How Lean Construction Management Improves Efficiency and ROI on Projects
“Less is more” is a concept that has historically escaped the construction industry. In fact, construction projects are actually getting more complex and challenging. Stricter demands on timelines and budgets, use of new materials and overall customization, complex building systems and tighter regulations, are only a few factors that contribute to construction projects becoming more excessive and ultimately more risky for all parties involved.
In order to stay competitive and profitable, construction teams need to find ways to maximize value and efficiency and minimize waste, or essentially do more with less. Applying Lean construction management principles to a project is a way to challenge old established processes and continuously assess ways to eliminate waste and inefficiencies to achieve:
- Increased productivity
- Improved quality
- Advanced execution–less fire-fighting
- Smoother operation–improved continuous flows
- Reduced operating costs
- Below, we’ll explore the foundations of Lean construction, as well as explain how applying these principles will specifically enhance and benefit projects.
A Brief History of Lean Construction
Lean is far from a new concept. The term Lean was actually first used to describe the production principles applied in automobile manufacturing. It was coined 1 by John F Krafcik during his time at MIT Sloan to describe a production policy he observed at car manufacturing plants that were able to produce a wide range of models while still maintaining the highest levels of productivity and quality.
In his article, Krafcik asserts that even the use of high technology did not yield the desired impacts on quality and productivity if it is applied without proper production management policies. He then goes on to define the key policies applied at the most productive plants, which have become the basis for Lean Production principles and the last 30 years of Lean studies and policies:
- Workflow standardization→removing waste
- Decentralized process improvement responsibilities–workers as more than cogs in a machine→adaptability and flexibility towards improvements
- Just-in-time inventory system→remove waste
- High emphasis on teamwork – respect, mutual trust and peer development
For those who have spent years working in construction, it’s not difficult to recognize how different a construction project and a construction site is from the majority of manufacturing plants and products. In manufacturing, a team can analyze the efficiency and productivity of a product over and over again until they are able to nearly perfect the process and the product’s quality. In construction, every project is a “prototype”. There is no other exact copy, with the same conditions, same people and same process built before to “practice” on. In fact, every week and every day is different than the one before, and the lessons learned from one sprint may not at all apply to the next. But even then, there are definite lessons and principles from Lean manufacturing that can be applied to construction in an effort to achieve higher levels of productivity and quality, similar to the improvements seen in car manufacturing plants.
Indeed, starting from 1992, the earliest written thoughts on Lean principles and their application to construction management came from Lauri Koskela2 challenging the industry’s paradigm that time-cost-quality are at a continuous trade-off with each other.
Further research on Lean construction stemmed from observations by Glenn Ballard and Gregory Howell3 that “normally only about 50% of the tasks on weekly work plans are completed by the end of the plan week.” Their insights gave way to reviewing and rethinking the principles applied to traditional construction management. Since those initial efforts, the entire industry has recognized that low productivity, inefficiency and continuous schedule and cost overruns are not acceptable. As a result, this has driven owners and construction teams to embrace the principles of Lean in search of a more successful and reliable project delivery.
In applying Lean construction management principles, the industry has defined one of the contractual or project delivery processes as Integrated Project Delivery (IPD).
What Is Lean Construction?
The Lean Construction Institute defines Lean Construction4 as, “A collaboration-based system that is founded on commitments and accountability. It requires a significant shift in the trust that each stakeholder places on another. The adversarial relationship that has existed in the industry between contractors and design teams over many centuries is challenged, with all stakeholders having to align with goals and objectives. In projects where Lean construction management principles are applied, teams integrate through collaborative tools and search for ways to eliminate waste. Teams seek to continuously improve through reflection. Lean processes are designed to remove variation and create a continuous workflow to drive significant improvement in predictability and strongly encourages respect for all people involved.”
As expected, as Lean management becomes more widely adopted in the construction industry, some of the benefits that the manufacturing industry experienced are now making their way into how construction teams operate and projects are executed.
The Benefits of Lean Construction
When implemented correctly, Lean construction reduces waste and improves efficiency–both significant benefits for project teams. However, in practicing these principles, there is immense value beyond a maximization of resources and improved productivity. In applying Lean construction management principles, here are some of the key benefits that can be achieved:
Higher Quality Work
Lean principles and the integrated project delivery process relies heavily on trust and respect of all people involved, resulting in a higher emphasis on communication and team performance. When a team is working as a unit, and not in the traditional adversarial way that has existed in the construction industry, every stakeholder feels empowered to highlight areas where more value and quality can be obtained. Additionally, alignment on the goals and objectives from the get-go, and a heavy focus on coordination and collaboration during pre-construction means a decreased chance of rework and encountering show-stopping issues during execution.
Based on the manufacturing principles of “just-in-time” delivery and “reducing waste,” another key opportunity that Lean construction promotes is leveraging prefabrication of components as much as possible. Prefabrication, or offsite construction, of elements like bathrooms, pre-wired light fixtures, even wall components in a controlled environment can be highly monitored for quality and consistency, and delivered to the site ready to “plug and play.” As an extreme example, take into consideration that a 30-story hotel in China was built in 15 days when 93% of its materials were premade. Although there is a potential loss of flexibility to make changes in the latter parts of the construction, it also enforces the benefits of making smart, value-driven decisions earlier in the design. If done well, prefabrication can have huge benefits–mitigating risk on the project’s schedule, budget and reducing skilled labor requirements on site.
Increases Employee Collaboration and Accountability
As described, Lean construction management relies heavily on the collaboration of the entire team. Managing a Lean construction project involves including and empowering all teams to contribute to the continuous improvement process through close, collaborative problem-solving.
One of the best ways to achieve streamlined, open collaboration between all stakeholders on a project is by utilizing technology tools and software that facilitates communication and problem-solving. For instance, Construction productivity software is one solution that allows cross-functional teams to always have access to the most relevant information and to collaborate to resolve issues or questions in real-time. Using the right technology is a key component to leveraging all the benefits of Lean principles in projects.
Greater Project Satisfaction
Achieving the full benefits of Lean construction management depends entirely on everyone understanding and aligning around the owner’s goals and objectives. Knowing which aspects of a project are regarded as the most valuable to the owner and end users allows teams to make the best, quickest decisions, without jeopardizing the outcome.
When owners know that their best interest is at the core of every decision that is made on the project, the speed at which issues are resolved in significantly increased. Decision making and contributions are decentralized, which allow the project to move quicker towards closeout. A project team that can promptly resolve any blockers has a better chance of staying on schedule and tracking to budget. All of these factors lead to a very happy owner, and ultimately to more contracts, work and profit for everyone involved.
Companies have reported an increase in productivity through the application of Lean construction management principles to a project, translating to an increased return on investment. Production rates are the core measurement units that a subcontractor or any “producing” party on a project base their estimates on. Ultimately, meeting the production rate used for an estimate is the key to being profitable. Any increase in productivity reduces the risk of losing profit and directly contributes to the continued business success of an organization.
Apart from the increase in productivity, any reduction in waste–whether actual material waste or procedural waste–results in overall efficiency of the project. In fact, a study carried out by Dr. Roger Liska, from the Department of Construction Science and Management at Clemson University, showed that the average construction worker is operating at about 40% efficiency. The remaining loss of productivity is largely attributed to some sort of waste in the process:
- 20% of efficiency is lost in waiting for materials, equipment or information
- 20% of efficiency is lost as a result of inefficient processes or poor systems design
- 15% of efficiency is lost due to poor scheduling of workers–where they are either working in a congested area or the area or space isn’t available
Since Lean construction leverages prefabrication wherever possible, reduction in material waste is also a great opportunity for gains in profitability. More controlled production environments allow for analyzing the materials and the processes much closer and maximizing the use of all raw materials. Minimizing the need for inventory and surplus materials yields savings that can then be invested back into the business.
Improves Risk Management
One of the key tools of Lean is Pull Scheduling. Also known as the Last Planner System (LPS), Pull Scheduling is a work plan method that is based on the following:
- Creating a backlog of tasks that are ready for execution (make-ready)
- Committing on tasks that will be achieved in the next sprint–weekly work plan (e.g., one week, two weeks, three weeks, etc.)
- Reviewing and assessing the success of those commitments–track progress, remedy issues, feedback and learnings
When implementing the Last Planner System, detailed knowledge of exactly where your team is at every stage of the project (progress tracking), and where they can execute most productively in the next sprint (look-aheads) is required.
When a team can closely monitor their progress against the planned commitments, it allows decision makers to identify potential upcoming risks and work towards mitigating or eliminating them before they occur. This process is very different from the status-quo–where the people that are able to make course-correcting decisions are the last to know when a commitment or plan isn’t progressing as expected. In traditional methods of planning, the project manager or superintendents frequently find themselves reacting to fires and inefficiencies after they’ve impacted the project, rather than having the opportunity to eliminate problems proactively.
By understanding the progress and issues of the site more proactively, teams can manage the overall site more collaboratively and efficiently, which also leads to a safer working environment for all, or in other words, “A clean, efficient site is a safe site”.
Look out for additional information on the Last Planner System and Progress Tracking in future PlanGrid blogs!
Impact of Integrated Project Delivery and Lean
If all of the above isn’t reason enough, there are many other additional benefits of applying Lean construction management to your project and starting to standardize it as your way of building. For instance, the application of Lean and IPD over the last 30 years has started to yield results in a way that the benefits can no longer be ignored.
According to a McKinsey Global Institute analysis, the impact on productivity and costs by improving the contractual structures in favor of more collaborative contractual relationships is:
- In the range of 8-9% improvement in productivity
- In the range of 6-7% improvement on average cost savings5
The combination of Lean principles and IPD puts the focus back on cohesive construction teams. By creating a formal project delivery method that holds all team members accountable and focuses on communication, all stakeholders are incentivized to work towards the same goal of efficient project completion. But even beyond the productivity and cost savings that applying Lean construction management principles provides, there are other significant positive value propositions that come with a more collaborative and integrated approach.
An integrated project, where, as previously described, there is an atmosphere of trust and respect, leads to more open communication and sharing of knowledge. As an effect, this allows the entire team to become more aligned with the owner’s desired outcomes and objectives. Teams are able to manage schedule, cost and quality in a way that does not jeopardize those key outcomes but adds value to the overall results.
Through a more collaborative arrangement, IPD allows open conversations with all the experts at a time that makes the most impact–early in the project. Lean manufacturing principles allow every person in the project to contribute their expertise and have their voice heard–decentralized decision making.
In highly collaborative projects, there is a large effort placed in the coordination at early design phases, where construction experts can provide feedback on budgets and value proposals, advise on constructability issues and overall coordination of design systems. When collaboration and planning is a major focus at the front-end of a project, it increases the likelihood that the overall project goals will be reached.
Contractor and Subcontractors
Having been involved in early feedback on the design, materials and overall logistics, the contractor and subcontractors can enter the construction phase with a much more detailed understanding of the objectives and goals of the project. In turn, certainty that efficient delivery will yield the desired profit outcomes for everyone involved is improved. Also, their deep understanding of the owner’s key objectives allows the team greater autonomy and speed in unblocking obstacles during the most critical phase–construction.
Lean Construction and the Labor Shortage
If your company isn’t already considering applying Lean construction principles to how you work, here is one last factor to consider: the construction labor shortage. With nearly 80% of construction businesses struggling to find qualified skilled labor, companies are seeking other ways to get around the hiring throttle. To help address the problem, Lean construction indeed helps to offset the impact of the labor shortage by boosting overall project efficiency. In fact, 13% of construction companies have reported starting to apply Lean construction management as a way of battling the labor shortage–counting on the increase in productivity, the reduction in waste, streamlining production, knowledge sharing across and within their company, and overall, banking on the growth of the value of the service and final product they provide. Although the industry still currently has a dire need for skilled labor, applying Lean principles can help lessen the impact of the shortage over time.
Lean Is the Future of Construction
No project is about to get less challenging, but how projects are managed can be streamlined and simplified. In order to stay ahead in the business of construction and balance the increasing complexities of projects, companies need to start thinking and applying Lean. Although Lean construction management might sound idealistic in theory, when implemented correctly, it truly helps teams maximize project efficiency and reduce overall risk. From a reduction in waste, increased ROI, a higher quality of work and more, the benefits of Lean construction can no longer be ignored.
- Krafcik, John F. (1988). “Triumph of the lean production system”. Sloan Management Review. 30(1): 41–52. https://www.lean.org/downloads/MITSloan.pdf
- mp up^ Koskela-TR72 Archived 2003-04-13 at the Wayback Machine.
- Ballard, Glenn (22–24 April 1994). “The Last Planner“(pdf). Northern California Construction Institute Spring Conference. Monterey, CA: Lean Construction Institute. Retrieved 31 March 2013.
- McKinsey&Company, McKinsey Global Institute – Reinventing Construction: A route to higher productivity, February 2017