Is Your Company Lean?

Winning a prestigious contract, developing a faster process to complete a critical task, or inventing an attachment for a machine that dramatically increases productivity are the home runs of the construction world. These game-changing events are the result of creativity, effort and investment.

No matter how long you have been in the construction business, you know you don’t win every contract you compete for, and not every job earns the margin estimated. Other business challenges include faster processes being quickly adopted by your competition, and inventions not working work as envisioned. How will your company sustain its growth and profitability in the post-recession economy? How will you differentiate yourself from the competition?

“Lean construction” is a frequent topic in major construction journals and publications. You only need to Google it to see that many well-known construction companies such as JE Dunn, M.A. Mortensen, Turner and many others promote its use on their websites. The term “lean” was coined by John Krafcik in the 1988 article, “Triumph of the Lean Production System,” published by MITSloan 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 a decimated 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 describes how Toyota’s culture focuses on the elimination of waste and improving the “flow” or transition from one operation to the next. Another key figure in the development of the philosophy is James P. Womack, founder of the Lean Enterprise Institute.

The essence of lean has been defined as the continual pursuit of delivering value for customers in the least-wasteful way. Traditionally, the construction process has come to accept that a certain amount of waste is to be expected. A field supervisor would not want to run short of materials at the risk of craftsmen being idled. A certain amount of non-productive time for travel or meetings goes with the job. The question that plagues our industry is: At what point does material waste and non-productive time go beyond acceptable to unacceptable? It can be a short slide from unacceptable to unprofitable.

Symptoms of Waste

The continual pursuit of delivering value and reducing waste is by definition a process and a way of business, not an event. That the marketing department declares the company lean does not make it so. The proof is in the methodical and purposeful actions that lead the company to the delivery of construction services in a way that meets the end user’s perception of value while eliminating unnecessary costs. These methodical and purposeful actions require awareness, investment and effort on every project, every day, by everyone.

Identifying where waste occurs and the magnitude of its impact on your cost of delivering construction services is necessary for reducing waste. Think about your organization. Are any of these types of waste evident in your operation?

  • Waiting – The job superintendent calls the project manager frequently during the work day for direction and decisions necessary to keep the crew working.
  • Correction – Personnel are dispatched on multiple occasions to complete punch list items on a project before retention is released.
  • Motion – Crews are often relocated from one area to another to keep them “busy.”
  • Transportation – A parts runner is constantly delivering “emergency” material orders to job sites.
  • Over processing – A vastly better finished product is provided than is specified or necessary for the end user’s purpose.
  • Over production – More material is required than estimated because the sub grade was low.
  • Inventory – Materials become unusable because they were stored unprotected in the elements.

Any combination of these types of waste results in loss of efficiency and time. Analysis of job cost and productivity reports is useful in identifying where improvements are needed. This is assuming that the reports are accurate, timely and meaningful.

Establishing expectations through quantity and cost budgets at the beginning of the project creates a baseline. Measuring and recording production quantities on a weekly basis and recording labor costs daily allow your team members to understand trends and unearth opportunities to eliminate waste. Questioning cost overruns and costs of correction provides a learning opportunity — if the emphasis is on eliminating the cause rather than identifying the person responsible.

It’s important to learn more about lean construction before you totally commit the resources and effort to this cultural shift in your organization. Lean is a process, not an event, and you have to start somewhere. Continuous improvement requires knowledge, measurement, teamwork, and perhaps most important, perseverance.

Eliminating waste is a daily grind in which you focus on a problem, identify potential solutions, measure results, and seek to continuously increase the value your company delivers to customers.

Robert Sniegowski is a principal in the construction practice at public accounting and consulting firm CliftonLarsonAllen LLP. He specializes in providing operations, job costing, and equipment consulting; business planning; expert witness testimony and technology systems selection and implementation advice to contractors. He is a graduate civil engineer and licensed professional engineer. He can be reached at [email protected]

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