While manufacturing and distribution have made big advances in efficiency and waste reduction, the construction industry hasn’t really changed. Despite advances in construction management by big builders and general contractors, the process still takes too long, is prone to errors and costs too much. The industry whines about labor shortages but does nothing to solve the problem.
A Few Innovative Builders and Contractors are Solving This With Offsite, Modular or Prefabricated Construction.
Writing in Constructive Dive News, Emily Peiffer notes that a renaissance in the prefab construction industry over the last five years may help drive innovation in what she calls a “stagnant” building industry. She sites figures from an article by Changali, Mohammed, and Van Nieuwland in the July 2015 McKinsey Insights that shows the contrast between the rapid increase in dollar productivity for manufacturing and the flat (or slightly declining) productivity in the construction industry among developed countries between 1994 and 2012.
Failure to improve productivity in the construction industry have caused inefficiencies and cost over-runs that have been endemic in building and construction. On the one hand, investment in large-scale projects is growing fast, expected to at least double in the next 15 years to a projected $13 trillion by 2030. On the other hand, the industry does poorly in terms of efficiency and waste.
The McKinsey research estimates that 98% of large projects suffer cost overruns of more than 30% and 77% are at least 40% late to completion. While McKinsey tracked large projects, we know these problems filter down to most new construction and remodeling projects.
The problem is so bad that there are now many contractors who’s business is based on low bidding the original quote and banking on making a profit from changes due to the inefficiencies in the process. We are reaching a tipping point where these practices will end.
Improving productivity in building and construction is a priority. The vision supported by the analysis suggests that construction methods should begin to adopt the methodologies that have supported growth in the manufacturing sector.
Current Construction Methods Suffer From
- poor organization because decision-making and procurement methods do not have the required speed and scale;
- inadequate communication because contractors, subcontractors and owners do not have a common understanding of project progress;
- flawed performance management because of poor communication and accountability on site;
- contractual misunderstandings because complex contracts negotiated by the procurement team may not be communicated and understood by project management;
- missed connections because of different levels of planning which confuse daily work schedules;
- poor short-term planning because companies that are good at planning over two or three months may not grasp the needs of the next week or two so that necessary equipment is in place as needed;
- insufficient risk management because the focus is too much on long-term risk and not enough on risks that crop up on the job;
- limited talent management because companies tend to defer to familiar people rather than finding the best talent for each job.
Industrial practices adapted to construction offer the most promise for improving performance. Offsite, modular or prefabricated construction is seen as a way of restoring the productivity in the major construction industry. Last September, the National Institute of Building Sciences, the Modular Building Institute and the Associated General Contractors of America held the first-ever Offsite Construction Expo in Washington, D.C. to help re-visualize the role of modular construction. The event attracted vendors, owners and contractors.
Current estimates are that only 2% to 5% of the overall construction have adopted offsite construction methods. However, industry experts are expecting that the numbers will grow as more designers, owners and contractors find value in adopting the offsite methods.
Speakers from the National Association of Building Sciences, FC Modular, and the University of Utah addressed the low productivity concerns of the construction industry. They expressed the need to improve productivity, to demonstrate value. They expressed concern about the high cost of labor and materials and the need for the industry to evolve to meet these challenges. They pointed to offsite methods as a way to combat industry volatility.
The safety of workers in traditional construction has been a major concern as well. Bureau of Labor Statistics figures cited by the Association of General Contractors indicated that workplace fatalities in construction are an increasing problem, rising by 6% between 2013 and 2014. Offsite construction has been heralded as a safer work environment because it is more controlled than on-site construction. There are fewer high-risk labor needs, less need to work at towering heights and work in extreme heat.
In a comparison of offsite modular construction and traditional projects, Ryan Smith, Associate Dean at the University of Utah found that indeed, modular projects had shorter build times (42% less total time from start to finish) and most were substantially cheaper (averaging 11% in cost savings).
There is an opportunity for building materials manufacturers to reach out to these firms to find out what it would take to become the preferred product for efficient construction practices.
The construction industry is poised to make advances in efficiency and this means opportunity for building materials manufacturers and suppliers. The more efficient the industry can become, the more building materials they will need.
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