Evenflow production has transformed C.P. Morgan from an also-ran to Indianapolis's largest builder in eight years. That growth couldn't have happened without a solid IT effort.
With annual sales growing from 220 homes in 1994 to 2,200 homes in 2002, Indianapolis-based C.P. Morgan is a poster child for how effective information systems can transform an average company into a superstar. The building/contracting company achieved that phenomenal growth by embracing evenflow production, the discipline of starting and finishing the same number of homes each day, week or month. In an evenflow system, the schedule is king. The builder has to set specific goals for every crew—from foundation subs to finish carpenters—on every day of every month, and to make sure that everyone meets those goals. n Of course, evenflow is a business process, not a technology project. But C.P. Morgan has found out that successful implementation requires foolproof sales, production, and back-office systems.
Committing to Systems
The company got serious about production in 1994, after sales dropped from 400 to 220 homes in a single year. According to Bob Kehlor, vice president of operations, they faced a choice: downsize, or commit to growth. "At a weekend retreat, [then-president] Chuck Morgan made the decision to grow," recalls Kehlor, who was given three weeks to deliver a centralized scheduling system. He came back with a customized FoxPro system. "It allowed us to deliver an automated tool to manage our home production; however, it didn't fully support our vision of achieving a consistent and predictable workflow in the field," Kehlor says.
One key to C.P. Morgan's success is an ongoing commitment to improve its processes and its technologies. Getting these to work smoothly has taken some trial and error. The company has changed scheduling systems twice, from the original FoxPro to a custom Microsoft Access-based system, and then to a custom SQL database. (SQL is considered the most powerful database system available.)
The original system required C.P. Morgan's field supervisors to manually fax schedule updates each evening to the office, where they were entered into the system by hand. Daily schedules also had to be manually faxed to trade partners. The system did not support schedule adjustments, it was not integrated with the company's back-office, and it was very limited in its ability to analyze trade partner performance.
Kehlor notes the long road his technology team has traveled, saying, "Our current version of the scheduling system is fully integrated with our back office. We've fully automated the interface between the field and the corporate system, using handheld devices. Updates as well as schedule adjustments flow directly to the corporate system, and schedules are sent directly from the system to a fax server. Most important, however, is that the system delivers a true predictable and consistent production pace throughout all phases of construction that our trades can count on to be accurate."
The company's technology infrastructure also includes a high-speed cable network to connect sales and construction offices to the corporate systems, web-based online customer services that let buyers track their homes' construction, Pocket PCs used by field supervisors, and a pilot program of wireless tablet PCs for sales counselors.
These tools, and others, have helped company executives better manage data and business processes, letting them gradually increase daily home starts without sacrificing quality or efficiency. "When we refocused the company, our goal was to generate eight starts a day by 2007," recalls Dan Horner, who was the company's vice president of sales and marketing until being named company president on October 1, 2003. "We reached 10 home starts a day in 2003."
Working With Subs
C.P. Morgan's scheduling software—the IT backbone of its evenflow system—has been crucial to maintaining a consistent 43-day construction schedule for each home. Meeting that schedule requires cooperation from trade partners, and getting that cooperation has been a sometimes-bumpy process. When the company committed to evenflow, it immediately began requiring each trade partner to agree to specific start and completion dates for its piece of every home. It was a drastic change. "In the mid 1990s, they were operating just like everyone else in town," recalls Bill Trent, owner of Plainfield, Indiana-based Trent Electric. "Then they had to sell their contractors on a new way of doing things." Although the promise of steady business kept Trent onboard, he says that some partners didn't want to be subject to the new demands. Several dropped out.
Those who stayed seem glad that they did. Not only is the work predictable, but so are the working conditions. "Before they instituted their scheduling system, they were like every other builder," recalls Chris Riesen, president of Ace Interiors, which provides interior trim, doors, lock sets and other items. "You could show up at a home site at a pre-scheduled time and not be able to get into the house because someone was laying concrete steps or some other reason."
Riesen says that C.P. Morgan's new production system has brought a dramatic change. "Now deliveries are like clockwork," he said. "I have a small business with 20 employees, and we have 99.99% accuracy in delivery to C.P. Morgan. I would not have been able to meet their growth needs if it wasn't for the scheduling system and other technology systems they have installed," he says.
Kehlor says this proves the power of good processes backed by solid technology. "You commonly hear how the trades are unreliable," he says. "It is not true. The traditional building system is inefficient. If the system is reliable, the trades can be efficient."
At this point, C.P. Morgan makes no technology demands of its trade partners—all they need is a fax machine. The company uses Zetafax server software to fax purchase orders directly to trade partners from its Trueline back-office software. But given the company's policy of continuous process improvement, that will likely change. In fact the long-term goal is to electronically integrate partners into the system. It recently took the first step by offering trade partners the option of receiving purchase orders (PO's) via email.
Paul Lelenko, president of Vinyl Craft Flooring, Indianapolis, says his firm participated in the pilot development of the email purchase order delivery. He says it has saved time and money. "Prior to the emailing of PO's, everything was done by fax, and that tied up our fax machine for an hour every day," Lelenko says. "I had one staff member in charge of waiting for the transmissions and organizing them. It's quicker and more efficient by email," he says.
Trent Electric is also migrating toward email. "C.P. Morgan is the only builder in the area distributing PO's by email," Trent says. "We still receive 60 to 80 faxes a day from them, but that number is decreasing as we move to accept all of our PO's by email."
Improving Quality Control
Technology is also helping improve quality. Trent Electric has been piloting a quality control system for C.P. Morgan for the last 18 months. It started with a series of paper checklists that Trent's crew chiefs used before leaving each home. "C.P. Morgan asked us if they could look at those checklists," Trent says. What he didn't realize is that C.P. Morgan would end up automating the checklists and giving them to its field supervisors.
Those supervisors recently switched from the Palm Pilots they were using to track schedules, to Pocket PCs. Because the Pocket PCs use a form of Microsoft Windows, the company was able to put Trent's checklists in an automated format using an Access database. Now C.P. Morgan field supervisors can go through each home and electronically record the completion status of all electrical elements. "We can now see, by type, every defect we find during construction," Kehlor says.
The feedback has helped Trent improve its quality scores. By keeping track of every missing wall plate, bad switch, or improperly installed outlet, C.P. Morgan is able to provide Trent with a summary report of defects, along with the number of times specific crews go back to a house to correct problems or bring missing items.
Trent Electric has been working with C.P. Morgan on this pilot quality control initiative for more than 12 months. Bill Trent says, "We started to knock off one set of problems at a time, aiming at the goal of never having to go back to a home. We have a set figure we know it costs us to go back to a house. Every time we don't go back, money is saved for everyone."
Managing the Buyer Experience
C.P. Morgan is also improving the buyer experience at their New Home Showroom (NHS). The NHS, which is promoted as the largest builder showroom east of the Mississippi, offers buyers a variety of option choices, but Horner calls managing those choices and getting them delivered at the right times "a complex and challenging task."
To help make the NHS experience less challenging, C.P. Morgan started using online options selection this year. "We created a custom online options selection system written in .NET," Kehlor says. "We were unable to find a licensed product that could be modified to meet our needs or would integrate easily with our back-office (Trueline) system. This Virtual New Home Showroom (VNHS) will allow customers to view an online catalog of options and record their selections in the comfort of their own homes." This lets them go online and browse options before they come to the NHS for final selections.
Design consultants just began a test of wireless tablet PCs. They can carry the tablet PCs to different parts of the showroom, record homebuyer choices for everything from lighting fixtures to flooring right on the spot, and print those choices before the buyer leaves the showroom. All choices flow to the Trueline system. The information will also be used to help organize the layout of the showroom. "Because we don't see our showroom as a profit center, but as a choice center, we thoroughly analyze what is being selected in the showroom," Horner says. So if the company sees that only a small percentage of buyers are upgrading handrails, they can move those handrails to the back of the showroom.
The company also uses third-party survey firms to discern national trends in demand, including things such as whether people are opting for bigger kitchens, more storage, or whatever. The information is used to determine which standard features and options the company can offer while still building "more square feet for less money" than its competitors.
In order to mine the explosion of data it's collecting, C.P. Morgan is in the midst of implementing a more-than-$300,000 data warehouse solution. It consists of Crystal Enterprise software, a report writer that can extract information from various databases, running on an SQL Server platform. It will help managers better understand everything from sales numbers to defect trends, and identify areas for improvement.
The database will also help the company keep sales on schedule. After all, for an evenflow system to work, the builder has to sell a consistent number of homes each month. If sales lag in a community, the data warehouse will make it easier to identify who is buying homes and what features they want, and to adjust marketing and sales efforts accordingly.
Smart use of information has put C.P. Morgan in such a strong position that company managers say it's time to expand. The next goal is to establish a beachhead in a new market within 3 to 5 years. "We've studied how businesses operate in multiple markets, using various business models," says Horner. "We identified some of the key issues that prevent builders from succeeding." One thing they found was that a builder's back-office system could make or break it. "We believe having the right systems in place up front will help ensure our success when we move into a new market." Indeed, if the last 9 years are any indication, competitors in that new market will be confronted with a well-oiled homebuilding team wielding an arsenal of highly effective technology tools.
ROI
- Scheduling and quality control software has made the
company more efficient, lowered home prices, and decreased callbacks.
- The company is gradually making trade partners an integral part of the system, and making them more efficient in the process.
Building Software
The problem with off-the-shelf software is that it often demands that users adjust their business processes. For C.P. Morgan, that was unacceptable. "Compromising on the business model is not an option," says vice president of operations Bob Kehlor, "so we have been forced to develop many of our own applications."
The company tried outsourcing software development, but found it more cost-effective to do it in-house. "We typically do programming in-house or closely manage the efforts of a software consultant with our own project manager," says Kehlor.
One key exception is the company's Trueline back-office software. According to Kehlor, the company chose Trueline for its open database architecture, which allows access to the data as well as the ability to integrate with other custom applications. They also appreciated the vendor's willingness to make custom changes to the product, such as integrating with C.P. Morgan's proprietary scheduling module.
Unfortunately, C.P. Morgan was unable to find a sales software package that could be easily customized to meet company needs, and is in the final stages of implementing a program developed in-house. "We've been searching for four years for a sales program that will meet our needs, but nothing we looked at would work at the level we wanted," Kehlor says. "After multiple failed pilots, we came to the conclusion last year that the only way we were going to get the functionality we needed was to write the application ourselves." President Dan Horner adds, "Software development has evolved to the point where it is significantly less expensive to get the functionality we need by writing it ourselves."
When fully implemented, the sales system will allow real-time views of prospect and buyer activity, task management, campaign management, online contract generation and approval, reports on sales counselor activity, real-time lot availability, and full integration with Trueline. The ultimate goal is to be paperless from point-of-sale to warranty maintenance, including establishing electronic customer signatures, according to Horner.
To accommodate the company's growing technology needs, the IT department has grown from 1 person in 1997, to 7 people in 2000, to a current staff of 15 associates. "The increase in IT staff is for a variety of reasons, not just the in-house programming," says Kehlor "We had no connection to our sales or construction offices until 2001, so the sophistication of the network has increased dramatically. In addition, the user support team has grown to meet the needs generated by the increased number of desktops, the introduction of handheld devices to our field staff, and overall general maintenance and education needs."
Despite the number of technology advancements, the company has worked to keep its IT budget as efficient as its construction processes. "Our budget as a percent of sales has not changed," Kehlor says.
Horner adds, "We have a 3-to-5-year picture of what we want to achieve with our investments. We establish priorities for those investments and we have rigorous standards for what we want to achieve with our investments. We do not invest in technology because we are in love with technology. Rather, we invest in technology where it can empower the organization to achieve our brand promise."
Michael Bordenaro is a Chicago-based writer.