule or improve construction quality.”
The Research Center found that the Atlanta builders who consistently met their scheduling targets did “systematic negotiations” with suppliers, vendors, and trade contractors to reduce time between deliveries, tasks, and other job site activities. The builders replaced those who weren’t willing to get on board.
For those who did, the builders scheduled sequential activities on each consecutive work day with the expectation that trade contractors would show up, do their installations, and complete them according to plan. No-shows were no longer tolerated. For the Atlanta builders, having a trade contractor in every house, every day, marked the first real step in reducing their cycle time.
To induce your trade contractors to help you out, explain what you want them to do (for example, if you’re doing even-flow production, ask them to commit to doing their tasks on certain days of the week or the month) and what’s in it for them. Cutting cycle time benefits trade contractors by providing them with a regular, dependable schedule, more work (since you’ll produce more homes more efficiently), and, as a result, more profitability.
Potter recommends making it part of your contractual agreement with a trade contractor complete tasks within a certain time period.
Don’t let customers dawdle over selections. Give them an inch, and they’ll take a month. Instead, write selection deadlines into your contract. If customers don’t pick out products by a certain time, do it for them.
Train your construction crews. Everyone may have different ideas about the way homes should be built. You need to train field workers in standard operations so they do things the way you want them done. Besides trimming cycle time, it’s a good quality assurance practice.
 Try an incentive program. All of the builders profiled in the 1993 Research Center report used bonus incentive programs tied to their superintendents’ achievement of target cycle times. The programs also considered construction quality assessed during periodic inspections.
Benchmark your company. Compare your production processes to those of other home builders. Do they deliver homes faster than you do? If so, what can you learn from them?
Look outside the industry, too. Studying Harley-Davidson’s “lean manufacturing” process gave the folks at Veridian Homes ideas for cutting their cycle time.
How do you know when you’ve achieved the “right” cycle time? There’s no magic number, because so much depends on your product and resources. However, when you complete homes sooner, your customers are happier, profits go up, and costs stay at reasonable levels, you’ll know you’ve got a good grip on cycle time.
Like business planning and customer relationship management, it’s something you should keep at constantly. “There is never a finish line for cycle time,” says Shinn. “You can always find ways of doing it better and faster.”
Jill Tunick is a consultant to NAHB’s Business Management Department. She can be reached at magenta729@aol.com.
NAHB offers several books to help you systematize your business and reduce cycle time:
- Ten Best Management Reports
- Building Quality: An Operations Manual for Home Builders
- Home Builder Contracts & Management Forms on Disk.
All are available from BuilderBooks.com. Call 1-800-223-2665 or go to www.builderbooks.com to order.
For more information about this item, please contact Natalie Holmes at 800-368-5242 x8201 or via e-mail at nholmes@nahb.com.
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