What can we learn from the retail industry and apply to building homes?

What’s in a bar code?

We may not wonder any more why bar codes are on packaging as we shop at a store, but in reality this way of information tracking is relatively new.  In June of 1974, the first U.P.C. scanner was installed at a Marsh’s supermarket in Troy, Ohio. The first product to have a bar code included was a packet of Wrigley’s gum.

The process is relatively simple, in that an optical reader device scans an item and the associative data is then pass onto the logistical parties in order to keep the store shelves filled. However, having proper formatting of data and agreed upon industry standards took some 20+ years. What retailers soon discovered, is that the more integrated their supply chains were with information, the less errors were experienced, quicker fulfillment times of orders occurred, and less man-hours incurred per dollar of revenue was achieved. In other words, they developed a very highly efficient supply chain model with a single pull-through triggering mechanism, that being the bar code.

Single Trigger Event Pull-Through Model for Retailers

Consolidation of Retailers In The 1980′s

As we entered the second decade of bar code scanning and single trigger envent tracking, Walmart had revenues of 1 billion, and 276 outlets in 11 states. Today, Walmart has sales of $421 billion and 8,970 locations worldwide. This type of unprecidented growth came from geographical expansion, and at the expense of smaller retailers that were not able to track their sales as efficiently. Mass retailers such as Walgreens and Target, realized the power of information tracking and automating their processes with Electronic Data Exchanges (EDI) in order to conduct more transactions with less resources.  In fact, the reality is that we are able to sustain a standard of living much higher than pre-1980′s due to a highly mechanized means of delivering products to market.

Measuring Productivity of the Construction Industry*

The productivity of the construction industry, as measured by constant contract dollars of new construction work per hourly work hour, has gradually declined (with some modest exceptions) over the past 40 years at an average compound rate of -0.59%/year (see Figure 1). This is particularly alarming when compared to the increasing labor productivity in all non-farm industries, which have experienced an increasing productivity of 1.77%/year over the same time period. Over the past decade, this trend has slightly improved but the decline in construction labor productivity relative to the rest of the industry has continued.

This is a serious problem which indicates that over the past 40 years, construction projects have required significantly more field work hours per dollar of contract. In other words, the construction industry seriously lags other industries in developing and applying labor saving ideas and in finding ways to substitute equipment for labor. While there are a number of construction tasks that have been made more productive through the use of labor saving equipment, it is clear that, looking at the whole industry, there is a significant productivity problem. Why is this the case and what can be done about it? First, let’s review the productivity data shown in Figure 1.   (read more)

Figure 1. Labor productivity index for US construction industry and all non-farm industries from 1964 through 2003.

*From: Labor Productivity Declines in the Construction Industry: Causes and Remedies, Paul Teicholz, Ph.D. Professor (Research) Emeritus, Dept. of Civil and Environmental Engineering, Stanford University

Where is The Single Trigger Event (Bar Codes) for Home Building?

Now, the next question is where is my bar code for building the home? If that’s your question, then we’re beginning to make great strides into the next evolution of building homes. This would not have been possible if it were not for the advent of just a few key ingrediants:

• Internet
• Building Information Modeling (BIM)
• Application Programming Interface (API)
• Web Based Store Front

The model is relatively simple, in that all information for building the home must be linked to any and all retail areas for a home builder. This means that data that is incurred in the design process must be associated with the builder’s marketing materials on the web (ie store front). Think of it if you will, the home builder’s web site is their retail store and that any purchasing activities will need to be done in their store. Once a customer buys the product, then the needed data is then exported through API’s into the appropriate areas to fulfill the transaction.

This model does not mean that builders are  going to do away with sales agents, models, and other traditional areas of home building. What is does mean, is that the information that is developed from Building Information Modeling (BIM), can now be linked to web-based interfaces such as floor plan options, Sales CRM, builders suppliers, and others. The single trigger event pull-through strategy (ie bar code), allows for all transactions to be interconnected with each other only if the event occurs. So in doing so, information flows according to Figure 2.

Figure 2 – Purchase of a home and affiliated options triggered by customer, allows for pulling through of labor and materials with information created up stream in the design stage with BIM through the supply chain network.

In summary, we are in the midst of the most exciting times for home building in the  history of the United States. We are being confronted with razor thin profit margins in a time that productivity is at rock bottom. In order to deal with single digit profit margins and high Sales General and Administration (S G & A) costs, we must automate our processes. This can be done with coordination of both design and material specifications through BIM. Once the data is formatted, it can then be passed to a builder’s admin system for both material and labor pricing and scheduling to construct a home. Of course, this transaction gets triggered by the online selection process by a home owner either with a designer and/or sales agent. Once we begin to emulate other industry’s ways to improve productivity, then we’ll see better profit margins in the future of home building. The future is bright!

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