The Lean Construction Journal in a 2009 white paper pegs the ratio of non-value-added or wasteful activities in a typical construction project at 55% to 65%. The white paper-Creating Value: A Sufficient Way to Eliminate Waste in Lean Design and Lean Production goes on to say, “Creating value and only value is the best way to reduce waste in design and construction.”
Needless to say, the construction industry is badly broken and needs fixing. How does the industry rise up and meet the challenges of customer demand for higher quality, improved profitability, and the shortage of skilled workers? The first step is to cast aside the not invented here syndrome and embrace a time tested manufacturing solution -the Toyota Production System-commonly called Lean.
Why should construction company managers even consider Lean as a way to improve their business? Here are some eye opening facts about the U.S. construction industry:
- 60% to 85% of construction time is spent waiting or fixing mistakes
- The average construction worker operates at 40% efficiency
- Critical shortages exist in qualified and skilled workers
- The return on equity for construction pales in comparison to all other U.S. industries
- Customers are frustrated with poor quality, confrontation, excessive change orders, and scheduling delays
These are some of the same or similar issues Japanese companies like Toyota faced in the 1950’s. Lean construction can help remediate the dire conditions described above. While Lean is no silver bullet, lean construction offers substantial improvements to the problems facing the construction industry. If construction companies want to prosper in the 21st Century then they should move toward lean thinking.
Why so Much Waste?
Why so much waste? Construction projects are so fragmented. Many times subcontractors do their work disregarding how what they do impact the work of other subcontractors. We call this the “throw it over the wall’ mentality. One functional department ( in this case subcontractor) completes its part of the project and throws it over the wall to the next department (subcontractor) who throws it back over the wall because it isn’t right. This mentality sub-optimizes the performance of the entire project creating quality and schedule problems.
Lean thinking is a new way to manage construction. Many people object because they believe lean is a manufacturing strategy and has no application in a “unique” industry like construction. The goal of Lean Process Improvement is to maximize value and eliminate waste using techniques like one-piece flow, Just-in-time delivery, and inventory reduction.
There is a small but growing movement to apply lean principles to construction. Applying lean principles to construction really means applying them to project management. This transformation involves mapping your construction processes, determining the most efficient work flow and establishing a pull system. How do you create a pull system? As a contractor you can begin by looking at what the completed project should be, and then work backwards, identifying each preceding step. Downstream processes determine what the upstream processes will be and when they should take place. Taking this view of the project will help you control the work flow. You should also look at creating value stream or process maps of your job support processes as well as project processes. Processes like job setup, estimating, payroll, accounts payable, purchasing, tool and material handling are good candidates for mapping.
The Need for Change
The construction industry is broken and the five facts below demonstrate why the industry needs to change:
- If it takes six months to build a house, then 85 percent of the time is spent on two activities: waiting on the next trade to show up, and fixing mistakes
- Clemson’s Professor Roger Liska conducted an analysis of productivity on the construction industry and found that the average construction worker operates at only 40 percent efficiency.
- Critical shortages of qualified, skilled workers are predicted to only get worse.
- Despite the construction boom of 2006, Business Week’s 2007 Investment Outlook Report indicated the return on equity (ROE) for all U.S. industries was 17.9 percent, while the ROE for the construction industry was a mere 9.7 percent.
- Industry customers are frustrated with poor quality, confrontation, excessive change orders in quantity and dollar value, scheduling delays and litigation.