Lean construction: Efficient, client centric business approach can increase profits and reduce costs

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Can you bulk up your profits by introducing lean business practices for your construction business?

Consultants and trainers associated with the Leading Edge Group and the Ontario General Contractors Association (OGCA) believe most general contractors would achieve much better results with “lean thinking.”

John Whelton, the Leading Edge Group’s vice president of North American operations, says a general contractor with 20 employees, investing $25,000 in training and consulting, could expect to achieve savings of $250,000 or more within a year or two.

These numbers are based on Lean’s holistic approach to improving operational efficiency and collaboration. To earn the “Green Belt” designation, for example, the candidate must deliver an improvement project that can generate at least $50,000 in economic advantages – and it would make sense for a successful contractor to provide training for five employees to reach this level; resulting in the quarter million dollar savings.

In fact, Garry Doyle, a Lean Construction consultant and trainer at Leading Edge Group, says there is evidence that some lean projects have enhanced construction efficiency by about 20 per cent in California. “They are cutting 20 per cent off of the cost and 20 per cent of the time in some cases,” he said. “The results depend on the level in which Lean is applied and in what form.”

How do Lean contractors achieve these results?

Doyle says the best results occur when the entire project – involving designers, the GC and sub-trades as well as the owner – are collaboratively engaged in the Integrated Project Delivery (IPD) model.

The practice within the industry is that “a whole lot of different companies are doing things in silo to the same end but are not working in conjunction with each other,” he said. “In the Lean view, IPD is an environment of contractual collaboration. Everyone is tied to the contract and its risk and reward, including the main suppliers and subcontractors. Everyone has skin in the game. Everyone has an interest. And all the savings are shared.”

This is good, but can Lean help general contractors competing for traditional fixed bid contracts where collaboration often needs to be defined after the contract is awarded, and cannot be totally mandated in the project process? Whelton says: “Yes.”

Lean principles can be applied to the contractor’s internal operations and processes, creating the discipline and efficiency that will allow it to be more profitable even if full IPD cannot be executed. “It provides basic tools to take the waste out of your organizations and increase the value to your customers. Furthermore, Lean thinking is focused on empowering staff across the organization with the knowledge and skills to improve the processes that they are involved in everyday. After all, these are the people that know these processes best. Empowering and engaging employees to identify and address improvement opportunities can eventually lead to a culture of ongoing continuous improvement focused on increased efficiency; improved quality and safety; reduced costs and increased customer and staff satisfaction, ” said Whelton.

Some of the “wins” may be simple but can still save tens of thousands of dollars in improving efficiency or avoiding costly errors and reworks.

“If you are ever on a site, have you ever seen a $1,000 mistake, or a $100,000 mistake?” Doyle asked. “And for every $10,000 we lose in a mistake, we have to sell $100,000 to recover from the error.”

For example, on a site, you may have people looking for tools strewn everywhere. “Is there a standard way we can do things more efficiently to avoid mistakes?”

Whelton says the best way to start learning the Lean process will be to attend a one or two-day workshop co-ordinated through the OGCA. The one-day event will give an overview of the process at the lowest or “White Belt” Lean level; the two-day program will build on the introduction to develop basic proficiency in using key tools and practices, thereby qualifying participants at the Yellow Belt level – resulting in some tangible cost savings and advantages for the contractor, he says. Participants can then progress to more advanced training, which requires them to execute the significant revenue enhancing and cost savings projects, resulting in a quick payback of the training investment.

Doyle and Leading Edge Group provide consulting services to help the process along, but this guidance is designed not to be the stereotypical consulting trap, where you pay the consultant to learn that you need more consulting to solve your problems.

“Our goal is to get your own people and organization up skilled, so they can eventually do the stuff themselves,” he said.

“We can start out and come in and run a few projects. However, the ultimate goal is to achieve a lean profile for the company, so it can sustain itself.”

The two day Yellow Belt workshop, March 9 and 10 at the OGCA’s offices in Mississauga costs between $678 (for members) and $762.25 for non-members.

The introductory one-day program has been scheduled for Tuesday Jan. 19, also at the OGCA headquarters, with a fee of $395 for members or $480.25 for non-members.

For additional information and to register, visit ogca.ca/education/course-listing.

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