Our multipart series on getting Lean cited several examples in which embracing Lean management principles helped dealers improve their operations. The series also touched on the importance of tracking performance and setting goals. Lean guru Scott Morrison suggests one benchmark is to keep an eye on your revenue per employee. After all, personnel costs are one of your biggest expenses. If you can increase revenues faster than your employee count, odds are good that much of the extra money you generate will drop to the bottom line.
That led us to experiment. Morrison identified nine companies in the current ProSales 100 that are known for their Lean programs: Curtis Lumber, Jackson Lumber, Hancock Lumber, BMC, US LBM, Franklin Building Supply, McCray Lumber & Millwork, and Tindell's Building Supply. We labeled them "Lean Leaders" and aggregated their per-employee sales numbers for 2016 and 2015.
We then organized 88 remaining companies into one of three groups and did the same math. The first group was lumberyards with manufacturing operation, such as truss plant. Eight of our nine Lean Leaders are that type of operation. The second group was lumberyards without manufacturing operations; the ninth Lean Leader fits this category. And the rest were specialty dealers, such as GMS and SRS Distribution. Three of the 100 dealers were excluded. Two were specialty firms: ABC Supply and L&W Supply. This was because ABC Supply acquired L&W at the end of last October. ABC's revenue counted only the final two months of L&W-related revenue but all of L&W's employees, because we asked for year-end employee counts. Meanwhile, L&W's report had only 10 months of revenue. Using those numbers skewed the results dramatically, so we felt it was best to delete them.
The final PS100 company left out of this analysis was the sole molding/millwork specialty firm on the list.
Aggregating each group's numbers, we came up with average revenues per employee for 2016 and 2015. Then we compared those two numbers. The result? Our "Lean Leaders" group improved their sales per employee average by 10.7% in 2016 from the year before. That's close to double the gain made by lumberyards without manufacturing operations (up 5.5%) and markedly better than the main peer group, lumberyards with manufacturing operations, which collectively improved by 4.4%. Meanwhile, the per-employee numbers for specialty dealers rose only 8.6%.
Of course, practicing Lean might not be the sole reason the Lean Leaders improved more than the others. But it does provide food for thought.
