Construction companies are leaving $1.6 trillion on the table. See how Lean Construction will put that money back in your pocket!
Ok, so you’ve heard the word ‘lean’ used in the construction industry many times BUT what exactly does this mean? Why has Lean Construction become such a hot topic? Before unpacking the true meaning of this important concept, let’s have a look at the facts:
Throughout the last 50 years, business output in the U.S. has comfortably risen whereas during the same 50 years, output in the construction industry has steadily diminished (Warcup 2015).
Since 1964, construction productivity has decreased by 0.32% each year while non-construction productivity has increased by 3.06% (Teicholz 2004).
Overall production within the construction industry is below all other industries (Forbes and Ahmed 2010).
Approximately 75% of all construction processes are deemed as non-value adding (Diekmann, Krewedl, Balonick, Stewart, & Won, 2004). The remaining 25% is broken down into two categories: 15% is regarded as essential, non-value added work and only 10% is regarded as value adding (Construction Industry Institute 2004).
It can be concluded that the bulk of all construction activities are considered a waste as per ‘lean’ guidelines (Construction Industry Institute 2004).
In 2017 the construction industry lost 1.6 trillion dollars due to being slow to adopt new technology (Cowin 2017).
“Not only has the U.S. construction industry failed to keep pace with the U.S. compounded annual business productivity growth rate of 1.76%, but it has lost ground since 1995 with a yearly productivity decline of 1.04%, according to a recent McKinsey Global Institute Report” (quoted in Slowey 2017).
“In its report, "Reinventing Construction Through a Productivity Revolution," McKinsey said the global construction industry, which has a 1% productivity growth rate compared to the world's 2.8%, has been slow to adopt the new technology and management techniques that could increase its value by $1.6 trillion” (quoted in Slowey 2017).
“McKinsey noted that unless the industry takes significant steps to modernize, it will not be able to meet the demands of an aggressive infrastructure program or be able to address the shortage of housing in the U.S” (quoted in Stowey 2017).
In short: productivity in the construction industry is very poor. So what now? How can we make the construction industry become more productive and efficient? The answer is where Lean Construction comes into play.
What is Lean Construction?
According to Rubrich (2012), Lean Construction is a business philosophy that takes into account company culture, planning, concepts and tools in order to maximize value while minimizing all types of waste (quoted in Warcup 2015).
In the words of Womack and Jones (2003), “In short, lean thinking is lean because it provides a way to do more and more with less and less - less human effort, less equipment, less time, and less space” (p. 15). Lean Construction boosts value by monitoring the responsibilities of all stakeholders more profoundly than conventional management styles.
Why does Lean Construction matter?
When a construction company adopts lean processes, not only does the construction company itself profit, but all stakeholders do. The owners, architects and engineers reap benefits too, as they all work in collaboration with each other.
Together, productivity is elevated and waste is compressed. It should be noted that ‘waste’ in Lean Construction refers to materials as well as resources, time, motion, production, effort, equipment, space and creativity (Liker and Meier 2006). Lean Construction processes achieve exceptional outcomes when compared to traditional management techniques (Forbes & Ahmed 2010).
Lean Construction Facts:
Here are the findings from a comprehensive study on Lean Construction conducted by McGraw-Hill Construction research and analytics department. These results demonstrate the advantages of enforcing a Lean Construction philosophy:
84% of respondents reported achieving higher quality on their projects.
80% reported greater customer satisfaction.
77% reported improved productivity.
64% reported either reduced costs or improved profitability.
77% reported improved safety performance.
74% reported a reduced project schedule.
64% reported greater profitability and/or reduced project costs (McGraw-Hill Construction 2013; quoted in Warcup 2015).
We hope you now have a better understanding of Lean Construction and its importance to the construction industry. The research and facts declare there is an urgency to better the world of construction. In our next blog we’ll share tips and tools on how to get your company lean!
If you’re looking for more detail on Lean Construction, check out one of our previous blogs on this topic here: The Lean Way of Thinking.
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Construction Industry Institute. (2004). Application of lean manufacturing principles to construction. Retrieved from https://www.construction-institute.org/scriptcontent/ more/rr191_11_more.cfm
Cowin, Laurie (2017). Construction by the numbers in 2017. Construction Dive. Retrieved from https://www.constructiondive.com/news/construction-by-the-numbers-in-2017/513743/.
Diekmann, J. E., Kredwedl, M., Balonick, J., Stewart, T., & Won, S. (2004). Application of lean manufacturing principles to construction. A report to The Construction Industry Institute. Austin, TX: The University of Texas at Austin.
Forbes, L. H., & Ahmed, S. M. (2010). Modern construction: Lean project delivery and integrated practices. Boca Raton, FL: CRC Press.
Liker, J. K., & Meier, D. (2006). The Toyota way fieldbook: A practical guide for
implementing Toyota’s 4Ps. Boston, MA: McGraw-Hill.
McGraw Hill Construction, (2013). Lean construction: Leveraging collaboration and advanced practices to increase project efficiency. Retrieved from http://www.leanconstruction.org/media/docs/Lean_Construction_SMR_2013.pdf
Slowey, Kim (2017). Weak productivity crippling global construction industry growth. Retrieved from https://www.constructiondive.com/news/weak-productivity-crippling-global-construction-industry-growth/437249/.
Teicholz, P. (2004). Labor productivity declines in the construction industry: causes and remedies. Retrieved from http://www.aecbytes.com/viewpoint/2004/issue_4.html.
Warcup (2015). Successful Paths to Becoming a Lean Organization in the Construction Industry. Utah State University, Graduate Studies. Retrieved from https://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=5291&context=etd.
Womack, J. P., & Jones, D. T. (2003). Lean thinking: Banish waste and create wealth in your corporation. New York, NY: Simon and Schuster.