For Logan Homes, “Business Process Management” Optimizes Process Management…And Saves $750,000 in the First Weeks of Use

Logan Homes is a successful developer and builder based in Wilmington, NC. They have been building homes in Wilmington and Southeastern North Carolina since 1986. “D” Logan is the founder and president. For softare, Logan Homes has used BuilderMT since 2003, but they recently enhanced the core Workflow Management Suite (WMS) with BuilderMT’s powerful new Business Process Management (BPM) solution. A year in development and testing, Business Process Management enables any authorized user to “drag-and-drop” components that represent activities along the critical path of home building, from preconstruction and contract flow, through construction, punch list, and warranty. As components are aligned on the screen (or moved to optimize processes over time), they create deep, back-end processes that can generate contracts, reports, information for pricing, schedules, automated notifications, purchase orders, payments, and more. “I view my building business as having three basic phases,” said D. “Phase One is pre-construction, permitting, plan approval and such, Phase Two is construction operations, and Phase Three is Post- Construction: Move-in and warranty, and anything we can do to drive for the best customer experience and referrals. BuilderMT handles every facet of Phase Two. So my pain points are Phases One and Three, and that’s where BPM comes in.” 

Pre-Construction Benefits of BPM Before a schedule can be created, Logan Homes has to manage hundreds of pre-construction tasks and notifications, as well as communications with prospects and clients from all over the United States. Using BPM, and without the aid of an expensive programmer, Logan Homes “wrote code” with BPM’s graphic dragand- drop tool to program specific functions that track all preconstruction needs, e.g. one-to-one or one-to-many alerts for uncompleted tasks. In short BPM, allows Logan Homes to create a pre-construction schedule with milestones and triggers that are specific to its processes and individual customers. “When we are really busy, we may have orders on homes that won’t be built for nine months or a year,” said D Logan. “BPM allows me to stop worrying about whether my team or I have remembered to do the right things at the right time. We are scrambling to make every customer happy, and we like to treat them well before we even build their homes. Now I have new tools to automate that process, starting with my sales team. Everyone is accountable now and the whole process is transparent and tied to milestones and alerts that we have created with the BPM tool.” 

Pricing Updates and Margin Maintenance While BuilderMT’s Workflow Management Suite handles prices at the sub-division level, and Logan Homes monitors costs once every three months. But there are plenty of gaps and loopholes that can cost hundreds of thousands of dollars in lost revenue and margin. With BPM, Logan Homes has a tool that embeds the best practices and enforces every detailed step within a critical path. What’s more, BPM is completely customizable, even on the fly, all with the click of a mouse. If material or labor costs change, yet those changes are not reflected in house prices, the new costs are an immediate reduction in revenue and margin. Logan Homes has target margins to maintain, and BPM protects those targets by ensuring that purchasing and sales are fully engaged and accountable for tracking all costs and pricing throughout the year…not just when they get around to it. “Before BPM, I had no assurance that my purchasing manager was monitoring costs and prices,” said D Logan. “Even with constant pressure and reminders, and with and meetings and notes – which are extremely time-consuming – lots was lost in the daily shuffle. But now with BPM, we can easily insert automated email forms that automatically alert, for instance, the purchasing manager of specific data, actions to takes, and reports due on specific days. If the form is not completed by a certain date with new pricing (the system can monitor sales prices by itself without any human intervention) BPM automatically escalates the issue, by sending an email up or down the command chain. If the pricing still has not been modified, the system automatically keeps checking for updates. BPM ensures that prices are monitored and that they are modified every three months. That alone adds many thousands of dollars in revenue.” Removing False Payables. With thousands of purchase orders and hundreds of scheduled tasks per home, there are typically dozens of ways that superintendents improvise to get their jobs done. Purchase orders may still be active even though the house is complete and ready for closing, yet they often remain slated for payment as part of the close-out process. Through an automated BPM routine, Logan Homes discovered that all of their inaccurate and open purchase orders amounted to $750,000. Before the “sweep-through” by BPM that $750,000 was posted on the ledger and financial statements. 

Benefits If costs change, yet those changes are not reflected in pricing, the new costs are an automatic reduction in both revenue and margin. D Logan, like many builders, has target margins to maintain, and BPM protects gross revenue and maintains margin targets by ensuring that purchasing and sales are fully engaged and accountable for tracking all costs and pricing throughout the year – not just when they get around to it. BPM Savings “Updated Pricing” example: $800 cost change made in pricing X 300 homes = $24000 in saved revenue and the associated margin. 

Removing False Payables With thousands of Purchase Orders and hundreds of scheduled tasks per home there are typically dozens of work-arounds, and superintendents improvise to get the job done, as when contractors show up late or without the right materials. Often purchase orders may still be alive in the system even though the house is complete and ready for closing. Purchase orders are supposed to be paid or closed out. Logan Homes discovered through an automated BPM routine that all of the inaccurate and open purchase orders that should be closed totaled $750,000. D Logan had $750,000 in false accounts payable, obligations for materials and labor that aren’t accurate yet were posted on the ledger and financial statements. 

Benefits: Through BPM, D Logan put $750,000 in cash flow back into his business, increasing his cash flow and borrowing power. Logan Homes’ financial partners have more confidence in the improved accuracy of the financial statements with BPM and that has real value in the soft housing market. D Logan is a more creditworthy customer because BPM helps provide more accurate financial statements. 

Customer Satisfaction and Referrals Logan Homes has done a terrific job of satisfying their customers, and their referral business has historically been above 50 percent of their annual starts. Business has slowed and the market is softer. So what can you do to drive customer satisfaction and lift the referral rate? D used BPM to automate his sales agent’s communication with customers, particularly those that are out of state and only have so many opportunities to visit Logan Homes and walk through the house, or prep for closing and moving. “BPM enables me to automatically monitor the contact/prospect database and schedule and send an email to the sales agent for a new home buyer that lives in New York, reminding them to call them or email them with a note about setting up their visit 60 days before their closing. In the old days – last year – we had to have the Sales Manager remember, or someone had a task it on a calendar, but they could forget, or just not do it. The customer doesn’t know, can’t remember to schedule their flight and be down here in Wilmington on October 4th. If the sales agent forgets or doesn’t get the job done, it automatically escalates to my Sales Manager who can deal with facts on each task and manage the exceptions. Now with BPM, we have an automated protocol that lets us reach out in advance and manage the process to enhance every customer experience. No one forgets and everyone is accountable. The BPM system won’t allow us to not be accountable.” 

Benefits: Logan Homes knows that more customers will be happy with their experience, which drives more referrals, and those are the lowest cost “leads” any builder can enjoy: a happy customer who tells their friends and family. BPM helps to reduce marketing costs and drives up lead generation in ways that are immeasurably better than before. 

Schedule Accuracy and Field Superintendent Accountability An accurate schedule keeps cycle times low, trade partners happy, and puts customers in the homes on schedule. That’s money in the bank. But there are numerous opportunities for personnel to manipulate the schedule and keep the appearance on being on track when they are not. Logan Homes has used BPM to implement an automated schedule checker that systematically looks for completed tasks that are manually back-dated in the field. “Let’s say the carpet was scheduled to be installed on January 5th, but my super clicks it as complete on 7th after manually back-dating it to the 5th. He hits his pay points but it’s amazing how many schedules are updated just before checks are cut Friday at 12:00 o’clock. With BPM – without having to write custom code – we created a protocol that automatically checks for manual backdating. An email alert is sent to notify a VP that back-dating has occurred. The VP gives the super five minutes to correct the backdating or he won’t get paid. You can guess the compliance rate.” 

Benefits: Trade Partners like to work for Logan Homes because the schedule is right and that accuracy means they aren’t wasting their time or effort based upon bad information. They can effectively plan their time and make more money working off a consistently accurate schedule than they can working for any other builder in the market. “This enables me to think about business without worrying about problems and proactively work on things that I need to manage,” says, D Logan. • Total Accountability • Transparent rules and automated process • Manages the process consistently • Reduces costs • Increases revenue and margins • Removes False Payables • Increases Customer Satisfaction • Improves Efficiencies • Reduces Cycle Times • Enhances Trade Partner Relations 

Roles, Responsibilities and Critical Priorities Job descriptions, role responsibilities, and critical tasks are invaluable for a well-run company. But for Logan Homes, despite three years of effort, the job of writing the descriptions wasn’t getting done. But Logan Homes has distilled that job to a simple task with the help of BPM. “I went to each of my managers and staff and asked them ‘What are the five top priorities you have right now?’ Then we used BPM to drag and drop icons to “write” a routine that helps track and manage each of those five critical priorities for each key employee. BPM is ensuring that we have a tool that tracks what we really want to get done.” “I need the routines codified because I want them done the right way, not the way the employee thinks they should be done. Now I know that everything is being done the same way. If a staff member leaves, I don’t have to retrain their replacement,” says D Logan. 

Benefits: “I need them because I want them done the right way, not the way employee thinks it should be done. Everything is being done the same way. Staff member leaves I don’t have to retrain them,” says D Logan. 

Why BPM? D Logan – His time is more valuable than ever. BPM helps Logan Homes develop systems and that helps save money and make money. The process and systems are not subject to human error or whim anymore. The payback is enormous in both obvious ways and not-so-obvious ways. 

BPM Benefits:

•  Total Accountability
• Transparent rules and automated process
•  Manages the process consistently
• Reduces costs
• Increases revenue and margins
• Removes False Payables
• Increases Customer Satisfaction
• Improves Efficiencies
• Reduces Cycle Times
• Enhances Trade Partner Relations

“I could use two programmers for two years on all the areas that BPM can deliver new benefits to my company such as pre- and post-construction processes but the best benefits are increased long term productivity and the ability to grow with less pain,” said D. Logan 

About BuilderMT BuilderMT has established itself as the best-selling, most award winning software suite for residential home builders of nearly any size, with year-on-year growth that outpaces all of its competitors, combined. Recent awards for BuilderMT include: • Professional Builder magazine’s 2008 Top 100 Products (for BPM) • ConstrucTech Top Product 2007 • ConstrucTech Hottest Company of the Year 2007 • ConstrucTech Vision Awards for 2007—Eastwood Homes • ConstrucTech Vision Awards for 2007 overall Team Award—New Urban Builders • Tom Gebes named to Builder list of the Fifty Most Influential People in the Home Building Industry, 2006 • ConstrucTech Hottest Company of the Year 2006 • ConstrucTech Vision Awards for 2006—Graham Hart Home Builder • ConstrucTech Vision Awards for 2006 overall Team Award—Generation Homes • Home Builder Executive Magazine 2006 Award for Scheduling Software • Home Builder Executive Magazine 2006 Builder Technology Innovation Award • Tom Gebes, President of BuilderMT, Ernest and Young Entrepreneur of the Year Finalists for 2006 • ConstrucTech Vision Awards for 2005—Delcor Homes • ConstrucTech Hottest Technology of the Year 2005 • TecHomeBuilder High Impact Products of the Year 2004 For large and medium-size home builders in the $250 billion home building industry, BuilderMT provides highly customizable building process management software that works in tandem with Sage Timberline Office accounting and estimating software, systems used by one in four of the Builder 100. BuilderMT systems have been purchased by more than 600 corporations and 7,000 individuals that manage nearly 300,000 housing starts annually, more than 20% of the new-home market. BuilderMT is widely recognized as a leader in process-driven, best building practices for builders, as well as customer service, warranty applications, online training, and innovative wireless applications. Since its inception in 1999, BuilderMT has maintained its status as a debt-free, highly profitable company that invests its profits back into infrastructure and software development. Article from: www.BuilderMT.com