12 March 2020
The landscape for the construction industry has changed immeasurably in the face of the current global pandemic, similar to almost all other industries. It would seem now more than ever, that Lean principles would be beneficial to help the industry navigate into the post-COVID world. Furthermore, with the ever-growing demands and complexities associated with the built environment pre-COVID, and the well-publicized productivity challenge within construction (more than 70% of all construction projects are completed late and over budget), it is evident that the industry has been in need of some level of disruption to enable it to keep apace of the progress other industries are making in terms of efficiency. So, why is Lean Construction still not fully embraced by contractors, and what do you as an end-user need to be aware of that can lead to this reticence to adopt?
Value is defined as what the customer perceives as important and is willing to pay for. It comprises anything that moves the project closer to completion and that cannot be reworked. True value is the ‘why’ behind a project being undertaken and the desired outcome or objectives, and this typically extends beyond budgets and schedules. Lean focuses on the prioritization of the operational needs and values of the users, while delivering on budget and schedule, promoting innovation that optimizes value and eliminates waste.
Construction industry studies have shown that in excess of 50% of the effort required to deliver a project is typically non-value-added effort, or waste from the perspective of the client. By focusing on non-value-added activities, processes are constantly reviewed for any waste or inefficiency, and what the client-led value objectives are, to achieve true alignment. Ultimately, it leads to productivity gains, optimal ways of working and the optimization of project outcomes.
Traditionally, construction is a combative industry – teams work in silos, the built environment is increasingly challenging, and as referenced above, productivity is stagnant. A combative culture will derail Lean, and will often have tangible impacts on a project, both in terms of cost and schedule. The Lean concept turns this on its head, championing collaboration, trust and open communication between all members of the project team, streamlining the efficiency of the project team and giving the highest chance of collective project success.
Not only does Lean remove waste and inefficiency, while facilitating early engagement, consistent collaboration and constant communication, but these factors intuitively streamline the workflow. Furthermore, the use of methodologies, such as modular and prefabrication, support fast-tracked delivery, as well as optimizing the capital spend.
Contractors play a key role in the adoption of Lean, as they are responsible for the key facets of a project, including cost, schedule, safety and quality. And yet for the most part, general contractors have been somewhat slow to embrace it. Why is this the case?
Lean is a significant change for any business, and can be perceived as a somewhat abstract methodology for those from a traditional construction background. It essentially changes the contractor’s organizational approach at its core, and so it must be fully bought into and believed to be achievable to facilitate such a fundamental change.
Construction contractors typically operate on a relatively tight net profit margin before tax, sitting around the 3% of revenue mark. Inevitably, the perceived costs associated with the necessary training and implementation of Lean will be a particularly important factor in this case, and may play a hand in its slow adoption as a result. Any potential adopter will need a good understanding of what level of productivity loss they should expect during the learning and implementation phase.
Lean’s main allure for the construction industry comes in the use of elemental and relatively inexpensive tools, which again taps into its inherent value. Breaking activities and tools down will be cost-efficient but effective. A platform like Last Planner is an example of one of these tools.
Similar to the client, Lean offers a distinct value proposition to the contractor, and again, the value relates to productivity. In an industry in which productivity is poor and wages account for a substantial proportion of total revenue, a marginal increase in productivity arising from a methodology such as Lean will have a significant impact on profit. For example, a 10% uplift in productivity in a business, with 3% average profit where wages amount to 35% of total revenue, will double the profit.
Furthermore, achieving improved productivity helps to mitigate against risk in a business that is inherently risky and competitive, and so it is hard to understand why the adoption rate is still remarkably low. However, the general consensus is that these distinct benefits have been lost in translation along the way, and that hard facts and statistics are needed to address this in terms f which contractors will be receptive.
While the benefits that off-site methodologies can offer is relatively well-known, the potential for OSM to counteract some of the productivity challenges arising from COVID measures (for example, reduced capacity on-site due to social distancing) is significant. Another system worth referencing in this regard is Last Planner, with its capabilities to produce a predictable and efficient work flow all the more pertinent with the current challenges being faced in the industry.
While we see Lean being readily adopted in some sectors, it is typically more widely accepted in manufacturing and industrial-type verticals. This is because the Lean concept is ingrained in their background, and as a result, it is second nature. For contractors, Lean can represent a daunting and costly investment, but it is evident that the derived benefits of adoption are worthwhile. There are many examples of contractors embracing the methodology to its full effect, and perhaps part of the solution lies in learning from peers and allies, exploring case studies of what has worked well in the adoption approach.
While overall, challenges to its widespread adoption remain, the benefits of Lean to projects and the construction industry as a whole are clear. It promotes the elimination of waste and inefficiency, nurtures a collaborative culture and streamlines the workflow and project delivery. In light of the set of sizeable challenges posed for our industry by COVID-19, Lean is all the more beneficial in terms of its offerings to tackle some of these key challenges, particularly relating to efficiency and maintaining a particular level of activity on a project (albeit, some of it off-site), as well as the coordination of workflow.
In bringing the concept to the forefront, Lean becomes a client-led objective, with a clear statement of the intention to embrace the Lean approach to all members of the project team at an early stage. It must be implemented through a systematic, process-driven and program-based approach.Ultimately, there’s a great deal to gain by innovating project delivery. The Lean methodology has a lot to offer, which begs the all-important question: where are you and your organization on the Lean journey?