In a housing market that is beginning to show some signs of life and an economy that continues to challenge consumers, lean building methods are the way to go for builders who need to gain better control over their construction costs, Scott Sedam, president of TrueNorth Development, said at the NAHB International Builders’ Show in Orlando in January.

The savings can be dramatic.

Over the past four years Sedam’s company has facilitated 65 implementations of the lean building approach. More than 700 builders have been enlisted in that process — including all levels of personnel and every department in the organization — not just the senior managers who ultimately are responsible for the waste in the first place.

Also on board were more than 1,400 suppliers, trades, distributors and manufacturers — who turn out to be a greatly underestimated source of savings when they are encouraged to look for improvements in their building products and processes, which is an opportunity for them to fatten their profits as well.

Using a highly structured process, more than 10,000 suggestions for building more efficiently have been considered.

As a result, “more than $125 million in improvements have been identified to date and we know we are just scratching the surface,” said Sedam.

For the most part, lean building hasn’t been taken seriously by the housing industry, but a brutal housing downturn that has decimated the ranks of U.S. builders by as much as 50% to 60% could be the opportunity that brings it to prominence.

With factory capacity down as a result of the recession, adding an even greater sense of urgency will be impending product shortages which, along with serious labor shortfalls, could be only a year and a half or so away, he added.

“A minimum of $1 out of every $3 spent in product and process is waste,” said Sedam, including 15% to 20% in wasted materials and another 20% to 25% wasted in the building process.

“Product waste is far easier to identify, quantify and eliminate than process waste,” he said, because “the product is tangible.” But “for every $1 you find in product, you will find $1.50 in process.”

For instance, he estimated there are 50 unnecessary trips to the average house from the 30 to 40 supply and trade companies that typically come onto the construction site. At an average cost of $200 per trip, that pencils out to $10,000 worth of unneeded visits.

“Lean design is a highly structured process,” Sedam emphasized, “and it can’t be done informally.” An ad hoc approach may yield 10% to 15% in savings, but “a year later you still are working on the same problems.”

Among the many principles of building green:

• “For the largest profit, use the smallest possible number of suppliers and trades,” he said. “Sole sourcing can be remarkable, but you have to have the absolutely right trade to work with.”
  
  Each extra trade drives up the complexity of the job exponentially, he said.
  
  
• Be wary of the lowest bid because it rarely results in the lowest cost.
  
  State workers comp insurance payments are worth ferreting out, he said, because the trades who are paying the lowest premiums tend to be the safest, and that is a predictive factor in the quality of their work. “Accidents cost you more,” he said.
  
  
• Measure the process, in close to real time.
  
  Sedam will go to a builder’s office and ask to be shown each phase of production for the year, with maybe five average cycle days in each phase and for different communities and different models.
  
  If the amounts of time involved are “all over the map, it really tells you something,” Sedam said. “It should take the same number of days no matter what you build. Build them on the same schedule, build them all fast, everything is predictable.”
  
  
• At least monthly, audit the materials that are dropped off at the site.
  
  “You need to audit things,” he said. For example, problems with cracking concrete can be remedied by recording the temperature and slump rate of the material when it is delivered. “It takes three minutes. Write down the measurements, give a copy to the driver and send it to the concrete company. Whether it is a good temperature or not, they know you are paying attention.”
  
  
• Avoid backcharges, which “are a poor substitute for good management.”
  
  He cited the example of a company that produces 500 units a year that had no backcharges in 2010 because it was able to manage the process.
  
  “You need to have the right suppliers and rates and the right people managing them,” he said.
  
  Backcharges cost money, create a “he said, she said” situation and instigate consternation and arguments. “Continual backcharging is indicative of problems in the company, and it creates ill will and problems.”
  
  
• Monitor how materials are being used because waste is rampant everywhere — in concrete, wood, engineered wood, brick, block, siding, roofing, et. al.
  
  In a 1995 study of lumber usage, construction management students measured every board inch of material that went into comparable homes in Chicago and Detroit. The yield on the wood in the Chicago home was 85.1%, compared to 74.9% in the second home — a $1 million difference in value between the two.
  
  “Measure the yield on the lumber that goes into your house,” he advised.
  
  
• Avoid high-sided dumpsters, and at least use ones with low sides. “They actually create waste, they bring things in,” he said.
  
  Sedam said he had participated in an exercise in which 30 workers emptied out a 30-cubic foot dumpster on the site, sorted the contents and found $1,600 worth of usable materials.
  
  
• Builders need to count their process numbers.
  
  The wasteful cutting of drywall is a prime example. Excluding the garage, builders should determine the sheetrock ratio of their homes — the installed square feet of material divided by the square feet of the living area.
  
  There will be differences and where the ratio is higher, builders should look for ways to bring it down. “Look at how you are doing the design,” he said. The difference in the drywall needed for a 12' square bedroom versus a room that is 12', 2" can represent $500 in savings.
  
  Also, “look at the ratio of the amount of board purchased over the amount of board actually installed in the house,” and find ways to reduce the waste.
  
  
• Spend time and money on getting the plan right up front because 50% of waste in product and process is designed into the house.
  
  Construction drawings should be site-specific and fully detailed. “With today’s technology, not having great plans is inexcusable,” and it ends up costing significantly more in expenses. “Fully detailed plans pay off 50 to one, 100 to one,” he said.
  
  Also, “you cannot eliminate waste designed-in up front, until you understand and measure the costs down-stream.”
  
  
• Hardly anyone does it, but a post-construction review and analysis with suppliers and trades “is essential,” he said. “Look at how to improve the plan and take waste out of it. Do every house individually before the drywall.”

Sedam also told builders that they need to keep in touch with their customers though the sales staff. “You have to have feedback about what the customer wants and will pay for.”

Builders also need to keep in mind that “dumbing down houses, making them ugly and hard to sell, is not lean. Lean is about value.”