Sunday, November 3, 2013
Does Lean Apply to My Contracting Business?
One of the most fun applications of LEAN was working with many polymer flooring contractors. I learned first hand that the concepts are not only applicable, but appropriate. It wasn't too long ago where people used to say, "but we don't make cars". Then it was, "that might work in manufacturing, but it won't in the office". Fast forward to 2014 and The Toyota Production System (or Lean) has become a business strategy in healthcare, insurance companies, banking, etc. etc.
Application of this thinking to a contracting business was not all that common in 2007. We had seen pretty good results in our own company, so we decided to follow the "2nd P", "Develop your People and Partners". I interpreted "Partners" to mean our customers and suppliers. Flooring contractors were my customer.
Flooring contractors are an interesting breed of business people. When I say flooring contractors, I'm talking about contractors who install epoxy, urethane or methacrylate seamless floors onto concrete. They do this at schools, prisons, food processing plants, amusement parks, airplane hangars, residential and commercial garages, supermarkets, firehouses, etc. This stuff is installed all over the world every day (and night and holiday weekend). The typical size of a flooring business can be 5-8 people, or it can be 50-60. Their work comes from generating their own leads by word of mouth, doing small trade shows or some print advertising. Some of the most successful flooring contractors are very small businesses where the owner estimates, sells, orders materials, recruits and trains a crew, does the actual installation, invoices and chases people to get paid. It is a highly competitive business, with very low margins of error. Like other types of contractors, these folks are extremely hard working. When you sleep, they work. That's because people like to have their floors done during shut downs, or at night.
Let's take a look at the 8 wastes, and how they apply to a contracting business.
1. Defects-sometimes the difference between making and losing money is the "punch list". In fact, defects is often the reason the contractor doesn't get paid at all. Talk about the VITAL importance of standardized work. For example, epoxies are mixed in batches of a couple of gallons at a time. The mixer combines "resin" with "hardener", and the clock starts ticking, because once mixed, there is a pot life before the material gels, then cures hard. The first batch needs to be mixed and applied the exact same way as the last batch (which could be 10 or 12 hours later). Any mistakes? Punch list. Re-work. Scrap (don't get paid).
2. Overproduction-examples are mixing more resin and hardener than your crew can apply in the "pot life" or broadcasting more colored sand or colored flake than needed. The sand and flake is thrown into wet epoxy that is applied on the floor by walking on spiked shoes, and it results in a decorative blend of color in a floor. If you broadcast too much, you need to sweep up whatever doesn't stick and dispose of it.
3. Waiting-there is no "value added" waiting for the epoxy to "dry" or cure in order to apply the next coat. Dry times can take as long as 12-14 hours. That's when the crew heads to the hotel, then returns to the job when everything cures. Faster drying formulas have a shorter pot life, and require higher skill levels to install properly. Great training and good standardization minimizes expensive waiting.
4. Non-essential processing-deliver EXACTLY what your customer expects and pays for. All they want is the floor they signed up for, and don't really care how many hoops you have to go through to deliver it. Need to re-prep the concrete because you are worried about good adhesion? Your dime. Really good crews know this beforehand (they do a "test patch") and figure it into their estimate.
5. Transport-your customer won't pay extra because you moved materials x times y distance. Set up your mix station as close as possible to where the concrete is, and when possible, have materials delivered from your supplier to the job and not to your shop, where you have to unload, reload, inventory, etc.
6. Inventory-poor cash floor kills more businesses than low sales. One trap to avoid is volume discounts. It might sound like a good deal, but it can turn out to be a disaster if you find yourself with a warehouse full of obsolete inventory. Disposal costs can be as high as $500 per 55-gallon drum, not counting the square footage cost to store it in your warehouse. The discipline of Kanban/Supermarket thinking will help you maintain good cash flow.
7. Motion-again, your customer doesn't pay extra because your crew walks around. Doing 5S prevents crew members from constantly going to and searching through your trucks looking for tools, or even worse, having 3 guys spend an hour or more at Home Depot because they don't have an extension cord.
8. Un-used employee brainpower-examples are not involving the people who actually do the work in the estimating process. Another is not doing a post-mortem after the job is done to gain agreement on what went well, what didn't, etc. It is perfectly OK to "pay tuition" for mistakes once. You don't stay in business if you have to take the same "courses" over and over!
Lean thinking is a good business strategy whether you are a flooring contractor, an electrical contractor, a plumbing house, or a painter. If there are processes and a customer, it applies, and can yield higher profits via higher productivity ($ invoiced /hour worked). It very well could be the difference between making money and losing your shirt!