The construction of commercial and residential buildings is a highly competitive industry that operates on tight financial margins while carrying high commercial risk levels. Some construction companies have embraced Lean management principles to create a competitive advantage.
A core principle of Lean management is to respect your extended network of partners and suppliers by challenging them and helping them improve. Companies who comprehensively practice Lean help their suppliers discover and fix problems to become more robust and better suppliers.
With this head contractor focused on creating a Lean management system to enable operational excellence across its construction sites, their subcontractors needed to be engaged and supported to increase their cost- efficiency by releasing value hidden in labour, material and contingency budgets.
This strategy requires the early engagement of subcontractors by getting them involved at the planning and tendering stage to enable understanding of the head contractor’s expectations before conducting their own planning and estimating.
Building long-term trusting relationships with subcontractors is critical to their appreciation of the system they will work in, providing them with the confidence to plan for high productivity levels and a need for less contingency budget.
During the planning and tendering stage, the head contractor consulted with each subcontractor to agree on metrics for their operational performance. This measurement system was formalised in subcontractor agreements and implemented to govern delivery at the mobilisation stage.
The head contractor established a robust communication system to provide clear and timely information to each subcontractor to enable efficient completion of their scope. This system also allowed subcontractors to escalate any problems or delays they had to engage the head contractor’s support to resolve them.
The communication system includes visual management forums that are utilised to create transparency of the performance metrics each subcontractor has agreed. These forums are used for reviewing performance and managing the resolution of any issues that arise.
The visual management system also provides a concise and transparent understanding of each stakeholder’s daily deliverables allowing each party to plan and work confidently with no ambiguity.
The head contractor also engaged the subcontractors in assessing their operations to identify opportunities to apply Lean methodologies where inefficiency resided. This activity stretched beyond the construction site to include each subcontractor’s supply chain and off-site facilities to increase efficiency and productivity throughout the value chain.
- 40% improvement in labour productivity.
- 85% improvement in on-time delivery to program.
- 35% reduction in subcontractor operating costs.