His Life Woodworks needed better tools to manage its front-end functions, especially purchasing, job costing and pricing.
"We make custom residential cabinetry, mostly for new construction," says company president John Johnson. "We're large for a custom shop with 52 people, so communications is a big issue. Probably our biggest struggle is getting design detail information out accurately."
Johnson does nearly all of the selling, and designs most of the jobs for the Torrance, Calif., company, which typically has as many as 100 jobs in process.
Johnson also works with his detailers to package the job together. The detailers manage all the shop questions, acting as in-house project managers. Johnson would like to get out of the sales side, but doesn't know if that will ever happen.
"Customers want to talk to the designer, the creative person. Most of them know me," he says.
Johnson's ability to visualize and develop designs for large custom projects helps the company get business, but that custom emphasis creates problems because all of the details have to be tracked.
"Custom woodworking is a progressive experience," Johnson says. "It's never a done deal. The customer is never done making up his mind. There's so much freedom to add, change and remove things. The 'job' has a different definition here than another shop may have."
Sean Henry was writing Materials Requirements Planning software for His Life Woodworks, and identified several problems. (Henry had his own company, worked as an employee of His Life Woodworks for a year, then formed Master Solutions LLC with Johnson to develop management software.) No one understood what a purchase order was for, and it was never used for reference, he says. Also, one person ran the accounting system, which was very customized and no one else knew how to use it. The labor collection system didn't process job data into a database that everyone could read. In general, Henry said that each person had developed his own method of doing things, which was unusable for everyone else.
Henry says that many companies start out with a single woodworker and the business grows beyond his ability to manage. Smaller companies take on the personalities of the owner, for good or bad. The purchasing, accounting, detailing and production people often don't know what each other is doing.
His Life Woodworks uses BusinessMaster, an operations management program developed jointly by Henry and the company for small- to medium-sized manufacturing companies. It is designed to improve purchasing, order entry, inventory control, production scheduling, job costing, and labor collection and payroll.
Henry says that as His Life Woodworks grew, it improved its ability to handle existing operations. The company began distributing the scheduling process directly to the production manager so the schedule was changed immediately and accurately. Purchasing speed was improved through proper use of a database rather than spreadsheets and forms.
Later, as revenue increased, improvements were made in time collection and payroll output functions. Payroll processing time went from two days to a few hours. Henry wrote a custom estimating program to work with BusinessMaster, eliminating the printing of estimates in Microsoft Word. (This will be included as a module in future versions.) Progressive billing and a connection to the accounting program eliminated typing of invoices and improved accounts receivables.
(His Life also uses Cabinet Vision Solid, and Microsoft Excel and Outlook. The integration with Solid and the accounting program were seen as major benefits.)
How is improvement measured? "It is total revenue to administrative personnel, and administrative personnel as a percentage," Henry says. "You are able to get more done with fewer administrative personnel. Sometimes this is an intangible, because as soon as you become more efficient, you take on more work.
"The first thing we did was purchasing," Henry says. "That's the most logical place to start because if you manage purchasing correctly, you get all sorts of ripple effects."
"John was selling jobs, I was running the shop, so there were certain things that were ignored," says Gary Brim, vice president, who oversees production. "Now we can see the bigger picture. We're able to review the year's orders and consider more volume buying."
After purchasing, scheduling was targeted. The company now has the ability to see the progress and status of each job, broken down week by week, with the amount spent up to that point.
"Anyone can pull up the job and see where it is," Johnson says. "Because we're so large, that's the biggest challenge. Customers call up and want to know what's going on with their project."
Henry says the system is designed to be oriented to many uses. Each of the contributing players can put his information in and the net result is the scheduling.
Pricing too low
"Implementing the system and getting the controls in place showed us how low we were pricing our goods, and why we weren't making any money," Brim says. "In the last few months we've made money like never before because we finally have a handle on what we're doing. We didn't know how much we were underselling ourselves. We were able to implement percentage increases and were able to get them."
Also, Brim says that they noticed a trend that was not unexpected - the standard frameless cabinets were moderately profitable, but the custom work was done at a loss. A month with mostly standard work was really good, profit-wise. A month with a lot of custom work was bad. Now they knew why.
"Ultimately, you know which jobs you'll lose money on, and you can make the difficult choice to turn them down," Brim says. "Now we have valid information to decide whether we want to do that kind of work any more. We looked at all the jobs for one contractor and we were breaking even on every job. We finally decided we didn't want to work for him anymore."
Each revision, called a work order, is handled like another job tracked in the scheduler with a six-digit number. Whether the company made or lost money on each item can be determined quickly. The initial job may have been profitable, but three or four reworks could have wiped out the profits.
"There's been some valuable information we've pulled from those work orders and they've changed some of the processes on the shop floor," Henry says.
Brim says one of the biggest changes has been standardizing processes. "If someone is on vacation, most of us know how to run the software," he says. "If a person is purchasing, we know how he's purchasing because there's only one way to do it. It's not his own method he devised on his own spreadsheet over two or three years."
The standardization also allowed His Life Woodworks to analyze production efficiency against similar jobs already in the database. A certain type of face frame cabinet job could be compared with 100 similar jobs, or the whole 3,000-job database, to identify areas that need improvement.
Finishing is a selling tool
On the shop floor, solid wood milling, assembly and finishing are handled separately. An SCM Sigma 65 beam saw is the newest piece of equipment. Delta table saws and a tilting arbor saw and CTD cutoff saw with TigerStop are also used.
Most edgebanding is done on a Holz-Her 1408 edgebander. Other equipment in the shop includes a Timesavers widebelt sander, J.L. Taylor clamp carrier, Ritter drawer box assembly clamp and Comil Cosmo NK2 case clamp. Gary Brim says the company is considering the purchase of a router with nesting capabilities. (A second shop in the nearby Wilmington section of Los Angeles does some work on a contract basis.)
His Life Woodworks has a large finishing area in a second building at its Torrance location, which Johnson says is an important selling point because many companies don't want to finish. A crew can also do finishing on site if needed. The company was using water-based finishes, but went back to catalyzed varnish when the regulations changed.
"Finishing in southern California is key to landing work in slow times," he says. "Finishing has a lot to do with our success. We lose money sometimes doing it, but we do it well."
His Life Woodworks buys all doors finished from Decore-ative Specialties. All hardware inventory is kept in a large metal storage container outside the building. Distributor E.B. Bradley comes in once a week, fills whichever items are low and bills His Life Woodworks for whatever has been used. "You get the invoice, pay it early for the two percent discount, you don't have to write 20 purchase orders to get the items and you never run short," Henry says.
Henry says the management structure of a company is as important as the software tools.
"Companies that have a structure in place, such as a purchasing department, that use project managers, or have a strong production manager, will transition more easily to using the more efficient tools," he says. "Companies that are larger, or have little to no structure will take longer.
"Bringing tools like this in without the corresponding disciplines won't get you much," Henry says. "Marry the two together, you can take a $5 million shop and have one person doing 98 percent of the selling, design and scheduling.
"His Life Woodworks has put everything in place administratively and structurally, and now its limiting factor is production capacity. The company could double in size and still have the same tools; the tools would just have twice as many jobs in the scheduler."
Henry says he's turned down some jobs where he thought the company didn't have enough structure. "Some other companies want to buy a solution to fix everything in their company, and software can't do that for you," he says. "If it won't work for a company, we don't want to sell it. We don't have any customers that are not using the product."
His Life Woodworks is using the product, and expects to continue to grow.
Have something to say? Share your thoughts with us in the comments below.