Process Optimization + Insight into Adopting Offsite + Innovative Business Solutions with Gerry (“Mr OffSite”) McCaughey

In this bonus episode, we've pieced together best-of insights from a conversation with Gerry (“Mr OffSite”) McCaughey. Covering topics such as process optimization and adopting innovation.

Gerry is a Founder & Board Member at Entekra LLC and CEO at OffSite TEK LLC, leading the charge in the transition to offsite construction with experience spanning multiple continents and decades.

Connect with Gerry and learn more about Offsite TEK.

Transcript

Haley Baumeister (00:00):

Hi, and thank you for joining us. I'm Haley Baumeister and I'm a digital marketing and communications consultant at the Housing Innovation Alliance. In today's episode, you'll get to listen in on a conversation between Alliance President, Dennis Steigerwalt, and housing panelist Jerry, "Mr. Offsite" McCaughey. This episode will be broken up in three segments. The first about process optimization, the second on advice for adopting innovation and offsite work. And the third, a call to action on how companies can utilize the alliances resources to better their building strategies. Let's listen in. I

Gerry McCaughey (00:33):

Don't think there's any real reason for, for concern if you talk, if you're comparing it to, to the likes of 2008. But I definitely think that we're experiencing a period of time here where builders are going to have to learn to sell again as opposed to being order takers, which I think is really what they have been doing for the last number of years. So we're now back to the stage of yeah, every customer counts and I'm gonna have to sell to them. It's not just, Yeah, you'll be lucky to get the house from me, it's now I have to sell to 'em. I was reading a report recently that said builders are paying more for the labor on site and getting lower productivity. It's like stagflation within the labor pool, on the construction, on the, on the <inaudible> cause job site itself. That to me is a real problem.

Gerry McCaughey (01:14):

You end up paying more to get less, that will translate its way into, into cost overall. And you know, and when the markets tied into its rise rising and people are a little bit more lean on what they're willing to pay for a, for a house, that that's, that's an issue. And I think it's probably one of the issues that everybody's known about the construction industry that, you know, productivity has been an issue for the last number of years, but it's, I think it's actually getting worse now. But the idea that you just simply throw people at the problem to solve the output issue with costs, that's a very, very dangerous game. And it really says something about a builder strategies going forward. I mean, you really have to be asking yourself how do you increase your output and not increase your costs? Well, that's through increased productivity. How do you increase productivity? Continuing on to do the same as you've been doing the last 10 years is not the way to do that. You know, that old mantra of that's the way we've always done it, this is when that's gonna get really challenged.

Dennis Steigerwalt (02:04):

I've heard builders talk about, you know, they've had strategic lists that they spent years getting better at a dozen things in their business. And now those dozen things as a result of the pandemic and the, you know, kind of the way in which the teams were integrating with each other and the speed at which things had to be executed. They gave all 12 of those back longer cycle times being one of them. Talk about productivity on the job site being another. I'm curious if you have thoughts on how long it takes us to get, get all that back that we just gave up and it's, it took us years to

Gerry McCaughey (02:30):

Get it and what's that expression? And things go up slower than they come down. So pulling them back when you let go of them, it's gonna be a harder job. It's not just a simple clicking clicking your fingers, but it still goes back to this to use that expression. I mean this idea of that's the way we've all was done. It is the problem here. What you're talking about here is process optimization. And I think it was either Autodesk or Pro or quite recently came out with a report that said approximately two days and every five on a job site is wasted by every worker because of incomplete drawings, inaccuracies and bad design, lack of information, wrong materials. I mean, I'm not making these up. These are, these are independent reports coming from where, whether it's McKinsey, nih, v, Proco, Autodesk, whatever. I don't say it's the prop.

Gerry McCaughey (03:12):

There's the opportunity that exists within the construction. There is absolutely a major opportunity in there to take the cycle time down, not just recover the 30 days that maybe has been lost through the pandemic, but actually bring it way down below that. And I can give you real examples of, of, for what it's worth. We, we converted, I can remember involved, we converted the builder over from stick framing to to off cycle. And we went through the whole process with, if you wanna take advantage of this, it's not just a matter of looking at how I can reduce the direct framing time. What we're gonna do here is by using offsite instruction, we're giving you a key. We're actually giving you the key to unlock profit. You can't get up otherwise. The direct framing cycle time reduction, clearly everybody can see, you can see it.

Gerry McCaughey (03:57):

I mean we just reduce the scene that turns the key halfway. But you can turn the key the rest of the way. You can actually take down another close on 15 days out of the process if you plan in advance. In other words, you change your internal builder processes to take advantage of what offsite brings you. And primarily what you're talking about there is the scheduling, the accuracy, the quality on site. The benefits from offsite construction come from the two sides that they come from the physical side of seeing the frame itself go up quickly, but it also comes from your ability to change the way you schedule everything as that is into that house and pull them all for condense it. It's proven. So that case when was only that biller, he took his framing time down on the very first house. Cause we had walked them through it, said, This is what you want you to do. This is how we want you to have all this materials ready to go. And you took the cycle time down from 105 days to 57. Wow.

Dennis Steigerwalt (04:48):

Talk about schedule compression. Wow.

Gerry McCaughey (04:51):

With no, and I mean with no effort. All that they did was order the stuff early, not because, and it's not that they couldn't have ordered early before, but they wouldn't do it before because they didn't trust what they were going to get in terms of their framing. There's an Irish newspaper that has a strap line that says before you make up your mind openness. I think that's part of the biggest problem that people come into it with these preconceived notions about what it's going to be or how it'll work. They think they know about it. If you really want to become more flexible, improved quality, improved productivity, lower cycle time, improve your, your, your sustainability credentials, come with an open mind. Don't come with these, these, these absolute heart and set facts that you think this is the way it should operate. The other thing I would say to a lot if builders are really serious about this is there is a theory that goes around in the US says, you know, not invented here.

Gerry McCaughey (05:40):

In other words, if it wasn't invented in us, it didn't exist. Let me tell you, I'm 40 plus years. My family's 60 plus years in the offsite industry. It's been done before. I would nearly encourage every builder and I think it's well worth their while. And maybe there's, so the housing additional alliance could do, and I know you do do things in this, is take builders and actually walk them around, meet builders. And I don't mean now I don't mean as necessarily in Germany or Austria, where a lot of them go to because they have a different, they have a different model in terms of the homes are built. They're not generally done by production home builders. It's more quasi custom homes on individual sites. But Britain and Ireland pretty much similar to the United States in terms of most of the homes that are delivered, although it's not the same volumes here. But most of the homes that are delivered are delivered by national production home builders. If you go and you talk to them and you see how they operate, how they run their offsite side of their businesses, I think most people here would be genuinely shocked that it would upturn most of their thinking on how they approach the job site.

Dennis Steigerwalt (06:36):

I wanna switch gears a little bit. You know, there was a, a conversation we had started a few weeks ago about a, a post that you had put out there regarding kind of the quote unquote the cart before the horse, putting the cart before the horse in, in, in context of, in investments in, in factories in machinery. What I'd like to do is, you know, maybe you could just retell that story a little bit. I know that I went, went off like wildfire, right? It was kind of all over social media receiving a lot of comments. So I I think that ties back to the, the process conversation quite a bit here. So I just wanted to make sure we hit on that.

Gerry McCaughey (07:06):

Yeah. I think at the end of it, at a 225,000 views and, and I think nearly two and a half thousand comments on, So it obviously, it obviously touched there was sore point, but it actually obviously some sort of point with people within the industry. Yeah. And most, most of the people were, were in agreement with it. Who, because I think there's a lot of people like myself both in the United States and around the world that, that understand if you're going to go into this business going out and just simply putting equipment on your factory floor, it's not going to make you a successful offset company. That's a bit like I used the analogy of Formula one racing. If anybody understands Formula one racing, you, you know, there's two identical cars. They're absolutely identical. They're owned by the same team. They have the same tires, they have the same fuel, they have the same aerodynamics, they're absolutely identical. But both cars don't cross the line at the same time. But you're both cars, let's call 'em piece of equipment, are identical. Why don't they do exactly what they're supposed to do? Why not? They just finish it exactly the same time. And obviously the answer is because they've both got different drivers, right?

Gerry McCaughey (08:04):

So, and then think about this situation. The driver is the software. He's the designer. He's determining how each one of the levers that are in that car are utilized in what order, what way determines whether or not that car finishes first or second relative to his, to his team here. So what I've seen in the US is over the last four or five years are people interested in the offsite industry. And I'm saying this genuine cause I want people in the industry to be successful, but I see people going out and spending large amounts of money on very high tech, sophisticated equipment thinking that that's the solution and not figuring out that that machine will only do what it's told to do. And the last thing that they think about doing is to, is investing in their design automation, their, their software and their people at that end of the business to make sure they can get the maximum amount outta that automation.

Gerry McCaughey (08:52):

And then when they discover that they're probably a year and a half of a delay before they're ever gonna get anything outta that equipped of any use because that's the length of time it's going take to get that optimized. And so what I've seen is people in this market seemed to have an easier time investing in 2, 3, 4, 5, 6, 7, 8, 9 million worth of automation on their factory floor, but can't get their head around the fact that they may have to invest 2, 3, 4, 5 million. Well that may just say a couple of million in perfecting their software and design automation in order to get the maximum efficiency out of that software. Out of that, that factory automation. And that's what I mean by putting the, the cart before the horse. They goly buy the hardware before they ever bought the software. And the software is actually who tells the hardware what to do.

Gerry McCaughey (09:33):

Put it on you spit like it and buying the, the, you know, you go and you buy your car, but you forgot to put the engine in it so it looks great sitting outside your house, but it's not going anywhere. Right? And that's the same as putting that, you know, whether it's that Swedish or or German automation sitting on your factory floor, right. Looks great. It's not gonna do anything. Or if it does, you know, it'll, it'll be sub optimum in terms of terms of its output. Keep saying that the machinery will only do what it's told to do. Now when you understand that, you realize because you're, you, you realize where the efficiency has to begin. Because when you look at, when you look at putting in automation on your factory floor, really what you're saying to yourself is I want to have high quality, high output, high efficiency in terms of my manufacturing.

Gerry McCaughey (10:13):

So let's focus on the word efficiency. In order to get that machine to do anything, you've had to send a file to us, which has had to come out of some software with some people sitting designing it. That's the most important level of efficiency that you have to gain because you have to make sure you can continually send accurate files to that machine and you don't want to be overspending your time and money producing those files. So you need to make sure that your software has been tuned to maximum performance to provide the information to the equipment for you to get the efficiency on the factory floor. But it won't work the other way around. There's two aspects to them in, in your, your design part, your engineering department is you have to make sure that people are trained as efficiently as possible. And that's, that require, rather requires investment.

Gerry McCaughey (10:56):

And you have to make sure that your software is invested in or customized to give you what you want, but also to give you maximum efficiency. Because what a lot of people also don't realize is the software out of the box is not really much used to you. There's a lot of work that has to go in, I don't wanna cut it programming some cases it is programming, in other cases it's just building up the information, the detailing that are specific to your type of manufacturing. But you have to spend the time doing it in order to get it, to send it to the equipment efficiently. Cause you don't wanna be replicating things over and over again. So efficiency of your design engineering department in my opinion is more important than the automation on the factory floor. Think about it this way, anybody with money can go and buy the automation on the factory floor.

Gerry McCaughey (11:38):

Mm-Hmm. <Affirmative> anyway. All of us can go to Rand or Wineman or anybody else say, I want that piece of equipment and they would be more than happy to supply it to you. They put it on your factory floor, you can buy it. You turn around to your design engineering department, try to produce the information to drive that machinery. Not everybody can do that, right? That's the hard part. It's not what you know that you don't know that catches you out. It's what you know for certain that isn't true. That catches you out. And the problem is when you, when you start to get into that software design engineer, getting the people trained up, finding them literally just in this current market, finding those people is a difficult task. But even when you find them getting them trained to the correct level, that's a difficult task.

Gerry McCaughey (12:15):

Then add to that, the fact that your software has to be customized to give you maximum efficiency, that's a lot of time and money and effort to be able to do that. And that, and this is where some of the horse horse before the carpet for the horse, that's in my opinion where most of these companies invested heavily in automation fail. They didn't understand that as the efficiency of the software. That's more important than the efficiency of the automation on the factory floor. You've got to be able to feed that beast on your factory floor as efficiently as possible. There's a lot of time and effort in work needs to win in there and it just seems to get missed. I'm listening to, to automation suppliers telling me that they've lead times now of upwards of two years to supply automation from Europe into the offsite industry in the United States. And I'm wondering where all the people are are gonna drive this automation because nobody's making investments in that side of things. They don't even know where the people are. That is the dilemma here. There really needs to be a focus on, on, on developing those people to allow you to drive and get the benefit of that automation on the factory floor. Yeah. So

Dennis Steigerwalt (13:12):

Building up that talent pool though, that that's, that's incredibly what we're getting. I guess the good news is with three year lead times, they have plenty of fi plenty of time to go out and find that person, get trained up. Right?

Gerry McCaughey (13:20):

Well way i I said is when my experience of it is, I mean you don't really get the benefit of experience people until they've got a lot more years than that under their belt. There's a dramatic difference between let's just say somebody who has 10 years experience providing files to Rand or Wineman automation and there is a guy who's got two or three years. I mean, take that for somebody who's been at this a long time, there's a dramatic difference even the three to three years and not give you really what you really don't. But again, there's a ways around it. I mean, I think that you're going to invest in that level of automation. My opinion, the first thing that anybody in the United States is gonna do is actually going put an advert in all the European newspapers saying, I want to bring somebody with experience over in the United States, whether that's for a year, two years, or three years.

Gerry McCaughey (14:00):

But to think that you're going to do it internally from scratch, you are really going to burn money. It's not that easy certainly to get off the ground. It's not that easy. And that's where I'm, where I'm saying that, that the carpet for the horse invest in your people and your software before you invest in the automation. I'm, what I'd say is I'm, I'm delighted to be part of the, the Housing Innovation Alliance and I think you guys have doing a great job and I think you're, you're an incredible resource to the industry and those who, who are interested and truly learning about, about offsite construction. And so when you asked me before about what could do, I mean I think that really what the industry should be doing is, is making contact with you guys and asking for your help independently to say, Look, what do I need to do here? Who, who can I send you to, to, to learn a little bit more about this? And you're a truly independent voice that has no vested interest other than trying to find better ways for builders build things. So I mean, I think that that's genuinely what, what I would say, Dennis, is just keep up that good work and let everybody in the, the, in the construction industry know there is an independent resource that can go too. That is the housing innovative Alliance to find out more about how to take advantage of offset construction.

Haley Baumeister (15:01):

Thank you so much for tuning into today's podcast. Don't forget to look out for future podcasts as well as check us out on LinkedIn and the Housing Innovation Alliance website. Thank you.