Many remodelers are actually managing three independent “businesses” or processes simultaneously: sales, design, and construction
If one of these runs slower than the rest, a bottleneck occurs, causing a variety of problems. Delays, excess work in process (WIP), and lost profitability are typical. Many remodelers get busy with day-to-day issues and lose sight of the fact that their capacity to produce is limited by that bottleneck. If a company could somehow eliminate bottlenecks and sell, design, and produce projects in half the time, its capacity would double. A 50% reduction may be unrealistic, but even 10% has an enormous impact on the bottom line.
Bottlenecks cause excess WIP to build up. Depending on the size of the company, the WIP could be worth millions of dollars. Someone has to pay for that WIP and it’s probably not the customer. And remember the old adage, “Time kills deals.” The longer it takes to process a project, the more you test fate and risk some unforeseen circumstance that kills it (illness, family event, stock market, global conflict, change in employment, etc.).
Bottlenecks Are Easy to Spot
A bottleneck occurs where the project is getting stalled. In sales, it could be when customers take forever to sign an agreement. In design, it might occur when we let the customer consider too many choices or redo different designs. Long lead times on certain materials or construction errors can cause bottlenecks in production.
Follow the Bottleneck
Eli Goldratt in his book The Goal explains that managers should place their attention on eliminating bottlenecks. Once that bottleneck is addressed a new one will emerge. “Follow the bottleneck” is great management advice for remodelers. Each time a bottleneck is removed, the company’s capacity increases and a new, smaller bottleneck will be revealed. Every company has a bottleneck somewhere. The key is to locate it and let the next one reveal itself. There is little return when investing resources into departments that are not the current bottleneck.
The Importance of Forecasting
Forecasting is another useful management tool to help prevent lumps in the workflow. Forecasting is truly a science, but one of the easier ways to do it is to track the actions that a prospect or customer takes. For instance, a prospect that visits your showroom is a slightly better prospect than one that refuses to come to visit you. And a prospect that signs a design agreement should have a very high probability of converting to construction. Each one of these actions is indicative of their likelihood to proceed and can be tracked and forecasted accordingly.
Manage the Handoff
We teach the sales department to share much more than the contract and scope in the handoff to design. They are also responsible for communicating the client’s priorities as well as estimated allowances. This information enables the designer to keep the client on budget and on time. Furthermore, any information on the customers’ personalities, communication preferences (email, text, phone), and family dynamics are all useful for the designer.
The handoff from design to production is crucial as well. Completely finished packages with clear instructions and product selections make the construction go much smoother. Resist the temptation to rush the design or start production prematurely. Every contractor I’ve worked with tells me they regret it later.
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