Impact Of Lean In Construction Industry Construction Essay

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The implementation of lean construction practices emphasizing the Last Planner System (LPS) (Ballard and Howell, 1998) and waste reduction techniques in a large number of projects has provided empirical evidence that is analyzed in this paper in order to summarize some of the lessons learned from the implementation. The paper analysis is based on data obtained from the authors own implementation experience and also from case studies found in the Lean Construction literature (Koskela 2000, Ballard 2000, Benardes 2001). Some of the important activities developed under this scheme are Periodic Meetings, Workshops, Plenary Sessions and Site Visits by the researchers. The project sample included 39 low rise building projects, 15 high rise building projects, 11 heavy industrial projects and 12 light industrial constructions. This information was collected during a research project carried out to develop implementation strategies for Lean Construction and to measure the impacts of those strategies. The analysis considered implementation of projects during a three year period, from 2001 to 2003 (Alarcon et al. 2002a, Calderon 2004).

4.2.2 Reduction in variability in projects

Improvements in percent of planned assignments completed.

Percent plan complete (PPC) of the projects under investigation increased over the three year period. These results can be attributed to a number of reasons like: -

Learning process

Experience accumulated by team

Support tools.

Top management involvement and understanding of the process

Influence of the level of implementation on project PPC

In an effort to obtain a better understanding of the impacts of the implementation level, a sub-sample of 11 National (Chilean) projects (N) and 5 international projects (I) were examined in more detail (Figure 2). Most projects in this sub-sample were building projects, except projects N8, N10 and N11 that were light industrial projects. Figure 2 shows projects classified into two groups, according to the level of implementation of the LPS elements present in the projects. The first group consisted of 10 projects with a basic level of implementation with emphasis on the weekly work plan and only informal Look-ahead planning. The second group included 6 projects that had implemented formal Look-ahead planning process and in one case formal workable backlog and learning processes. The projects were also ordered according to their average PPC to facilitate the analysis. Figure 3 shows that, in general, projects with a more complete implementation had a higher PPC than projects with basic implementation.

Causes for non completion in projects

Initially for first year of implementation the causes for non-compliances were poor planning and field interference. At the end of third year the causes were associated with sub-contractor where this single item accounted for 24% of the causes. Poor planning of material, accounted for 10% of cause.

Figure 2.1: Evolution of PPC in three year period Figure 2.2: Impact of level of implementation On

PPC performance

A general conclusion is that causes associated with external agents increased their participation, probably due to a better control of internal causes in the projects as they improved PPC. In projects with high PPC causes associated with the contractor's own management become less important in comparison with causes attributed to subcontractors. These causes increased in almost 200 % during the period studied, but the percentage of contracts given to subcontractors also increased, explaining part of the effect.

Figure 2.3: Evolution of causes for non-completion in projects

4.2.3 The impact of it support on PPC performance

The poor use of information generated during implementation of LPS was identified as the main barrier for a more complete implementation. To break implementation barriers, the research team developed a prototype computer system working closely with the companies in a continuous interaction with them during system design. The prototype system, called "Plan Control" was tested in several projects These resulted in higher PPC performance for those projects that used IT support compared with projects without IT support.

4.2.4 Performance improvements

Performance improvements were measured quantitatively and qualitatively in a number of companies involved in implementation efforts. Figure 8 shows performance improvements reported by 8 different companies. These measures include different performance indicators such as manpower productivity, cost factors, construction speed, schedule reductions, etc. Productivity improvements of up to 86 % have been measured in individual projects (Alarcon et al., 2000).

Figure 2.4: Variation of project performance reported by 8 companies

4.2.5 Conclusions

The analysis of the evidence obtained from implementation of Lean Construction practices in many projects analyzed in this paper demonstrates the effectiveness of the proposed practices and their multiple benefits:

• The LPS is an effective tool to improve reliability of planning in projects.

• Improvements in PPC are usually accompanied by a more stable and less variable performance of the PPC indicator.

• Improved PPC performance produce a shift in causes for non-compliance from internal to external causes.

• IT tools can support a more complete and standard implementation of the LPS in projects and increase the probability to achieve higher PPC performance.

• Performance improvements were observed in almost all the projects under investigation. However, performance measurement was a difficult task for the companies.

• Performance improvement impacts between 7% to 48% were reported by 8 companies that participated in the implementation program.

The experience and the results obtained have lead to the design of an implementation strategy that has produced good results. The strategy involves development of systematic training and research actions, a proactive interaction with contractor upper management and project organizations, collaboration among companies and a constant search for new ways to improve the implementation process. Working in a collaborative approach, with different training actions, sharing experiences and information among the companies produces a number of benefits: development of skills for implementation, development of a healthy competition among companies that are working together, fast learning from successes and failures.

4.3 CASE-2 competing construction management paradigms

4.3.1 Introduction

Logistics management concepts and tools currently have a great value for several business sectors that are searching for productivity and competitiveness improvement, providing costs reduction and better customer satisfaction. With that purpose they are trying to promote a better integration between internal and external actors who support logistics activities. This paper reports on three case studies undertaken as part of a Master Research program, which has the main objective of investigating how logistics concepts and tools are being applied to the Brazilian building construction sector. As a conclusion, guidelines are presented in order to improve logistics efficiency and effectiveness in the building production process. These guidelines are based on positive and negative experiences of some construction companies presented briefly in three case studies and on experiences of companies from other sectors of the economy. It is discussed how logistics concepts and management tools can be applied to building construction in order to achieve competitive advantage. It also attempts to demonstrate the validity of these concepts and tools and to identify general guidelines for logistics management improvement through case studies developed in three Brazilian companies.

The main objectives of a logistics system are to maximize customer service level and to minimize total cost in its activities. In other words, the objectives are to generate value to the customer and to reduce cost in the production process.

4.3.2 Case studies general presentation

Three case studies were conducted in order to identify: (1) general difficulties in logistics management process; (2) new visions, methods and tools that are being applied on building companies; (3) the opportunity of using these visions, methods and tools in building companies. Observations were made in internal ambit of the companies, what means, it was done a diagnosis research focused in their logistics management process and it was not taken into account an analysis of external influences.

Fig. 2.5 Aspects analyzed in the case study

The first company, which is called "X", acts as an entrepreneur and a general contractor of residential and commercial buildings in a specific district. The production process rationalization strategy used by this firm is focused on the improvement of traditional constructive techniques and on the improvement of labours work conditions.

Some key points for logistics efficiency improvement identified in this company are:

· Strategic politics for supplier's relationship definition;

· Site layout planning considering the different site phases;

· Agents roles and responsibilities definition in site logistics activities;

·Duplicity elimination and velocity increasing in data processing and information exchange.

The second company, that is called "Y", acts only as a general contractor in "cooperative systems" project. Usually they are huge projects with six or more buildings with long term execution. Its production process rationalization strategy can be characterized by a widely subcontracting practice and it seeks a vertical disintegration of production process.

Some key points for logistics efficiency improvement identified in this company are:

· Logistics coordination function definition;

· General procedures for acquisition process definition;

· Supply plans elaboration;

· Duplicity elimination and velocity increasing in data processing and information Exchange.

The third company, that is called here "Z", acts as an entrepreneur and a general contractor of residential buildings. It has bigger revenues than the others do and all units are commercialized through direct financing with the company. To achieve this strategy and reduce costs, company Z has also standardized lots of constructive solutions for their building projects and minimized the number of material and component suppliers.

The main key points for logistics efficiency improvement identified in this company are:

· Process integration with suppliers increase;

· Information vehicles improvement including Electronic Data Exchange (EDI) implementation;

· Interference reduction among subcontractors and agents roles and responsibilities definition in site logistics activities.

Although the three companies have different strategies and different challenges for logistics improvement, it was possible to notice that in all of them some philosophies, methods and tools for logistics management are somehow being used.

4.3.3 Logistics management

Supply Logistics Management

Supply function is currently pointed as being responsible for production process delays and stops, because a lack of material can impede the accomplishment of an activity, causing productivity loss .But recently, the "Quality Movement" and, in a certain way, the diffusion of Just In Time(JIT) principles have been influencing positively the supply logistics process.

Quality Movement has involved hundreds of companies in the very different Brazilian States. It consists basically on the diffusion and implementation of Quality Management Systems in these firms. These systems, based on ISO 9000 series, helped supply logistics improvement, particularly, through a standardization of procedures, that are in fact operational tools, like: (1) specifications and purchase orders; (2) suppliers selection and qualification; (3) material quality assurance; (4) materials and components deliveries inspection; (5) criteria for divergences solution in the relationships between the company and suppliers.

Just in Time is a philosophy that can be traduced as a synchronized flow production system without stock. Large materials and components stocks (including finished services waiting for a sequential job) usually hide problems like: (1) non punctuality in materials and components deliveries; (2) inability of the suppliers of doing deliveries in small lots; (3) inability in foreseeing with accuracy the periods of activities execution; (4) problems in production teams planning and productivity rates appropriation; (5) lack of knowledge of materials and components loss rates.

None of the three companies studied (X, Y, Z) adopt JIT systems. But most of management practices mentioned above are in the scope of their production strategy objectives in order to reduce stocks. So it is possible to identify JIT philosophy influence in their current practice. Some challenges to the evolution of a relationship between a company and its suppliers are: to establish long term and stable relations; to limit the number of suppliers; do not to change suppliers frequently; to establish a global qualification system; to evaluate suppliers by total costs; to collaborate with suppliers to make their products more reliable, and less expensive.

Evaluating the companies studied, Company Z was the only one that had developed long term relations with suppliers. Ninety percent of their suppliers were exclusive partners in their building projects. Before a building project conception start, all these material suppliers are already defined. Company X was not in the same stage but it has developed a partnership with two of its suppliers. Company Y had not established any partnership.

From an operational point of view, another important aspect for supply logistics management efficiency is the production planning, which includes supply plans. production plans can be divided in three different levels:- initial global plan, more detailed plan and commitment plan.

The case studies showed that this plan in the third level (commitment plan) is the one the companies have much more difficulties in accomplishing. Mostly because they have a culture of using planning methods to push production and also because building production process involves lots of uncertainties what makes this attempt a little bit hard to be successful.

Site Logistic Management

Some tools that can be used to aid site logistics management are commented here associated to "site preparation phase", site layout planning, handling systems studies, "design for production" and checklists.

Site preparation phase

It can be defined as a stage of the production process dedicated to preview in advance, before site activities start. The adoption of this stage as well as a methodological tool to organize decision process in the production process is an excellent opportunity for logistics planning and organizing, especially site logistics. In this way, unilateral decisions made by any element of a production team during service execution can be avoided. It also seeks to lessen interface problems among internal agents, because it consists of several meetings where take part all agents in order to make decisions. This preparation phase is not very common in projects developed by Brazilian building companies and in none case studies was possible to verify an operational tool like the described above. However, Company X was interested in developing a methodological tool based in a sequence of meetings involving all agents. And in Company Z, the resident engineer prepares an operational plan in a period of one month, just after some designs are already developed, in which he presents necessary site equipment, general site organization and an initial site layout sheet.

Design for Production

Another helpful tool for site logistics management is what it has been called in Brazil, designs for production. Melhado (1994) defines it as "a group of design elements concurrently elaborated with definite product design, defining the arrangement and sequence of production activities, equipment utilization, building site planning and evolution, and other information linked to the resources and characteristics of a construction company". All the companies (X, Y and Z) are using them. Company Y, for example, uses formwork, partition walls and external rendering designs for production.

Checklists for Site Conditions Control

A checklist itself is a very interesting management tool for site logistics diagnosis and control and also to help decision making process in site layout planning. Company Z has developed a detailed checklist for logistic control in which there are more than a hundred items monitored, related to site conditions. The foreman or resident engineer periodically (once a month) verifies site organization based on this checklist.

4.3.4 Logistics information flow management

An information system involves the definition of a way to send, receive and record information in an organization. The information system is the one that promotes internal relationship of several subsystems of a firm. An efficient information system is the one that is able to appropriately use data resources transmission, receiving and recording of a firm. On the other hand, an effective information system is the one that is able to supply the different internal systems with correct information at a correct time.

Some general principles for an information system implementation are: (1) analysis of information needs; (2) integration of information needs; (3) elaboration of an appropriate information system design; (4) selection of equipment and software; (5) gradual implementation with constant evaluation. So before adopting complex computational tools it is necessary to adjust the information system.

4.3.5 Guidelines for logistics improvement

Facing all challenges pointed out above to develop logistics management and using the case studies experiences and theoretical background, some general guidelines are proposed as follows. These guidelines are organized in three different levels: strategic, structural, and operational. Although the companies have different production rationalization strategies it is believed that this proposition is valid for all of them.

Strategic Level

Some strategic guidelines for logistics improvement are:

- Decision of customer service level desired, what means, desired stock levels and acquisition request attendance time;

- Decision of logistics goals to be reached in short, middle and long time and performance indicators for them;

- Decision of relationship politics with suppliers, seeking supply chain process integration and partnering.

Structural Level

Structural level guidelines are related to structural organization of firms through a systemic view. Some of them are:

- Determination of agents' responsibilities in logistics process, especially the logistics coordination responsible. Here it is suggested two ways to structure logistics within a company's organization. He firms can opt to develop a new administrative function that will be responsible to coordinate these activities or can create a "logistic pole", which consists of a collective forum involving multiple agents for logistics coordination.

- Definition of an information system design and a mechanism for information exchange among actors of logistic process. Firms must seek in a later future to implement tools, which will permit information exchange in "real time".

- Definition of a general procedure for purchase practice (centralized or decentralized).

Operational Level

In an operational level it is necessary at least to develop the following guidelines:

- Definition of critical materials for physical flow rationalization;

- Elaboration of supply plans considering the three hierarchical levels of planning. It should be developed a general initial plan, an intermediate plan for a shorter period and a commitment plan in a weekly basis for daily activities;

- Elaboration of site layout planning considering technical and economical feasibility of several internal transport alternatives for handling materials and previewing different arrangements for the different site phases;

- Planning of vertical transport equipment use in a daily schedule;

- Elaboration of designs for production for critical services;

- Incorporation of constructive system changes seeking to let them more rationalized or industrialized.

4.3.6 Conclusion

This paper aimed to initiate a discussion about the current opportunity of studying logistics applied to building construction, and to briefly describe some concepts and management tools that can be applied to logistics improvement. General guidelines then were presented based on three middle size Brazilian building companies' experiences and on a theoretical reflection about the theme. As it was foreseen in the initial hypothesis, in all studied companies it was possible to identify positive and negative experiences in logistics management. The most relevant positive experiences found in one or more of them have been gathered in the general guidelines. On the other hand, the negative experiences showed potential changes in logistics management in order to be more effective and efficient, so they also have helped to develop some of the presented guidelines.

4.4 CASE-3 Competing construction management paradigms

4.4.1 Introduction

Projects are conceived as temporary production systems, to be designed in the light of relevant 'physics' of the task to be accomplished. It is claimed that complex, quick, and uncertain projects cannot be managed in traditional ways. Detailed CPM schedules, after-the-fact tracking, earned value analyse, and competitive bidding are inadequate to the challenge of today's dynamic projects. The case views Lean Construction as a new paradigm challenging traditional thinking about construction and project management.


Designing and making the products the first time is what construction projects are all about and puts them firmly in the same class with other project based production systems; e.g., shipbuilding, movie production, software engineering, consumer product development, etc.

This project management approach to projects brings with it some key concepts, among the most important of which value, flow and pull. Value is understood as a production concept, not an economic concept. Consequently, expressions like value for the money are replaced with expressions like value is provided when customers are enabled to accomplish their purposes.

Flow, the movement of materials and information through networks of interdependent specialists, is almost invisible to those who see through the eyes of traditional project management.

4.4.2 The anomaly

Traditional project management assumes that variability in work flow is outside management control and so does not attempt to systematically reduce variability. Rather, contingencies of various sort are used in an attempt to accommodate and absorb this external variability within the limits of budgeted time and money. In 1994, Ballard and Howell (Ballard, 1994; Ballard and Howell, 1994; Howell and Ballard,1994a and 1994b) began publishing measurement data on work flow variability. The first data showed a 36% plan failure rate; i.e., 36% of assignments on weekly work plans were not completed as planned. Later publication (Ballard and Howell, 1998) expanded the data set, revealing a 54% grand average plan failure rate over a wide range of projects and project types.


Adherents of the old paradigm conceive a project in terms of delivery in conformance to contracts, neglecting waste minimization and value maximization goals. Failure to agree on the very object of study offers little prospect of agreement on anything else.

4.4.3 Management

The competing concepts of management can be expressed in terms of Johnson & Broms ( 2000) dictum between Management- By- Result (MBR) and Management -By-Means(MBM). MBR would have managers establish financial targets and monitor performance against those targets. Financial measures are used to evaluate and correct production processes. MBM would have managers create and maintain the means or conditions for sustained organizational performance, relying on process measures for feedback on system performance. Johnson and Broms present Toyota as one of the exemplars of MBM.

MBR conceives management as consisting of goal setting before the act of production, monitoring during the act of production, and correcting after the act of production. The MBM concept of management by contrast has production system design before, system operation during, and improvement after the act of production, with operating itself divided into goal setting, controlling and correcting.

4.4.4 Control

Traditionalists conceive control in terms of after-the-fact variance detection, while the Lean Constructionists conceive control in terms of active steering of a production system or project towards its objectives. This can clearly be understood as a consequence of the MBR and MBM concepts of management.

4.4.5 Will lean construction be victorious?

Not all the challengers to existing traditional way of working are successful. An opinion is set that lean construction will displace Traditional thinking about project and construction management.

Budget profit: $6,200,000

Actual profit: $9,200,000

Figure 2.6: GyM Profitability Improvement

Figure shows the actual versus estimated gross margin (operating profit) on the first nine projects on which they employed a lean construction approach. Profit margin increased by $3 million, from $6.2 to $9.2 million. This is one example of many.