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Construction Break

Lean construction is the continual pursuit of delivering value for customers by eliminating waste from the construction process.

Why Lean Construction and Why Now?

  • 9/6/2012

Why Lean Construction and Why Now?

If your construction company survived the last five years of this down construction market you may be feeling you are nothing but skin and bones. Any fat in your cost structure was cut long ago. So what is this talk of lean construction, and why has this manufacturing industry concept suddenly emerged as a hot topic when building faster and cheaper has defined the path to profitability since the construction of pyramids in Egypt?

The term lean was coined by John Krafcik in a 1988 article, “Triumph of the Lean Production System” published in the Sloan Management Review. The principles of lean production come from the efforts to rebuild the Japanese manufacturing industry following the devastation of World War II. With limited natural resources and workforce, eliminating waste was essential to Japan’s post-war economy. In his 2004 book, The Toyota Way-14 Management Principles From the World’s Greatest Manufacturer, Jeffrey Liker described how Toyota’s culture focuses on the elimination of waste and improving the flow or smoothness of transition from one operation to the next.

For those that manage construction operations, it is easy to reject the notion that “lean” principles can be applied to construction.

  • “Contractors have always had an interest in cutting costs and increasing production.”
  • “Low bid wins the job in this business.”
  • “Construction is nothing like manufacturing. No two projects are the same, means and methods are dependent on the project parameters, and the personnel turnover is excessive.”
  • “Contractors do the best they can under contractual and environmental conditions that are extremely variable and difficult to predict.”

On the other side of this debate, the construction industry has changed and buyers are in a position to demand a higher level of service than even the best-in-class delivered before 2006.

  • Research has consistently shown that in the construction industry, less than 50 percent of work time is spent in preparation or on task .
  • Buyers of construction services are often engaged in highly competitive industries, for example, high tech, manufacturing, and retail.
  • Astute buyers have observed the waste they are directly or indirectly paying for as their projects are being built and are asking why they should continue to bear these additional costs.

Addressing the buyer’s needs could be the opportunity construction companies have been looking for to differentiate their company from the competition. However, capitalizing on this opportunity is a multi-step process. Those in a leadership role or who serve as a key advisor to leaders in their organization might explore the following issues before they begin this transformation.

Education: Implementing lean in your organization is a significant commitment that should not be an emotional decision. There is a wealth of information available on the internet, through seminars, or by retaining the services of a consultant. Becoming better educated about the process, available resources, the investment, challenges, and expectations is essential.

Self assessment: How is your company doing — honestly? Are costs and productivity measurements understood? Is there a pattern to profitable projects or losers? What are the similarities (positive or negative) in size of job, type of job, customers, geographic location, and project manager? What is the opportunity?

Identify the pioneers: Executive leadership has to insist this cultural change is necessary for sustainability and profitability. They must also insist on staying the course when it gets tough. Additionally, an advance team of financial managers, project managers, and field supervisors who are open-minded, creative, and committed to continuous improvement must be identified to lead the company’s daily efforts.

Focus on essentials: How does the organization add value for its customers? What are the non-valued added activities? For non-value added activities — which are necessary and which are unnecessary? Can the unnecessary be eliminated? Can the necessary non-value added activities be minimized or made more efficient? Where is your greatest opportunity for a win? For example, an increased emphasis on planning for the next day’s work might eliminate an “emergency” delivery from the warehouse. Not only is the cost of delivery eliminated, but the greater savings comes from less time wasted by an idle crew that must wait for the delivery or shift to less urgent work. Wasted time is a management issue, not a craftsperson problem. Planning is inexpensive compared to the cost of crew that is not being utilized well.

Collaborate: All stakeholders in a construction project as well as the interested parties (e.g., taxpayers, traveling public, and neighbors) should be invited to participate in the effort to deliver value on a construction project. The best solutions to the challenges that threaten safe, profitable, quality, and timely project delivery arise when all perspectives are welcomed and considered.

“Lean” construction is not about cutting customer service or quality, or exploiting employees, subcontractors, or suppliers. Lean construction is the continual and methodical pursuit of delivering value for customers by eliminating waste from the construction process. In a buyer’s market, developing a corporate culture that tackles every project with the quest to deliver more value and eliminate more waste than the last project will differentiate your company from its competition. Developing a lean construction culture is a journey that takes organizational commitment to the process, perseverance, and collaboration. There is always an opportunity to improve, regardless how lean the organization has become. As with any journey, deciding that there is something better for an organization is the first step.

Bob Sniegowski, Construction and Real Estate, Principal/Consultant or 612-376-4659

Chad Royer, Manufacturing and Distribution, Senior Consultant or 612-397-3295