Lessons You Can Learn From the Big Solar Guys. Part 3: Lean Operations

series lessons from large installers

Boards, investors, and shareholders at established and public solar installation firms are pressing for delivery of better profits on their projects. In order to do this, many are hiring operational excellence consultants or building in-house process improvement teams that use principles common in Lean manufacturing to evaluate how the company is fulfilling on its project delivery.

You might not have the cash on hand to hire one of these consultants, but what can you learn from these techniques that you can take into your own "soft cost reduction" efforts? If you are like most solar companies, your operations have grown organically as your project pipeline has increased. Perhaps you hired a designer when you finally got so many leads that you could no longer perform site visits, design the initial systems, and close the deals without working 14 hour days. Or perhaps you hired a helper for your installer crew, an office manager to deal with project paperwork, a salesperson, another installer, etc. Soon enough, you have a bustling small business operation! Sound familiar?

Take a Step Back and "Lean" Your Operations

You are not alone if you have organically grown your solar company; most installers have. However, organic growth generally results in unplanned process. Unplanned process results in messy handoffs, rework, time wasted, and the slow erosion of project profitability every step of the way. The result of this is a ceiling you will bump up against where you cannot grow any further. You can throw people at a problem up to a point, then the overhead of salaries and poor process strike.

Lean is a process framework that can help you identify what is truly important in your business and what is really creating value; i.e. that which the customer is actually paying you for! The following is a framework for the Lean journey.

Identify Value

First, put yourself in the customer's shoes and identify value. What is it you are offering the customer that brings them to your company over other choices? It's a lot harder and less intuitive than you think. Inside the solar installation company, we have many biases about what the "value" is that the customer is purchasing. Value is a concept that flows through the entire project.

Map Your Project Path

One of the tools I recommend to evaluate your situation is the Critical Path Method (CPM), a tool used by many project managers. CPM will help you understand where your operations are now AND evaluate where you are likely to find your greatest savings of people and/process.

Use CPM to construct a model of your operations including the following:

  1. A list of all activities required to complete the project (leave no stone unturned!)
  2. The duration (total time in days, hours) each activity will take to complete (now- not idealized)
  3. The dependencies between activities (i.e. cannot get a permit without a one-line)
  4. End points such as major milestones (i.e. permit received).

Software tools are available that can automate the calculations and help you understand how long projects are taking. A good project manager with a PMP certification will also be able to run this kind of analysis for you.

Create Velocity

Now that you know what steps you take you can evaluate what you can do in parallel and what you can remove altogether to start to create your Critical Path. The Critical Path is the shortest path a project takes from inception to completion. Yes, there will be external influences on this path. Focus on what you can control inside your operations. For example, the number of days from when your staff submit a permit package until it is received it is not in your company's direct control. Should you understand and plan for that time? Absolutely!

Let the Customer Drive

By involving the customer in the right parts of the process and setting the correct incentives, you can let the customer drive the project progress. For example, an incentive of a confirmed start date for installation if a customer signs and returns a paperwork packet by a certain date helps create velocity.

Continuously Improve

Don't stop here. Once you have set a benchmark for your critical path, evaluate potential changes against how it would improve your process. Now you have a system you can build a return on investment argument against for any potential hire, process change, software implementation, etc.

Continue to look at your operations and adjust the flow. Invite your employees to the table in the process to point out inefficiencies and propose ideas to create velocity.

Posted on January 21, 2014 and filed under operations.