Marginal construction must be kept lean

Every family needs a roof over its head; every business needs somewhere from which to operate and grow. So the construction industry – and its sub-sectors – is hardly an insignificant part of the economy. Various statistics abound, but as an order of magnitude it employs some 1.2 million people and represents some 9.8 percent of the UK’s GDP – about £56bn.

Factor in all the allied support and supply chain activities and these figures climb even further. But unlike other sectors the construction sector seems fragmented; is sensitive to the smallest economic variance and appears to live off very small margins – often less than four percent for contractors.

So given the importance, yet vulnerability of the industry, how can it embrace ways of working, best practice and innovation?

There are a few, forward thinking construction companies, that are turning to an innovation called ‘Lean’ and more predictable projects and focussed cost reductions, rather than ‘slash and burn’ tactics.

So what does Lean looks like? Well, it is guided by a few, uncomplicated principles:
1 Know your customer values and what they are willing to pay for – and this may change over time;
2 Understand the wasteful activity in your business – construction examples are given later on;
3 Create processes for continually reviewing (1 above) and removing (2 above);
4 Make the flow of value-adding steps for (1) run smoother, faster and eliminate interruptions;
5 Don’t do anything until the customer, or a downstream process, calls for it;
6 Expect a journey; it’s not a one-off activity as continuous improvement never stops!

However, ‘waste’ is a broad term and needs putting into context for construction. Typical wastes found within projects are: Waiting for approval, sign-offs, tools, materials, information, sub-contractors to get on site; re-work or rejection of incorrect items and snagging; building ahead of demand; unnecessary motion around the site; materials and stocks; too much too soon (storage and deterioration issues), or not enough and the ensuing stoppages. Furthermore, poor or insufficient training and communications; poor design processes, omissions and errors, too many changes affecting drawings release; over processing and creating more detail and activity or using more costly materials than the client requires.

To put this ‘waste’ into further context a recent study revealed that 57 percent of all construction activity was consumed with processes that gave no value to the client at all. However, construction is not alone in what seems an alarmingly high figure – many other sectors carry similar levels of waste. But unlike many semi automated or automated industries, construction is still, by necessity, labour intensive. Therefore the wasted activity in labour dependent operations is significant. Figure 1 above illustrates typical non-value adding activity. As outlined above, time absorbed in people searching for tools, materials and equipment is the biggest culprit.

At this point it is vital to say that this waste is not intentional – nobody designs a system in this way – it just evolves, and the system then perpetuates it.

Given that the benefits of superior productivity, better quality, selective cost reduction, slicker supply chains, better margins and happier staff, many other non-manufacturing sectors are successfully adopting Lean; and there are many diverse examples. 

Bedford Hospital, an NHS Acute Trust, is developing Lean projects in radiology, emergency care pathway and pathology labs. Another example is Anglia Support Partnership. This is a NHS organisation that provides shared business support services to NHS and other public sector organisations. Over the last year it has successfully deployed Lean to the extent that some of its business units are now gaining new contracts.

The results are both quantitative and qualitative: better quality, faster delivery, a freeing up of internal capacity…and a far better ‘can do’ team spirit. On the south coast, Eastbourne Homes Ltd, a housing association, has recently undertaken its first steps in Lean. Initial results show that waiting times for disabled adaptations have been reduced by 53 percent and the backlog of requests for adaptations has been cut from 120 to 46. Moreover, suppliers, clients and other stakeholders – such as the local authority and the county council – are now more deeply involved as an integral part of the process and success.

However, in the construction sector, the question of who would be responsible for Lean projects is a significant stumbling block. The processes in construction are often highly interdependent yet fragmented and dispersed. There are complex networks of primary contractors, sub-contractors and other suppliers. The very nature of construction projects means that there is little continuity. Teams and networks are assembled for each project, work together and then disbanded at completion. To put it another way: If you were a Premier League manager, would you select a completely new set of players for each game? So the question remains: even if there was a common agreement, who would be responsible for the implementation of Lean?

A more fundamental constraint is that of culture and learning. By its very nature construction is a pragmatic, and, quite literally, an earthy world. With the pressures of building projects there is little time to reflect and learn before the next project gets underway. Of course, time is devoted to technical and craft skills training – but what about time for new concepts and innovations?

Then there is the issue of going about Lean with internal resources or going outside and getting consultancies in to train and work with the staff. Both have merits and demerits, but sometimes the latter course of action is seen as ‘lacking in ability and knowledge’ by management.

This is understandable, but it is groundless in reality. Like any other specialist, technical skill or knowledge: buy it if you need it. The trick is to ensure any external support works with you and that you acquire the skills and capability – don’t let it walk away with the consultants.

One point that often thwarts Lean is that of expectations. It is not a fad, or ‘flavour of the month’. The fact that it’s been around for sometime scotches that notion. It is a proven and durable route to better quality, targeted cost reduction and faster, more controlled projects. It needs to be treated as such. It requires a cultural change.

Part of the misunderstanding about Lean is created by the modern world in which we live. There is a tendency to expect, if not believe, that many of our activities are predictable and ‘plug and play’.

Not so with Lean. It is a long haul and is way beyond applying ‘tools and techniques’. These alone can lead to disaster if used in isolation and unconnected or supported by organisational culture. Yes, there will be motivating and rapid pay-back ‘quick wins’.

Whatever our views on the environmental issues, sustainability, climate change and depletion of natural resources…they are all here to stay and will become even more important. Against this background there are supply side and output side activities to consider as part of ‘whole systems’ thinking in sustainable construction. DTI figures suggest that the demolition and construction industry, in England and Wales, has to deal with some 90 million tonnes of inert waste each year. Of course some of this waste is unavoidable, and indeed, is useful in. say, backfill for quarry sites. But the fact remains that on top of demolition waste and other, inappropriate, site practices which create materials spoilage there are other by-products such as cardboard, timber, packaging, plaster board, insulation…and so on. All of which points towards opportunities: recycling, re-use or eliminating waste.

Of course, coercive waste reduction through tax instruments such as the 1996 landfill tax is here to stay. However on the positive side, proactive and forward thinking companies are gaining benefits. Cost reduction and quality opportunities will vary on a project-to-project basis of course but simple, effective approaches on the supply side, during site activity and on the output side are there to be had.

The final issue that besets so many construction companies is, (and reasonably so) ‘can we get a return on investment’. The answer is usually ‘yes’. But before entering into Lean be very clear about what your current performance measures are and how you go about collecting that data and evaluate the results. Standard cost justifications such as payback have merit but equally important is assessing the qualitative measures such as staff and client satisfaction.

A number of organisations are reporting gains. Recently, three construction companies in the South East of England in particular have seen sizable benefits. Over seven percent reduction in surplus materials cost through Lean and ‘pull’ systems. Increase in productivity through better site layout – less time spent searching for tools and materials; 11.2 percent decrease in landfill costs through re-use and recovery of materials; better quality, smoother project management and – ultimately – better client satisfaction and supply chain harmony through a Lean approach to design and planning.

What next?
First, talk to people and organisations that have done it; learn from them as to successes and pitfalls. Second, develop your own staff to gather internal capacity and capability – if you call on external support make sure the skills and knowledge remain. Third, be very clear about goals and what you want to achieve. It sounds obvious and simple – yet so many Lean projects get washed up on the reef of failure at this early stage. Fourth, work outwards from manageable projects and pay careful attention to evaluation. Fifth, genuine Lean is a long haul – politically, culturally and skills wise – so be prepared for this and resist ‘fad’ mentality; the snipers and dinosaurs!

So in traveling full circle: why would a sector that is particularly sensitive to economic shifts, lives off relatively low margins and is central in the UK economy not want to innovate? Lean can provide a platform from which to create better margins, better quality and on-time sign off and hand-overs.

Source information:
Authors: Dr Mick Lynn, (Quarry House Consulting) Tim Franklin and John Coleman (Alturos Ltd) all have extensive experience in implementing quality programmes and change management