Technology

Eliminating Guesswork In Real-Time A Key To 2024 Resiliency

In a "VUCA-for-longer" backdrop, guesswork and the wide margins of error needed to sustain viability that go with ballpark ranges, rough estimates, and theoretical outcomes practically beg for extinction moments.

Technology

Eliminating Guesswork In Real-Time A Key To 2024 Resiliency

In a "VUCA-for-longer" backdrop, guesswork and the wide margins of error needed to sustain viability that go with ballpark ranges, rough estimates, and theoretical outcomes practically beg for extinction moments.

November 7th, 2023
Eliminating Guesswork In Real-Time A Key To 2024 Resiliency
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The late Jim Ryan – of homebuilding's Ryan family dynasty – revered his older brother Ed, for and with whom he worked in the early years of what was to become Ryan Homes.

One of the ways that reverence found expression was Jim's plain, full-throated awe at Ed's mastery of home construction details that Jim – more of a sales, marketing, and management motivator – could only flail at with wild guesses.

He could tell you, down to the board inch, how much lumber it would take to build any one of the models," Jim recounted to me a lifetime ago about a lifetime earlier than that. "A truck would arrive at a homesite, and not a stick of waste would be left after the house was fully framed. He even knew the exact number of nails to buy."

Given to a bit of blarney, Jim's specific note of esteem for the precision and rigor Ed brought to production home construction may have been literal or the stuff of legends, only partly true.

What matters from this unforgettable moment of recollection is this. The "partly-true" point is central to a field where precision, calculation, and data have always mattered in the simple promise of a homebuilder to sell a customer only what they value, and omit what they don't, including wasted materials, time, and money that make up margins of error.

You could say precision, calculation, and data matter more now than ever. Why? Listen to any homebuilding executive talk about the challenges – and opportunities – of the present and near-future business outlook, and you'll hear these four terms repeated in the context of strategy, tactics, capability, and culture.

  • Volatility has replaced steady states, constants, fixed values at every piece and part of building's end-to-end value-cycle.
  • Uncertainty runs through macro and local economics, consumer behavior, policy, the natural environment, and investment trends, with mixed signals, cross-currents, and riptides, preventing predictability on any level.
  • Complexity – the intricacy of related moving-parts in:
  1. land investment and capital costs
  2. vertical construction starts – apportioning a balanced mix of spec and build-to-order production to drive volume and margins;
  3. price-pace-and-profit margin considerations;
  4. market segmentation product splits between non-contingent first-time buyers and less price- and interest rate sensitive move-up and second-time move-up affluent buyers;
  5. sales levers around mortgage rate buy-downs, incentives, free upgrades, or other concessions;
  6. home size and subdivision density variations seeking affordability
  7. not to mention, marketing moving-targets around in-and-out local migration and other local and hyper-local job, income-, and family formation trends, hybrid home-office work models, digital engagement channels, virtual touring and selling platforms.
  • Ambiguity – competing preferences and attitudes around flexibility vs. stability and security, affordability vs. sustainability and resiliency, price vs. value, connectedness vs. privacy, safety, and peace-of-mind, etc.

Against this "VUCA-for-longer" backdrop, guesswork and the wide margins of error needed to sustain business and operational viability that go with ballpark ranges, rough estimates, and theoretical outcomes practically beg for extinction moments – especially for firms whose business models call for them to invest short-term debt for long-term returns.

For all the work homebuilders have done – and tens of thousands of dollars of savings they've recouped – by capturing from 60 to 90 days back from construction cycle-times elongated by Covid-related build-cycle chokeholds – data still indicates that an average of $10,000 goes down the drain on every home built due to inaccurate material estimation and wasted labor from unnecessary site visits.

With pricing power in question now and even more at-risk according to 2024 commentary among leading homebuilding strategists, a capability that eliminates guesswork and replaces it with precision, calculation, and data might well put itself on track to becoming a game-changer.

Where it's now well understood that a typical 2,100 square-foot home might be made up of 450 to 500 SKUs that add up to about 20,000 separate purchased pieces and parts that together comprise up to 700 lines of bill of materials detail, a simplified estimation process that automates the estimation process based on site-specific plans could capture that $10,000 and then some in lower construction costs and synchronized data between procurement and design.

That's the promise of Higharc's recently-rolled out "beta" model of Procure, an adaptive tool that "that measures both master and site-specific plans to generate takeoffs and bills of materials automatically."

Included among Procure's features:

Master Takeoffs: Unlike CAD and BIM workflows that require manual estimation and repeated data entry, Procure automates takeoffs at the master plan level for every option so builders can control costs and bring new plans and communities to market faster.

Site-Specific Takeoffs and Bills of Materials: Procure automates takeoffs for any plan, including any combination of intersecting options and accounting for any locked options. Then, with waste factors that Estimators set, Procure automatically calculates bills of materials. That means builders always know what to buy with up-to-date measures and materials for every site-specific home.

Estimation in Context: Procure pairs material specification lists with 2D and 3D visualizations to give estimators and procurement agents a way to see in real-time how every line item looks, avoiding misunderstandings and confirming design choices.

Enterprise Resource Planning (ERP) Mapping: Procure lets Estimators map resource codes to building model objects per master plan so that purchasing data for every site-specific home can be generated and coordinated with an ERP system in real-time. Your purchasing data stays in sync with the product design, allowing you to update product specs across homes and communities instantly.

High-level, Higharc founder and CEO Marc Minor puts the Procure release into the context of the broader and deeper aims of the 2018 start-up:

A broad goal we have is to unlock the power of homebuilding data for other parts of the value chain outside of drafters effectively," Minor tells The Builder's Daily. "What Higharc does so well is it takes a plan – so to speak --and it acknowledges that almost always, the most important information about a home is locked away inside this plan. What’s more, the plan is often wrong or unclear. What we do is to make sure that the essential information is accurate and then we automatically extend the usefulness of that data to non-technical users.
For homebuilders – sales and marketing professionals, but also especially purchasing and estimating professionals – that means having this tight feedback loop between what home is supposed to be built, and what are its parts and pieces? How much do they cost? How do we place an order for them? That has never been possible before."

Although it may not have ever been possible, such a tight feedback loop across homebuilding's end-to-end life-cycle would begin to morph long-sought gains from digital-twin preproduction into more of a digital thread that meshes what a consumer household will value most in a home to an entire, "unitized" process that produces it.

There are a lot of siloed operations within homebuilders today, and in some ways, that's become comfortable for them," says Michael Bergin, Higharc co-founder and VP Product. "There's a comfort level that comes along with that --not having a source of truth is just seen as a matter of doing business. It's hard for many of our customers to imagine what life would be like if they really could be totally unitized on a per lot level and have certainty across everything that needs to be purchased and have that consistent across all the departments from marketing and sales to the construction documents and purchasing. The technology that we've built takes what's common in product lifecycle management and design automation and applies it to the homebuilding industry, which is so unique because of all the option combinatorial complexity that goes into any home that's sold."

The "combinatorial complexity," as we've noted is accelerating in a "VUCA-for-longer" business, economic, and consumer behavior environment. What builders talk about needing to do amounts to a real-time business responsiveness and alignment to a whipsaw of possibilities, probabilities, and actualities each capable of shifting dynamics on a national, local, and submarket basis. Adaptiveness and agility – without resorting to guesswork – maybe the qualities necessary for organizations to become and remain resilient.

When it comes to agility, something that Higharc affords that would be very difficult to do in a traditional CAD model where you're representing your homes is to value engineer their homes at a broad scale," Bergin says. "Let's say you wanted to go in and take some of your product and just bring it in one foot, and maybe that means that you can add one additional home in your community if your entitlements support that. Just being able to change that product becomes quite simple. In Higharc, that can even be an option on your phone. But if you had your homes represented just as data in the ERP and as CAD drawings that pivot can amount to months and months of work to make those adjustments.
This is a place where we can have a big impact in terms of value engineering the home – making these types of changes across a system so that the homes will be more affordable. And, at the same time, builders can stay profitable due to their ability to manage every piece without guesswork."

ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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