CSI: Design: Less is More

IT WAS DUBBED “PLANFEST,” AN ACROSS-THE-BOARD analysis of the plans being offered by Beazer Homes' 33 divisions.

“I personally reviewed product and results from the previous 12 months and looked at what worked and what didn't,” says Gonzalo Romero, Beazer's vice president of corporate planning and design, who puddle jumped from division to division in 2003 and 2004, creating a baseline to use in future years.

After looking at just 10 divisions, Romero began to see trends emerge. The most valuable was that roughly half of each division's revenue was generated by its top 10 plans. The trend was company-wide.

“It got to where I wouldn't have to look at a spreadsheet,” he says.

So Beazer started deleting.

In flush times, design often drove what was built, and until recently, many builders sought to blur the line between production and custom homes. Larry Moore, a partner in the architectural firm Bloodgood, Sharp and Buster, sees a growing sense of caution among the builders he works with. “There's a renewed interest in how to build smart and get the most for the dollar,” he says.

A product audit like Beazer's Planfest is one way builders can cut design costs. Pulte Homes also is slashing the number of plans it is offering. And David Weekley Homes is introducing an entirely new, more competitive line of homes to replace what the company has been offering.

“Builders are concluding that maybe prices are going down a little bit, and they're trying to compete,” says Bob Wilhelm, a design principal at William Hezmalhalch Architects in Irvine, Calif.

For Beazer, it was time to eliminate redundancies during a period of rapid growth. Last year, Beazer built 16,450 single-family homes, mostly for entry-level and first-time, move-up buyers. The company had done informal product audits over the years, but by 2003, it was time to formalize the process.

Despite the overhaul, the number of plans Beazer offers has not decreased, Romero says. Instead, the number of markets it's targeting has increased. A division may still offer 54 plans, but while it dropped some single-family detached plans, it may have added townhouses to the mix.

“Now, each division will be able to reach a wider market with the same amount of work,” he says. “That will hopefully translate into more sales and better margins.”

If the byword at Beazer is diversification, at Pulte Homes the goal is simplification.

At the beginning of 2004, the Michigan-based company offered some 2,200 plans, according to Sean Degen, Pulte's vice president of architectural services. The goal for 2005 is to reduce the number to 1,250, he says. In 2006, only 600 to 800 plans will remain. Meanwhile, Pulte aims to build 40,000 homes this year.

Like Beazer, Pulte's rapid growth was accompanied by a growth in redundant floor plans.

“Historically, Pulte has been a very decentralized company. That's how we got to be what we are today,” Degen says. “Now, we're getting so big that we have to take advantage of the amount of leverage that we're missing out on.”

The company has 10 areas nationwide, each containing a number of markets: The Great Lakes area, for example, comprises Indianapolis, Detroit, Chicago, Cleveland, and Grand Rapids, Mich., cities with similar climates, demographics, and architectural history.

“So the same plan becomes five different plans, which inhibits your ability to leverage the product—the kitchen counters you use, for example,” Degen says. “And the consistency across markets makes it simpler on our trades. There's less of a chance for mistakes and callbacks, so those cities needed to get together and pick one plan.”

Both Beazer and Pulte have paid close attention to the financial performance and sales of each plan in deciding which ones stay and which ones go. Any plan that represents less than 5 percent of sales gets eliminated, Degen says.

Other builders are taking a close look at the elements of each plan, searching for ways to decrease the amount of time and skill needed to build them. “Some of our clients are revising their plans—tweaking them, giving them a facelift,” Wilhelm says. “On some of these projects, they're trying to keep the roof simple, keep the framing simple, and keep the volume down a little bit.”

That's the approach David Weekley Homes is taking to hold down costs. Houston-based Weekley, the second-largest privately owned home builder in the country, builds around 3,500 single-family detached homes annually. Now, starting with its entry-level homes and moving into its mid-line products, the builder is looking at the number of corners in a house, the type of extra cladding, and the number of windows “to see if we haven't over designed,” says company president David Weekley.

At the same time, Weekley's designers are trying to put some “pop and pizzazz into a home without excess cost.”

The company has seen a dramatic lowering of costs, he says, from an average of $46.34 per square foot for an entry-level home to $32.87 per square foot for its new entry-level Inauguration Series—a 29 percent reduction.

Another way to keep the costs under control is not to change a design once it has been approved by the builder.

“For us, it's to have the discipline to say ‘no' to a customer,” Weekley says.

Pulte is fighting the urge to make changes willy-nilly by analyzing market trends rather than reacting to random feedback from customers.

The company is looking to create “product portfolios.” A move-up buyer, for example, will receive a portfolio “with a menu of plans from a similar market and demographic.” The portfolios will give buyers a choice, but a limited one that the company can live with. That will require a lot of up-front work at the corporate office, but Pulte believes it will pay off in the long run.

The Case: Extensive numbers of floor plans and intricate design required extra time, skill, and money to plan, estimate, and build.
The Investigation: Reduce the number of floor plans and simplify the design. The Evidence: Beazer's top 100 plans generated half its revenue. Pulte Homes slashed more than 1,000 plans in a year but built just as many homes. David Weekly Homes attacked costs with simpler roof pitches and reduced numbers of windows, doors, and corners.
The Verdict: A smaller number of floor plans can still offer customers the choices the want most; simpler design in an entry-level series cut hard costs an average of 29 percent at David Weekly Homes.

So there you have it—hard evidence of cost saving initiatives from the departments that can open a vein in a builder's business and leave him bleeding in a puddle of red ink. That's what we call preventive policing. Case closed.