Fortune Favors the Bold

Listening to my favorite podcasters review the Super Bowl, the guys kept returning to the theme, "Fortune favors the bold." Certainly New Orleans was more bold; first by going for it on fourth and one at the goal line and later by starting the second half with an onside kick.

Apparently the expression goes back a long way; it's been part of recorded history for more than 2200 years. My guess is that goes back a lot farther than that. By "fortune" I think we mean the luck that seems to permeate so much of our lives. And luck does come into play when two very equally matched opponents compete with each other. Both New Orleans and Indianapolis had  top-notch quarterbacks, a host of excellent receivers, good running backs, and opportunistic defenses. When both teams are that good and execute so well the outcome of the game can often come down to a "lucky" break.

As component manufacturers we compete with companies that have many of the same competencies we do. They build a good truss, they take care of customers, they have competent designers. Like a good football team, we can work on every department within our company make it as good as it can be; we’re never done with that process. Still, there may be times that the boldness of our decisions as companies, as departments, and as individuals will make the difference between winning and losing.

By definition, acting boldly requires a certain amount of discomfort. Will it work? What will they say? Doubts can creep in, causing us to keep doing what we've always been doing. Bold action is by no means the same as irresponsible action. Sean Payton, the coach of the New Orleans Saints, did a lot of thinking and preparation prior to taking the risks that he did during the Super Bowl. His study of his own team and the Indianapolis Colts told him that without taking some risks his chance of winning the game were perhaps no more than 50-50.

So what steps should we take? It might mean talking with our customers in a way that we have never done in the past. It may mean revealing more about ourselves, our businesses, and our objectives. Who knows? Perhaps our customers (or at least some of them) will respond in kind. In the current environment, many people are looking for opportunities to work more closely, and share some of their problems.

It may mean attempting to measure designer productivity for the first time. We universally recognize the value in measuring our production totals - and even comparing one production line with another. But when it comes to designers, many of us are reluctant to ‘put numbers’ to their contribution. Evaluating a table by board feet produced alone (without any understanding of the type of work that was done) would be misleading at best. Similarly with designers, using just one yardstick to measure designer productivity could well lead to unintended and undesirable results. A good manager knows the difference between measuring and judging. Measurements are done to help you understand, not be misconstrued as understanding. In highly technical work there are a lot of variables; a manager mixes all of the measurements together with personal observations to come up with the overall evaluation. The fact that there is the potential to misuse measurements is no reason to not measure.

It may mean seeking out an alliance with another component manufacturer, perhaps on the edge of your current delivery area, or perhaps on the other side of the country. It may mean figuring out a way to completely eliminate all paper from your production floor. It might mean challenging yourself to find a way to produce the same amount you currently do - with three less people. How about freshening up the company logo?

Consider acting boldly. Think where the Saints would be without it.

The World Where ‘Eck You A’ Reigns Supreme

Scholars tell us that coins began to be used between 400 and 600 B.C. They were a big hit. Bartering is great, but it has its limits. Coins soon became a widely accepted, universal unit of exchange. Now imagine a world where all component manufacturers have a unit of exchange that is just as valuable as coins are. Because this unit of exchange is completely accepted by everyone, manufacturers can easily compare the production efficiency with each other. Everyone estimates their jobs using the same method. Getting a quote from another manufacturer to build trusses for you is a snap, because you both measure jobs in exactly same way. Oh, and by the way, this is a real place. It is called, ‘Australia.’

Down Under

It’s really true. In Australia, virtually all manufacturers have “bought in” to the concept of converting all forms of work into EquA’s, or “equivalent finks.” Getting deeply into EquA’s can get complicated, but the basic idea is simple. Convert all work into the single unit (our “coin.”) This is done by arbitrarily declaring that “a standard fink truss with one splice takes 1 EquA to build.” The next step is to come up with a method to determine how many EquA’s it takes to set up (as opposed to build) that truss. From there, we have to come up with an easy way to determine the EquA for all truss types. In Australia, this is mostly done through the number of joints, but, as I said, it can get a little complicated. Attached is a PDF describing the method in some detail, if you are interested. My purpose here is not to explain the method, but rather to describe the benefits that the Australians enjoy because they all use the same method to measure work.

The Point

I had heard about this method of estimating before my trip to Australia in 2006. From what I had heard before that trip, the Aussies were a bit ‘EquA obsessed.’ Why would this method be better any other? And how could it really be true that everyone used the same method? During my visit to MiTek Australia I had a chance to talk at length to Andrew Scane, one of the MiTek sales and support guys there. He told me that the small size of Australia (population equal to Michigan + Ohio) had helped. Also, MiTek had promoted the use of this method, and supported in throughout its software suite there.

I asked more questions. I wanted to know if the EquA method was accurate. Was 23 commons really the same as 18.5 cathedrals? At some point, I realized that that wasn’t the point. Once you accept EquA’s as your unit of measure, once you just decide to trust it (like we do dollar bills,) a whole world opens up to you. Once you begin to do everything in EquA’s – estimate labor, calculate production capacity, price jobs, determine overhead, set profit goals, you are now living in a world that is much easier to comprehend and manage.

One Example – The Labor Rate

Once you can measure your work in EquA’s, you can determine plant’s capacity in terms of EquA’s. And once that has been done, you can measure your productivity by combining your overhead and direct labor, and dividing by your plant’s EquA capacity. So if you find you capacity is about 300 EquA’s a day and your overhead and labor is about $4,500 per day, you know your (non-material) cost of production is $15 per EquA. How does that compare to your competition? In Australia, you can just ask, because everyone measures in the same way.

MiTek Australia has written considerable documentation on how to make sure you are accurately calculating overhead, as you can see in the attached document. They actually provide a software program called Profit Centre that allows you to step-by-step enter costs (like those tax-filing programs we sometimes use) and use those figures to really see your overhead per EquA. It really is cool stuff.

Regrettably (I think) in the US, we have the phenomenon known as “no two customers do things the same.” Because of this, most of us have a much more fuzzy sense of our productivity and costs than the Australians do. To be fair, in the US we have a large variety of production equipment – it is more uniform (pedestals) in Australia. Also worth noting, in nearby New Zealand, preachers of the “EquA religion’ have not made many converts. Still, sometimes I wish I lived in a world where we all agreed to use the same “coin.”

Things You Can Do With MBA

MiTek’s Business Application (MBA)has grown a lot since its inception 15 years ago. That presents a problem, and several people I’ve talked to have said, “I know I’m not using all of its capabilities.” To help, I’ll present a short summary of its capabilities.

Overview

MBA enables a component manufacturer to keep records of all of the quotes and orders processed by the business. By directly reading the design files (trusses, wall panels,) the actual material used can be quickly and accurately summarized. Ancillary items, such as hangers, loose material, and any other items supplied can be added to quotes and orders. Using the wealth of information available about the components, labor estimates can be generated. Customizable reports allow the creation of quotes, production lists, and management reports.

Managing Your Business

You can get started with MBA with nothing more than a numbering system. However, the more information you store for each job, the more information you can get out of the system. Setting up customers and sales reps is a first step, enabling you to see how many quotes are becoming orders and tracking sales rep activity. Different markups can be applied to different customers or customer groups.

Classifying the job by type (Roof, Floor, Custom, Ag, Government, Multi-Family, etc.) allows you to look at subsets of your job mix. The more categories, the more you can examine the work you do and look for problems and opportunities.

Territories are an underutilized concept. You can use Territories for tracking your success in different markets, or set up loading territories so that you can make sure that the correct codes and loads are applied to the jobs delivered to a given area. Different tax codes and delivery charges can be linked to different territories.

Quotes and Orders can be stored separately, so that a record of the original quote is preserved even after extensive changes to the order.

Some of the most complicated customizations of MBA have been in labor estimating. Although the user can set up an almost endless variety of different schemes, custom programming is sometimes needed if you want to “look ahead” at the other trusses in the job to determine setup costs and labor.

Detailed analysis of individual orders and ‘summary reports’ of a group of orders can be done with the report writer. The reports “out of the box” are never enough for creative managers, who will always think of new ways to look at the accumulated data. Technical reps can make some changes to existing reports “over the phone,” and many customers have a person on their staff that has learned how to customize reports, and thus avoiding any delay in seeing how the ‘latest change’ on a favorite report will look.

As the Design Console

The MBA is best utilized as the “desktop” for all of your design work. Once a job or quote is started, you simply hit the “layout” button and MBA creates the job folder, launches the layout application, and keeps track of where everything is. This saves a lot of time when compared to creating the layout or the trusses first, and then having to ‘show’ MBA where the job is when you want to import the design work.

Comment or changes can be recorded in the job’s Call Log and minor changes (such as a delivery date change) are recorded automatically in the Change Log so the entire history of the order can be tracked. Attachments, such as a scan of the customer’s purchase order or photos from the job site can be attached to the order. The Job Navigator allows you to create customized lists for each user, for example a designer could have a list of “Work Assigned” to them, and another list of “All Orders Overdue to the Shop.”

Production Pre-planning

One of the most popular tools in MBA is called Build-a-Batch, which allows a user to organize all of the components in a job into production (table) groups. Once ‘batches’ are created, production paperwork can be generated for each group, including batch cutting. Build-a-Batch’s ability to see each truss, the quantity, span, pitch and visually ‘drag and drop’ into different groups makes the process very easy. Individual trusses can even have their quantities split into more than one group, if needed.

Although a simple “Delivery Date” field can be used for scheduling , a flexible Calendar Scheduling feature allows work to be assigned to the whole shop, or particular workstations. As work is added, a graph shows remaining capacity for each resource.

Other Tools

A set of standard trusses can be created, and used to create price lists or do “quick quotes” without having to (re-)do design work.

User security is managed in MBA, limiting access to defaults, making certain changes, and running certain reports.

A stand-alone Inventory module is available to help manage lumber and plates.