Use Process Mapping to Control Your VPOs
Efficient and up-to-date systems and software can lessen the blow of variance purchase order costs.
Philip Robichaud is Calgary, Canada-based Morrison Homes' information technology manager, and he's been with the company three of his 15 years in the business. One of his recent tasks was to take the inefficiency — and paper — out of the variance purchase order process. On the job site, Morrison Homes issues a fair number of variance purchase orders for such things such as extra truck loads during excavation, extra gravel, on-site damage or vandalism. Morrison averages about eight to 10 VPOs per home.
Morrison Homes is one of Canada's leading home builders; in 2007, a record year, the company completed 590 homes. In 2008, it will see that number decline due to prevailing market conditions, but it still expects to put up at least 300 homes. The company builds in the Calgary area, and home sizes vary widely, from starter homes of 1,000 square feet that cost under $300,000 Canadian dollars to large custom homes of more than $2 million that range upward of 6,000 square feet.
The company has been a Calgary-area builder for 45 years, and it has a great reputation. Morrison Homes allocates most of its 100 employees to back office processes and carries 12 site supers; 12 in sales; and another 12 in design and drafting, with a strong reliance on subcontractors. Still, the company battled VPOs — 5,900 of them across 590 starts in 2007. That's a costly process to maintain.
"We determined exactly what each VPO was costing us," says Robichaud, "because we knew from analysis that the whole organization was spending 19 minutes on each one, as it had to be hand-written and manually processed in the back office. Then we had the back office staff faxing the VPOs to the vendor and manually entering the data in the various back office systems. After the vendor came back with a price, a new purchase order was created and sent out. Some of our employees spent their days just standing by the fax machine sending out VPOs."
Robichaud and Morrison Homes have since taken the process entirely paperless, and the data exchanges among supers, the back office and vendors are now entirely electronic, with no reentry of data — all thanks to process mapping software. The software ran around $30,000 and paid for itself with the savings it created from the VPO process alone. "It has saved us a great deal of money already," says Robichaud.
Today, process customization can be done with a graphical drag-and-drop interface that allows company users to adjust the process or add and remove steps, such as notifications or file transfers. They can also insert authorized data directly into the firm's back office system or the vendor's back office system.
"Now, when a super wants to create a VPO, he uses his BlackBerry (through the Canadian Telus system) and accesses a VPO form to enter a job number and a description of the work to be completed," says Robichaud. He then picks a vendor from a list and sends the VPO. An e-mail goes off to the applicable subcontractor, who is provided with a Web link that takes them to a page where they can submit their pricing; Morrison Homes' purchasing department is automatically notified. If the subcontractor's price is approved, the supplier gets an e-mail with the PO attached as a PDF; the software then automatically adds the VPO into Morrison Homes' accounting system.
"The entire process is entirely paperless, digital and automated. There is no data entry required beyond what the super does on-site, and we can insert information directly into a vendors ERP system if we need to," says Robichaud. Robichaud is now so comfortable with the mapping solution that he is working with other Morrison Homes staff to map other new processes; he wants to automate the Dumpster administration and work on moving a home buyer through the option selection and design processes.
|Tom Gebes is widely recognized as one of the nation's leading experts on software technology and home building. He is the founder and president of BuilderMT. Contact him at Tom.Gebes@BuilderMT.com.|