The Positive Feedback Loop

“The sooner a project is completed, the sooner it can be sold or leased. That’s a real opportunity cost that means something to owners when I sell them on using our products.” Ken Cloyd, chairman of the board of California TrusFrame, said this to me a few years back during an interview for an article focused on innovation in the industry.

I explored a complementary concept shared by Jason Blenker, president of Blenker Building Systems, in this space last issue: builders and framers can’t find enough labor, and the constraints they currently face hold back their success. As Blenker made clear, the Framing the American Dream (FAD) project addresses the labor issues by offering builders and framers a clear explanation of how to build more by using their framing crews more efficiently and effectively.

That story is a compelling parallel to Cloyd’s sales pitch. “For the owner, every day of that project has a cost associated with it,” explained Cloyd. “Whether it’s covering loan interest or salaries of the personnel devoted to the project until it’s completed, there are real costs sunk into each hour the building’s construction is in process and not resulting in being sold or generating rent income.”

NAHB recently analyzed the permit-to-completion times for single-family housing from the U.S. Census Bureau’s 2015 Survey of Construction. According to their analysis, “the average completion time of a single-family house is around 7 months, which usually includes almost a month from authorization to start and another 6 months to finish the construction.” While actual start-to-completion times vary by location, clearly almost every builder has the opportunity to complete projects faster and therefore generate better cash flow. It stands to reason they would embrace any practical opportunity to reduce completions times.

The 2015 FAD study showed framing times could be reduced by 60 percent. This is consistent with the 2600 square foot house built in 1995, where framing the house with components saved 253 total hours. In other words, component framing has the potential to create a positive feedback loop: builders or framers who switch to components reduce average completion times; as construction cycle times decrease, the need for component packages increases. As builders and framers become more familiar with components, handling and installation becomes more efficient, further reducing cycle times. More projects for builders and framers means more sales opportunities for component manufacturers—everybody wins!