Project Management: Reducing the Wastes that Cost YOU Time and Money!!
Utilizing Lean Management Principles to run better projects
Project Management is one of the hardest aspects of a real estate investment business. Why is it so difficult? Well that’s a nuanced conversation which we’ll get into but the main reason that makes managing projects difficult is the amount of variables involved in making critical decisions.
Many people don’t know the power of specific management tools and how they can transform certain aspects of your business. One tool that I think is especially transformative is Lean Management Principles.
I’ve had a prior post that dives deep into the different aspects of Lean Six Sigma but for this post I’d like to specifically talk about Lean Management Principles and how you can utilize this simple yet affective tool to make drastic improvements in your project management.
7 Wastes Of Lean Management
Below are the 7 Wastes of Lean Management. These principles are intended to help identify the key areas of waste that occur in the processes of your business.
It’s one thing to know these wastes, it’s a completely different thing to know how they apply to your business and how you can capitalize on the knowledge and prioritize eliminating waste. When it comes to project management knowing these 7 wastes is essential to streamlining the production (renovation of property) and ensuring higher quality product in the most efficient manner possible.
Let’s break down the details of how these wastes apply directly to Project management of your Real Estate Properties.
Over Production
Over Production is a little hard to identify when it comes to renovation projects and construction but with a little imagination you can begin to see where there are instances of over production in your projects.
One of the best ways I can describe over production is doing more than is required in the construction process. Sometimes this comes down to planning, other times this comes down your contractors doing things the harder way.
A perfect example of this in my opinion is when doing pex plumbing using a copper stub out for water lines is a lot more efficient and requires less effort than using an elbow and pex to angle stop.
To those that don’t know much about plumbing this might go over your head so I’ll provide some images to show the difference and hopefully that makes sense.
The first image, you’ll notice on the right the water supply lines for the future vanity come up have a 90 degree elbow copper fitting and then another piece of pex comes out straight. This is what I call over production. The reason being is that you need to add an extra 90 degree elbow copper fitting for both the hot and cold water, add 2 crimp rings, and 2 clamps. The other reason why I believe this isn’t the best way to do things is that for the future let’s say you want to remove or need to remove the angle stop valve, the only way to remove it is to cut the pex which shortens the pex and makes it more challenging to put another one on afterwards.
This second photo represents an easier and more efficient but also a more long term solution. With a copper stub out the angle stop is a compression fitting so you don’t have to keep cutting the angle stop in the future if you ever have a leak or need to remove it for whatever reason.
Waste of Unnecessary Motion
Another example of unnecessary motion in construction is on the job site. I’ve spoken about going to “Gemba” before which is the Japanese’s way of saying the place where work is performed. Going to gemba symbolizes your willingness to see with your eyes what is happening on your job sites.
Watching your contractors work you’ll often see that they’ll be walking around back and forth to get tools for a particular task they are working on. An easy way to fix this problem of unnecessary motion is to make sure all your guys have contractor belts, or have all the tools necessary for the task nearby. This will reduce the amount of unnecessary motion from the place where they are doing their task to walking around aimlessly to find a tool, then having to come back. It’s more than just unnecessary motion its also a loss of momentum and a time suck that delays projects.
Waste of Inventory
This is a bit of a challenge unless you have rockstar contractors. Buying materials for a project can be difficult and making sure that there is a minimal waste as possible is even more difficult.
Again, going to Gemba will help you see how much inventory waste is being produced at your job sites and this will give you an idea of what you need to focus on when ordering materials. Couple the job site visits with looking at the data you’ll start to see where there’s the most waste.
A perfect example of this would be paint. Let’s say you get 15 gallons of wall paint for a 1200 sq ft house and you only do 1 coat and the walls look great. At the end of the project you find that you have 5 gallons of unused paint that wasn’t opened. Now you know if you only need to apply 1 coat, 10 gallons is more than enough for a 1200 sq ft house and now for future projects you’ll order 5 gallons and if needed you’ll order more if necessary. This is a bit of a nuanced example because saving on the waste of inventory could potentially create waste of unnecessary motion so it’s definitely a bit of a balancing act. Another thing you could do is move the unused materials in this case the paint to another project, the only thing is the way it is stored might ruin the paint and potentially create waste regardless.
For materials that are are unused that can be returned we typically return for the sake of accurate data. This ensures that we didn’t have waste of inventory, we saved a few bucks but also helps when it comes down to modifying our estimate template. Having clean accurate data helps make sure we don’t estimate for too much material to begin with.
Production Of Defects
Rework is probably one of the most time consuming things that can happen for your construction projects. Making sure you have a thorough plan, and do things correctly the first time is paramount to reducing rework. Rework not only is a time waster, it also costs extra money in materials and sometimes labor and creates an opportunity cost because you’re wasting precious human resources on something that should/could have been done correctly the first time.
When you see the picture above what do you see that is considered rework?
Right off the bat I see two things…
Obviously the mud that had to be touched up after the paint was done and the wall paint that got on the ceiling a bit.
Now I believe that touch ups is inevitable. It would be a fruitless endeavor to think you can completely mitigate touch ups, but you can do your best to keep it to a minimum.
During the mudding and sanding phase to make sure you keep the touch ups to a minimum the best thing you can do is walk around the job site and put some painters tape on all the areas that need more attention. Making sure the walls are mudding as best as possible and sanded well is super important because the imperfections will show once you throw a coat of paint on the dry wall.
Taking the time to put tape in the areas that need work will save you in wasted time doing re work. Why this is important is because think of all the things you need to do in the example I provided about touch ups.
Paint is already done, floors are in and now you have to mud the wall again. It’s not just mudding the wall. You need to make sure you don’t make a mess, you mud the wall, you wait until it dries, now you sand it and dust got all over the place which you need to clean up, now you have to prime the mud and wait until it dries, then you need to carefully paint it again with the wall color and all that work just for a small 8 inch circle.
Waste of Waiting
Waiting is the worst thing ever. Waiting costs you money…
Waiting for materials to arrive can easily be fixed in theory but in reality it isn’t always black and white. Planning ahead can help mitigate the amount of waiting you do for materials but sometimes there’s delays outside your control.
It’s important to take note of the lead time for every aspect of the construction.
How long does it take to order specific materials?
How long does permitting take?
How many days in advance do you need to order dumpsters?
When should you be scheduling for utilities?
When do you request draw money from lenders?
The list goes on.
At the end of the day we’re all humans and we can’t avoid that everyone moves at their own pace. You can only control so much of the process and waiting is something that you have a small amount of control over because their might be a handful of people between you and the thing you are trying to accomplish. Want to turn on utilities? Well you need to call the utility company, they need to schedule a time, someone needs to be present, then they turn it on. That process could take 3 days and if your contractors are waiting 3 days because the project already started and utilities aren’t on, that’s a huge waste of time.
Waste of Transportation
The biggest waste of transportation is a bit obvious to most when it comes to managing construction, too many trips to home depot or the supply store. Now you might think who cares if you aren’t making the trips and your contractor is.
Wasted time is wasted time. A round trip to home depot for a few items could be easily an hour even if the home depot is 3 miles away.
10 Minutes to the Home Depot. 5 minutes to find your item, another 5 minutes in line, 10 minutes back and now you spent 30 minutes on the low end just to grab a few things. That’s also best case scenario, if you had to get an employee to pull something off the top shelf that’s easily more than an hour trip.
Here’s how to find ways to mitigate unnecessary motion.
Use your Home Depot Pro Account to count the amount of trips your contractor did for a project
See what items where purchased for each trip and try to narrow down where there was unnecessary trips that could have been avoided with a little bit more planning
Let’s say you bought all your plumbing materials at once but forgot a few items and had to make another trip the following day. This is an unnecessary trip and for the future projects make sure you account for the missing materials and order them all before hand to avoid wasting time
Order materials before hand for pickup to reduce the amount of time your contractor will be at Home Depot
I remember the first property we bought 3 years ago we ended up making around 160 trips to Home Depot, granted we were fixing it up ourselves and didn’t have contractors so we were figuring things out as we went but imagine all the wasted time in making those trips and walking those aisles… Our average amount of trips per projects is less than 15 now and I’d like to get that down less than 10.
It’s also worth noting that poor planning could lead to potential setbacks which would result in waste of transportation for your contractors. There’s nothing worse than your contractors showing up to do work expecting for materials or utilities to be turned on only for them to have to leave.
Over Processing
Depending on the level of finish you typically do for your renovations over processing will vary from person to person. In our typical projects we do rental grade finishes which requires things to be functional, and to look decent cosmetically but nothing has to be perfect. This is important to note because this helps us eliminate over processing.
A perfect example of this would be cabinets in our rental units. More times than not we keep the wall cabinets and just repaint them and get new hardware to freshen them up. If we took them out and replaced them we’d not only be spending more money, our contractors would have to go through the process of ripping them out, throwing them in the trash, repairing any drywall that might have been damaged, and then put new cabinets in.
That’s 4 steps compared to the 2 it takes to clean and paint.
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Secrets to Improving Project Management
The amount of people I’ve met in the real estate industry that don’t know anything about lean six sigma or even heard of it is astounding. This means that you taking the time to read this write up automatically puts you in the top 10% and if you implement these tools daily in your operations and in your projects you’ll easily be top 1%. I’ve said it before and I’ll say it again…
Most real estate investors think like investors and not business owners. Knowing and utilizing these tools will put you so far ahead of your competition it will blow your mind.
These are simple tools that don’t require much effort to implement. Do yourself a favor and utilize the resources you have available to you, maximize your efficiency by taking stock of these things and using data to support better business decisions.