Sekisui Housing Company Case

Routinely Builds 80% of a House in Three Days

Twenty years ago, a Target article featuring Tokyo Sekisui grabbed attention because Sekisui routinely completed 80 percent of the work on a new house in three days. A second article appeared in Target in 2008. Tokyo Sekisui’s time standard remains at three days, but if modules can be delivered to the building site overnight, 80 percent of the work is done in two days. Makes a great headline for a lean-oriented readership, but lean is a small part of the full story.

During the intervening years, the most noticeable improvements have been in quality from suppliers, in automation (mostly to improve quality), in how each house is designed, in environmental performance – but especially in attention to all stakeholders in a process. Today most houses delivered by Tokyo Sekisui are powered by solar panels on the roof. Since 2001 Sekisui has sustained zero emissions and zero waste at construction sites; no volatiles go into the air, no contaminants flow into water, and all material recovered from the site is returned for recycling. Astounding, but the big venture is toward creating housing that well serves both occupants and communities over a lifetime.

Tokyo Sekisui is busy meeting the human challenges of a new age in Japan. Gone are the days of lifetime employment. Unlike their fathers, today’s college graduates in Japan are as likely as Americans to jump ship if the work challenges and the work environment are not to their suiting. Non-college youth are more restive too. The Tokyo operations must work hard to cultivate a cadre of highly skilled, experienced people. Competitors might like to raid employees too.

In this market, Japanese regulations are tough, and homebuyers are more environmentally demanding than Americans. These forces pushed Sekisui Housing and its affiliated Sekisui Chemical Company to become icons of corporate responsibility. Far more detail than can be summarized in a case is in the 2014 Corporate Sustainability Report:

(Warning: A big file to download, but worth it. The case emphasizes information not in the wealth of information contained in this file)

A quick definition of corporate responsibility is that a company genuinely attempts to improve the lot of all its stakeholders; customers first of course, but also employees, suppliers, communities – and the environment. As for investors, they still demand a profit, so this is a difficult juggling act. Investors in Sekisui Housing appear to be patient, but communications with investors appear to be pretty standard.

In Japan, Sekisui is the market leader in factory-built residential houses. Toyota has struggled in this business for years and nearly dropped out. To see what you can learn on line about Toyota versus Sekisui here’s a starter URL:

Sekisui Housing is a subsidiary of Sekisui Chemical: For operational purposes Sekisui Housing is tied into two other large subsidiaries, notably Urban Infrastructure and Environmental. That division fabricates a variety of materials for urban infrastructure, like piping, but is also very strong in R&D for building materials. Since Sekisui Housing has its own construction R&D, the combination sets up the company to be a technical leader in design for everything (sometimes called DFX).

Sekisui Housing is a technology leader in the industry. One of its specialties is smart houses. However, the craze for sensor and gizmo laden residences seems to have ebbed for the same reason that people tire of feature laden computers – not worth the trouble.

Manufactured houses are much more precise than stick-build. Sekisui houses snap together like Lego blocks, and snap apart with little damage too. Linear tolerance for the equivalent of a 2×4 is about 1 mm deviation in an 8 foot run. Robots weld steel frame modules in a fixture also having tight dimensional tolerances. Tight tolerances are the physical key to quality production at high speed. They always have been; Henry Ford was first with a workable assembly line because he spent extra for precision tooling; no custom fitting or re-work. However, finishing a house on site may require traditional craft skills, and Sekisui does have craftsmen.

To minimize haul distances to building sites, Sekisui Housing has eight plants throughout Japan. The author has only been in the Tokyo plant serving the densely populated Kanto Plain, and it’s the biggest one.

The Houses

Each steel framed module corresponds to a room of a house. The average house consists of thirteen modules covering 1400 square feet of floor space, usually on two floors (a little over half the size of the average new American house). Modules come in 92 standard sizes and shapes, but can be combined with no wall between to form a bigger room, and so on.

Land space is tight, especially around Tokyo, and real estate prices remain stratospheric despite 25 years of deflation. That is a factor in the process. Most houses are replacements on real estate already owned, and those paying a mortgage on ground with no house on it want that interlude to be very short. (The author once compared housing values with a Japanese counterpart. The valuations of similar floor-space structures were about the same; the value of similar-sized real estate in Japan was about $1 million higher, about 40x the valuation of the Midwest housing site.)

No two houses are exactly alike. Exterior and interior finish combinations vary; so do roof styles. Stairs, fittings, plumbing fixtures, and light-switch locations may be unique. Assembly is build-to-order, lot-size-one, in sequence. The Tokyo plant has no space to re-sequence to better balance loads, despite 786,000 square feet under roof. Instead the workers flood the zones where extra work is needed.

Final assembly is on two lines. Light work content modules are on a two-meter per minute line. Heavy work-content modules, like kitchens and bathrooms, are on a 0.7 meter per minute line. Stores, fabrication, subassembly feed the lines in sequence with no kanban. Workers have to read the drawings and know what to move and when. Each module gets about 200 dimensional checks in production to flag any problem before it drifts downstream. Kaizen teams have plenty of data to prompt improvement.

Completed modules go directly to a truck in a marshalling yard, or alleyway. There is no rework area. Everything has to fit the first time, both in the plant and in field erection. When all modules have accumulated, the trucks convoy them to the building site and prefer to move in low-traffic night hours. The average haul distance is 60 miles; maximum 120 miles. When trucks arrive, Sekisui field workers bolt the modules together and seal them quickly to achieve a watertight configuration in one day. Weather is often a factor, and no truck can sit in a Tokyo street very long. Coordinating this is a daily routine for Tokyo Sekisui.

Product scheduling and delivery in sequence is scheduled with systems called SHIPS and HAPPS. Only IT people remember what these stand for; the marvel is in the execution, not the software. This quality level and dimensional consistency took years to develop with suppliers. Today, the plant averages about 2.5 days of material – small stuff – in stock. Big items consume space, so twenty percent of all supplier deliveries are direct-to-line. Only 2-4 hours of most items can be held at line side.

The Timeline for a Three-Day House

Finishing 80 percent of the work on a house in three days is the eye-popper for lean enthusiasts, but Sekisui is not unique. All competitors operate similarly, so three days is just a requirement to be in the business. Figure 1 replicates Tokyo Sekisui’s time-line diagram of their overall process. Going down the left side of that figure, note that the time from signing a contract until a house is done averages 40 days. While 80 percent of Sekisui’s hands-on work is done in three days, labor by suppliers prepping material for module assembly is not included; supplier lead time is 10 days.

Selling and designing a house also takes almost as much time and work as building a house. Sales personnel interest a customer in a concept design; then design consultants called housing advisors work with each customer to make up the order in the Sekisui CAD format. In 2009 this averaged 30 hours of skilled, experienced time per house. It usually stretches for months before a contract is signed; probably more now because Sekisui keeps expanding the number of stakeholder interests that should be considered in a design. Signing signifies that the CAD drawings show detail what the customer wants, and to the precision required by the process. Sekisui Housing commits to turn the keys over to the owner 40 days later.

The CAD drawing conventions are unique, but standard throughout Sekisui housing operations. All employees must learn to interpret them, which usually takes 3-6 months to a basic level, and much longer to really nail the nuances. Drawings cue all work to be done, so no additional work instructions are necessary when all employees “speak” the same CAD drawing language. Interpreting the drawings means learning the process implications of each drawing, not just how an artifact goes together. This common core of communication is a big factor in Sekisui being what it is.

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The timeline is 40 days, but is marked +/- from Day Zero, which is the day that the house is delivered to the site and erected there.

A lot of activity during the 40-day lead time is not shown in Figure 1. An existing building usually occupies the site for a new house. In that first 30 days, it must be torn down, and its materials returned for recycling. If they take down their own house, Sekisui can usually recycle almost 100% by weight today. If it is some other house, the recycle percentage may go as low as 30%. Then the site is prepared for assembly of the room modules (pad poured usually). All permits must be in order, and government inspectors must certify that everything agrees with local code. Like inspectors almost everywhere, inspectors may attach little importance to a builder’s time line.

Once the modules are delivered and assembled on site, the house must be finished in nine days, which includes everything from connecting utilities to landscaping – and any craft “artwork” that the owner wants to grace the dwelling.

Houses Designed for Everything

Sekisui has constructed houses using all kinds of materials, but now almost all of them are steel frame. The Tokyo plant builds only steel frame. Design has evolved with careful attention to details such as fasteners and frame cross sections for high strength and resilience to stress, like earthquakes and typhoons, but they want them light in weight.

Translating customers’ desires into CAD using Sekisui modules is an interactive exercise. Few customers can interpret the CAD, so illustrating a design’s appearance, inside and out, is done with 3D models, imagery, and virtual reality. Using checklists, the customer must then imagine how they will use the house to specify electric plug locations, for instance. Delivering a house that matches what a customer had in mind is a detail-oriented tacit skill cultivated by experience. Sometimes Sekisui even asks a customer to spend three days in one of their model houses that is much like the one the customer imagines – just to see if they really like it. The system has been honed to eliminate major change orders after signing a contract, and they are rare.

Reality is that house usage changes over its lifetime, so nothing is ever exactly as desired at a given time. A Sekisui house is guaranteed for 20 years, and expected to last 30 years before needing a “face lift.” Its design lifetime is 60 years because of materials other than the steel frame, which will last much longer. Consequently, Sekisui’s remodeling business is growing. If regularly maintained, revised, or upgraded, a Sekisui house owner can expect to maintain a house for decades in nearly new condition. Interchangeable bolt-on modules make such things possible – a tinker-toy system in concept. From this, in recent years Sekisui has moved toward revising houses as the needs of occupants change.

DFE Means Design for Earthquakes

Customer safety is a must-do design requirement for Sekisui engineers. A steel-frame house is guaranteed resistant to major structural damage in winds up to 140 mph – about Katrina force, and Japan is the most earthquake-prone spot on earth. Sekisui houses are designed to withstand earthquakes stronger than those that struck Kobe and Osaka in 1995, but not a wall of mud coming over it, as in the Fukushima disaster. Sekisui designs compete with other housing companies on robustness to natural disasters.

Seismic monitors record an average 300 earthquakes per day in Japan. Amid the rumbles of urban life, humans notice only a tiny fraction of these, but all Japanese regularly experience quakes above Richter 5.0. Furniture walks or tumbles over. Occasionally, powerful earthquakes disrupt life, and sometimes end it. The Kobe Earthquake hit 7.3 on the Richter scale, claimed 6500 lives, and left $200 billion in damages – a Hurricane Katrina scale hit. The much bigger Fukushima disaster continues to affect all Japanese, and they all learn about the Great Kanto Earthquake of 1923, which claimed 140,000 lives. Earthquakes are never far from the minds of Japanese homeowners.

The Richter scale is logarithmic. For every one-point increase on the Richter scale, earthquake wave displacement amplitude increases by 10 times and the earthquake energy causing this increases by about 32 times. However, Richter readings don’t indicate how much a building is shaking, so they aren’t used to improve designs.

Instead, design for earthquake resistance considers peak ground acceleration, peak ground velocity, and the duration of tremors. Sekisui and most other Japanese designers consider peak ground acceleration to be the most critical factor. They prefer to measure it by GAL readings (1 GAL = 1 cm / sec2). 1 GAL is imperceptible. Above 100 GAL, storage cabinets begin to shake. At 400 GAL over thirty per cent of wooden houses will collapse. During the Kobe earthquake peak GAL reached 833, and 980 GAL is equivalent to the acceleration of gravity, or one g.

Welded steel modules bolted together flex to prevent fracture, but keep the structure intact. Sealants and flexible materials prevent cracked walls, broken pipes, and other damage. Test stands to check design ideas replicate the vibration signatures of worst case possibilities, up to the point where a test stand starts to shake itself apart. In the Kobe quake, Sekisui houses suffered minor damage, while the traditional tile roofs of wooden houses fell in, crushing the occupants.

The design objective is for a house to maintain structural integrity at a GAL rating of 1600. If prolonged, at that intensity a house would sink into the earth melting beneath it.

A Stakeholder Culture

The culture at Sekisui Housing oozes social responsibility. It’s their brand. Even investors sense that investing in Sekisui is a plug for environmental improvement, not merely a monetary gamble. The culture results from pursuing its mission, which in its current form is the opening sentence of the Sekisui Housing philosophy:

Our purpose is to create homes and communities that improve with time and last for generations.

Sekisui leaders have been evolving this culture for at least 25 years. From time to time, they overtly reinforce their mission with multiple goals to pursue. Awkwardly translated from Japanese, the following list summarizes goals over the past decade:

Prominence in the Environment: Make the ecology and economic activities compatible.

Prominence in Customer Service and Quality: Gain and maintain the full trust of our customers.

Prominence in Human Resources: Encourage our employees to positively set their own goals.

Attitude of Risk Management: Take thorough steps to prevent trouble occurring and reduce the generation of after-the-event risks.

Attitude of Compliance: Enhance each employee’s awareness (of the situation, of all stakeholder needs, etc.)

Attitude of Disclosure and Communication: Reflect stakeholder’s opinions in corporate activities.

Sekisui Chemical, Sekisui Housing’s parent, has pursued quality and lean initiatives for decades. Long embedded in the culture, quality, process improvement, and kaizen were the base for a newer initiative, meeting the expectations of all stakeholders to the maximum extent possible. They have worked this initiative since 2004, long enough to “take them to a new level.”

For example, the Sekisui Quality System and the Environmental Management System blurred into each other. Quality came to mean anticipating and precluding future problems for all stakeholders, one stakeholder being the environment. For instance, the definition of “an Attitude of Risk Management” prompts transforming the mush of fine sentiment into operational specifics.

Juggling conflicts is no small task. For example, some customers are environmentally conscious while others regard environmental extras as frills. Sekisui has to coach the frill-shunners along, and sometimes succeeds. Satisfying investor demand for profit growth requires cost reductions of several percent per year. Navigating such balances requires being innovative, imaginative, and skilled communicating with all stakeholders.

Employees are expected to use judgment navigating this balance. The “Attitude of Compliance” shown above is not bureaucratic compliance with rules, but learning how to apply the Sekisui system to the needs of all stakeholders in any situation. Actually doing this requires more tacit learning than explicit learning.

Sekisui Housing’s present improvement initiatives depend on that elusive attribute of successful organization called communication. If all stakeholders are to “understand,” communication excellence has to be built into operational systems, but how?

Developing the Communications Culture

To communicate without waste, every employee in Sekisui has to become fluent in the “languages” of the company. The two dominant languages are the CAD drawing system and the kaizen system.

Both systems can be learned to a basic level in a few months, but neither one is ever completely learned. Conditions, context, and technology keep moving on. But every new hire begins learning the systems almost immediately.

Every new employee – all sales personnel, all installers, all material handlers, all staff – begins immediately to learn the basic industrial engineering and quality tools used by Sekisui Housing, starting with kaizen projects. Everybody in every position is expected to engage in Sekisui kaizen and progress in ability. If they don’t, they can’t understand the inside vernacular, remaining ever an outsider. It’s a necessary part of everyone’s work responsibilities.

The same is true of the drawing system. If newbies are progressing well, after about a year they should be able to talk basics with any customer about their house, using only the drawings. But they will probably need several more years before they can work up a customer’s concept of a house into the drawing system. For that, learning has to run deeper than visualizing a house using only the drawing. One has to learn what processes are necessitated by a particular drawing: in plants, in the field, and with customers. In other words, you have to learn to infer much that is not on the drawing.

These communications languages cut out a great deal of wasteful paperwork and meetings. For example, workers refer to little else but the drawings in maintaining the complex workflow of material in sequence going through the fab plant. (Japanese call this using “peopleware” instead of software.)

On advanced projects, kaizen leaders must have at least 10 years experience, and perhaps closer to 15. Leaders should understand the workings of the company, its improvement methods, and demonstrate skill in coaching others – both technical and behavioral. Today many kaizen projects focus on improving processes with customers and communities, but in-house process kaizen is not dead.

After decades, kaizen improvement remains a big deal inside Sekisui. Every six months, every employee must report on their kaizen experiences and accomplishments to a large group of fellow employees. Once a year, each operating unit of Sekisui Chemical (Sekisui Housing’s parent) selects their best kaizen project of the year to send to all-Sekisui competition. Winning this is recognized throughout the company as a high achievement. Even each unit’s contenders are held up as role models. The objective is to maximize the learning of all units.

Developing Individuals

Developing a cadre of employees to perform at the Sekisui level has become more challenging. Today’s requirements require closer teamwork, while the attitudes of new employees have become more individualistic, like Westerners. Lifetime employment in Japan was always a custom, not a binding contract. Only large, growing companies could maintain it. This social convention assured employment in return for doing whatever the company needed at the time; something like being in military service.

Lifetime employment is long gone, eroded by economic opportunity and the attitudes of Japanese youth. In the mid-2000s, big Japanese companies lost 35% of all new college hires in the first year. Sekisui Housing loses only about 4%. Those who stay the first few years are likely to become lifers. Sekisui Housing needs that for the “peopleware” element of their systems to work.

If Sekisui is not what a new hire wants to do with their life, it’s best that they go their way sooner rather than later. Thus Sekisui Housing first pays attention to “getting the right people on the bus;” then cultivating them to like the work. Sekisui has job postings for them. New employees are encouraged to rotate through several jobs to find a niche in which they feel challenged and happy. Those who stay should have an intrinsic interest in the work – love it.

Promotions are now by merit – although merit greatly depends on demonstrated performance in team settings and first level leadership. Senior managers have to learn how to evaluate their charges carefully and fairly, and their mid-level leaders, not just the newbies. Leaders at all levels have to know how to bring along others in order to have a strong organization in the future.

As a result senior managers’ mentoring of their charges is not a now-and-then activity. Coaching the “soft stuff” is part of their standard work: coaching the value system in practice; the work culture; how to think; how to listen; how to behave in meetings; how to persuade others – including mentoring about mentoring. Mentoring takes place on the job every day, in addition to periodic personal conversations. All managers from the CEO to team leaders should know how to seize good mentoring opportunities at times when they are relevant to the current activity and to the mentee. (Even in sports, the best coaching is on the spot while the athlete is in action, and thoughtful mentoring deepens the mentor’s own learning.)

Effective mentoring is considered so important to the future of Sekisui that managers have weekly meetings on it. The objective is to develop all people and all functions in the organization to work together solving problems – including the messy ones – with minimal friction. Eliminating communication waste makes every other challenge besetting Sekisui easier to surmount.

A Vigorous Learning Organization

Sekisui fits the pattern of a vigorous learning organization. Its common languages – the CAD drawing system and the kaizen system – enable people to communicate and to learn quickly. Skill training is straightforward by comparison. It has a system to draw people with an affinity for the work into the company and to develop them behaviorally for effective problem solving together. And its mission statement points the direction for further learning and improvement.

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