"Industrialised methods of housebuilding are often said to depend on achieving economies of scale to be successful, and therefore driving down costs on completion. Explain what is meant by economies of scale in this context and discuss the factors which may either promote or hinder the achievement of such economies in the housebuilding industry."
"The construction industry has been based on what can be described as traditional building, that is, materials and components are purchased in the market and then assembled on site into buildings designed for particular or prospective clients" (Harvey, 2000, p.208). Nowadays the methods of construction are changing with the use of prefabricated components for house building. Also known as the industrialised building system which means components such as walls, floor panels, ceilings, concrete beams, and so on, are produced in large quantity in a factory and then assembled on site. Mass production has resulted into economies of scale and thus as output increases, the average costs decrease. "To be successful, industrialised building must be able to compete with traditional building methods. However, cost must be interpreted broadly, allowing for speed of building, subsequent maintenance costs, flexibility for the future adaptation and special government aid towards research and development. The extent to which industrialised building can be competitive depends upon conditions of demand and supply" (Harvey, 2000, p.209).
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The construction industry is a very competitive industry. With the use of industrialised building system, construction practices can be improved and modernise the industry. However, to change conventional practice to industrialised methods of housebuilding is very difficult. One of the obvious shortcomings is to establish economic of scale. Economies of scale cannot be achieved if the industrialised methods of housebuilding do not catch on in the market, and without economies of scale the price of using industrialised methods of housebuilding will not go down. Without competitive prices, it will be difficult to use industrialised methods of housebuilding, which will prevent the industry from achieving economies of scale. Let's have a look at the advantages and disadvantages of using such method and see if this method will be able to achieve economies of scale.
As indicated by Offsite Production in the UK Construction Industry - prepared by HSE (2009)
"Clients using off-site production techniques find that many UK manufacturers now use state of the art manufacturing techniques in modern highly automated factories. Benefits include predictability, quality assurance, faster construction times, less waste, less noise and disruption to neighbours, less - even zero - defects and lower site accident rates and improved health and safety. These advantages are seen clearly in urban locations where the increasing demand for housing and the scarcity of green field sites forces developers to build on ever smaller plots of land within existing residential developments. As more housing is built, so the demand for schools, shops, hospitals, and leisure and infrastructure facilities increases" (Taylor, 2009, p.6).
Traditional way of building might be time consuming. All the materials needed for construction should be transported to the site and several skilled workers are needed to do specific tasks. Sometimes due to skilled worker shortages, the work on certain part of the building might be delayed. The weather is another contributing factor that will affect the time spent in completing a building. Compared to industrialised way of housebuilding, all the components are ready made in the factory. Factory production lines use CNC machines (computed numerically controlled machines) for accurate cutting, aligning, screwing, nailing, painting and handling etc drastically reduce waste materials. What waste is produced is controlled and recycled. All the components that need to be built in a factory are not weather dependent. Workers in the factory have a specific starting time and finishing time that they have to spent on the production line. On-site these components are erected by crane using skilled assemblers. As most of the work has been carried out off site there is a reduced assembly time on site with fewer tradesmen required and as such less time is spent on completing the building. As highlighted by Offsite Production in the UK Construction Industry - prepared by HSE (2009) "An example of lower site time is that demonstrated by McDonalds fast food chain where site time from green field to first hamburger sold can be as low as 48 hours site time" (Taylor, 2009, p.6).
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Let's compare the safety issues between traditional ways of building and industrialized ways of building. Every year there are lots of injuries related to the construction industry specially happening on site.
Looking at the statics of the HSE (health and safety executive) for 2008/2009 we can see that there were many injuries last year.
180Â workers were killed at work, a rate of 0.6 per 100 000 workers.
131 895Â other injuries to employees were reported under RIDDOR, a rate of 502.2 per 100 000 employees.
246 000Â reportable injuries occurred, according to the Labour Force Survey, a rate of 870 per 100 000 workers." (Health and safety statistics: 2008/2009)
Instead of having so many workers on site working on different part of a building, all the components can be prefabricated in a controlled factory environment hence reducing on-site time for workers and reducing the potential for site-based accidents and ill health. In a factory all the works are being monitored constantly resulting in a better quality of build; better finish; fewer defects; all snagging complete and all services tested. Compared to work in open air, it is better to work in the comfort of a factory and being controlled and using production line techniques that significantly reduce the risk of accidents and ill health. Also there can be much annoyance to neighbours caused by traditional building methods usually from noise, dust and litter. With less activity on the construction site the local environment benefits.
With shortages in locally available skills it is unlikely that traditional construction methods employ local labour. The site workforce may have to travel considerable distances to the site. Employment for factory-produced buildings is easier as the factory site is permanent and skill shortages and numbers can be easily addressed. Local employment will always benefit where permanent factory units are established.
Nowadays mostly everything can be done using a computer. It is becoming a very popular tool in the construction industry and especially in factories doing prefabricated components for buildings. The use of templates and jigs in a factory environment provides greater accuracy and tolerances particularly when used with CAD design systems. Also 3D modelling and component scheduling enables a fully completed building to be visualised prior to construction. Changes to the layout can be made quickly and cheaply. Assembly drawings are used by the factory production lines using CNC machines (computed numerically controlled machines) and production methods.
We have looked at the advantages of industrialised methods of housebuilding; now let's have a look at the disadvantages of the same method of housebuilding.
Harvey (2000) commented that "If skilled craftsmen and wet finishers are to be eliminated in the assembly process, the components of factory-built systems must have greater dimensional precision than traditional materials. But the greater accuracy of steel, plastics, wood and concrete slabs prepared under high pressure has to be weighed against their higher cost relative to bricks and concrete, especially as they are not as yet fully proven. Since materials account for about half the cost of a building and labour for one third, a 25 percent increase in the cost of materials would require a 37.5 percent saving in labour costs just to break even" (Harvey, 2000, p.210).
Taking into consideration the distance between the factory and the site, prefabricated components increase transport costs through the long and extra journey of delivering them to the site because they are usually bulkier and more fragile than raw materials and also is dependent upon the limitations of vehicles and available traffic routes. Now on-site, even though less skilled workers are needed to assemble the components, it is essential to have cranes for lifting purposes. These cranes do cost a lot in terms of money and need to be controlled by very skilled people as the work to be done is in a very accurate manner. When it comes to modification, it is hard to modify industrialised building. On the other hand, it is still possible to have changes when using the traditional way of building both in actual construction and in subsequent use.
As Harvey mentioned (2000) "In contrast, changes in industrialized building usually involve interference with the basic design. Thus, when experience necessitated new fire precautions for hospitals, they could only be incorporated in the industrially designed building at considerable expense" (Harvey, 2000, p.211).
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I came to the conclusion that factory based systems are particularly suitable for custom-made one-off buildings and economies of scale are dependant upon large and regular orders. Where bulk orders are attained, cost savings are significant and benefit both supplier and manufacturer. At the moment due to the recent recession and lack of new projects, it is very unlikely that industrialised way of building will be much involved in the construction industry and hence will not reach mass production which will result in no economies of scales.
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