Running head: CONSTRUCTION LOGISTICS

Construction Logistics An Assignment Submitted by Name of Student Name of Establishment Class XXXX, Section XXXX, Spring 2012

CONSTRUCTION LOGISTICS Construction Logistics Construction logistics plays a crucial role in ensuring production process effectiveness and overall industry success. Today, it is known that production process in construction (like in any other industry) should be integrated in order to avoid excess costs and waste and ensure effective collaboration between different participants within supply chain to meet time, cost, quality, and customer requirements. On the other hand, problems that existed twenty years ago still exist, as older approaches to construction supply chain management are used. However, approaches to construction logistics and operational process are being developed to provide opportunities for construction industry improvement. This can be seen through the report Application of the New Production Philosophy to Construction by Koskela (1992) and Rethinking Construction Report by Egan (1998), as well as Improving Construction Logistics a report of the Strategic Forum for Construction (SFfC) (2005).

According to Koskelas report, the nature of current production processes in construction is strongly connected to the use of conversion model and, therefore, focuses on the process of transformation of an input into an output. So, its major components include inputs (first of all, labor, construction materials, financial resources, and information), conversion process, and outputs (i.e. a certain building). The value of the process output is associated with the costs of its inputs and, therefore, is considered to be not very important. Herewith, the whole process of construction and building is divided into certain elements or sub-processes, which are viewed separately, rather than as a single flow. Such an approach disintegrates the whole project. This is accompanied by the use of a hierarchical organizational structure (Koskela, 1992, pp. 12-13, 30). These features create some specific problems and influence the nature of the production process in construction industry. For example, such managerial concepts as sequential approach

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to project realization, lack of quality considerations (including continuous quality improvement), segmented control, and CPM network methods violate the principles of flow process design and improvement and thus deteriorate production flows and increase the number of non-value-adding activities. The sequential approach is characterized by the following features: involving few or no design iterations, ignoring subsequent phases constraints, providing insufficient feedback, and lacking leadership and responsibility. This leads to suboptimal solutions in production process, poor operability and constructability, numerous change orders, and lack of improvement and innovation. Meanwhile, segmented control results in multiple handling and slower error correction, as well as the lack of overall process and flow control. Also, traditional approach to network planning is unable to plan flows of teams or material flows consistently and so, creates process disruptions and disconnects. Therefore, construction logistics lacks integrity and systemic consistency. Other problems include neglect of proper project and construction planning, management of materials, and management of work flows. Also, production process in construction is characterized by considerable waste (including quality, value, and safety), which is invisible and inactionable, and loss of quality and product value (Koskela, 1992, pp. 32-36). These are general features of production nature in construction, which are connected to the flow problems caused by the use of conventional approach to operational processes. These features can be found in other industries too. Still, there are some specific features of production process, which are characteristic only to construction industry and are caused by its peculiarities. Generally, they include such aspects of construction logistics as on-site coordination of material flows, building site, supply chains, and coordination of different participants of construction projects, as well as other technical, organizational, and environmental issues, which influence project time, quality, and cost (Sobotka, Czarnigowska, and Stefaniak, 2005, pp. 205-206, 215),

CONSTRUCTION LOGISTICS According to Koskela, due to different needs, priorities, sites, surroundings, designer

views, and other factors, construction production has one-of-a-kind nature (that is, its projects are unique). Of course, this does not influence all the production processes within construction, as some types of activities and resources are common; still, this can create some difficulties. For instance, incoherent and unorganized input of varied client groups can cause disruptions to the flow of activities. Herewith, these activity flows are likely to have a specific design (respective to a certain project) and can involve some new activities; therefore, they can be more difficult to coordinate and control. Also, construction projects are more difficult to compare and measure due to their uniqueness. Consequently, within these projects, it is not easy to ensure continuous improvement, variability reduction, cycle time compression, and transparency enhancement (especially in terms of project costs) (Koskela, 1992, 44-45). The latter is mostly caused by the fact that decision making is often based on cash flow, and cost records do not help to determine savings from logistics improvements. Also, one-of-a-kind nature of construction projects assumes the involvement of working teams for a short period of time, which causes difficulties in the optimization of construction logistics and supply chains (SFfC, 2005, p. 6). As construction production is carried out at products final site, it has some specific features connected to such aspects as variability (e.g. external intrusion, interruptions, or uncertainty regarding resources, site geology, or environmental factors), complexity (due to a large variety of work teams), transparency (as constantly evolving environment makes visual control complicated), and benchmarking (due to decentralized approach) (Koskela, 1992, 46). Also, construction projects are usually performed by temporary multiorganizations made up of different companies, which may have never worked together before, and involving temporary work teams. Naturally, this creates certain problems regarding variability control,

CONSTRUCTION LOGISTICS continuous organizational improvement, and monitoring of complete production processes, as well as information communication and goal congruity (Koskela, 1992, 47). On the whole, the nature of production process in construction industry is determined by the general model of operational process (namely the conversion and the sequential approach) and peculiarities of construction industry, which impact supply chain management. So, as we can see, production process and logistics management within construction industry face some problems and difficulties. These problems point to the ineffectiveness of

traditional (conversion) approach to construction. So, a new model should be used. According to Koskela (1992), a new production philosophy to construction should be represented by a more complex and integrated model than a conventional one. Within this model Production is a flow of material and/or information from raw material to the end product . In this flow, the material is processed (converted), it is inspected, it is waiting or it is moving. These activities are inherently different. Processing represents the conversion aspect of production; inspecting, moving and waiting represent the flow aspect of production. Flow processes can be characterized by time, cost and value. Value refers to the fulfilment of customer requirements. In most cases, only processing activities are valueadding activities. For material flows, processing activities are alternations of shape or substance, assembly and disassembly. (p. 15). Thus, within the new model, production involves two processes: conversions (valueadding activities) and flows (non-value-adding activities). Within a construction project, flow processes involve design processes and construction processes, namely material and work processes, as well as project management, design management, and construction management

CONSTRUCTION LOGISTICS processes. All of them can be characterized by their cost and duration, which depend on the efficiency of value-adding activities and the amount of non-value-adding activities, and customer value (namely the value for a next customer and a final customer), which consists of product performance and conformance to specifications (Koskela, 1992, p. 38). Consequently, within this model, production efficiency depends not only on conversion efficiency (e.g. levels of technology, skills, motivation, etc.), but also on the efficacy of flow

activities, binding various conversion activities. Herewith, flow efficiency assumes the reduction of the number of flow activities or their elimination. This can be achieved through the use of the following eleven principles of flow design and improvement: reduction of the share of nonvalue-adding activities, output value increase, variability reduction, reduction of cycle time, simplification through the minimization of the number of process parts, steps, and linkages, output flexibility increase, process transparency growth, control of complete processes rather than separate sub-processes, ensuring continuous process improvement, benchmarking, and ensuring the balance between flow and conversion improvement (Koskela, 1992, pp. 15-16). Also, in order to overcome flow problems, various techniques can be used. For instance, instead of sequential method of project realization, concurrent engineering can be used. This type of solutions helps to reduce cycle time, consider next production stages better, and focus control on complete processes. Also, construction industry can use systematization of constructability knowledge, performance specification, and partial solutions (mostly concerning organizational rethinking), such as design-built contracts, ensuring contractors participation in designing, or involvement of third parties responsible for flow management (Koskela, 1992, pp. 42-43). The new production philosophy assumes some other changes too. For instance, quality improvement in construction industry involves the redesign and improvement of processes in

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order to ensure lower variability; creation of mechanisms for rapid defect and deviation detection and correction; and improvement of specifications identification for different conversion activities. Meanwhile, non-segmented control assumes control of a complete flow process. Herewith, planning requires a shift from network to flow planning (Koskela, 1992, pp. 43-44). Apart from suggesting a new model of production and pointing to the mechanisms of overcoming flow problems, which can be applied to construction industry, Koskela paid special attention to the peculiarities of this industry (namely one-of-a-kind nature of its projects, the use of temporary multiorganizations, regulatory interventions, and site production) in terms of improvement of construction logistics. For example, the solution to the problem of one-of-a-kind nature of constriction projects involves artificial feedback cycles, planning and employee training based on the use of mock-up models, client involvement, clear instructions, high quality documentation, continuous planning, etc. These are operational solutions for control and improvement. Herewith, structural solutions assume the use of standard work flows and associated skills and components, as well as concept buildings, which are based on pre-engineering solutions adaptable to different needs (e.g. building schools, office buildings, hospitals, etc.) (Koskela, 1992, pp. 45-46). Thus, Koskelas proposals provide a link between on-site and off-site production in construction projects through the combination of on-site and off-site activities. Moreover, Kaskela claims that the configuration of material flows should ensure the performance of only minimal number of activities on site (which is a structural solution). This assumes the use of modularization, prefabrication, and preassembly (for projects allowing a great share of off-site production); or speeding up and pushing some activities (e.g. inspection, sorting, or storage) upstream in the material flow (i.e. for projects requiring mostly on-site production). Also, such

CONSTRUCTION LOGISTICS operational solutions as temporary enclosures, detailed and continuous planning (including risk planning), multi-skilled work teams, and systematized work procedures can be used to manage production constraints connected to the site of production (Koskela, 1992, pp. 46-47, 49). Also, Koskela provides several suggestions regarding the problems caused by the use of temporary multi-organizations. The possible solutions include team building, clear role definition, decoupling of work packages, working with cooperating organizations, and

encouraging long-term relationships and partnership between an owner and an engineering firm, an engineering firm and a vendor, or contractor and subcontractor (Koskela, 1992, pp. 48). Naturally, construction industry is subject to various checks and approvals by regulatory authorities, which creates uncertainty and process constraints (first of all, time constraints). So, these activities should be included into production flow. While being part of the flow, they should be simplified and speeded up (e.g. approval process) and the way of their execution should be changed) (Koskela, 1992, p. 48). This will improve construction logistics. Herewith, the realization of these suggestions is mostly the responsibility of regulatory authorities and governments, unlike other aspects of construction supply chain. Thus, Koskela contributed to construction logistics through the suggestion of a new production model based on an integrated approach to production process in construction and considering industrys logistics peculiarities. This model can improve the effectiveness of operational processes and increase quality, time, and cost parameters of construction industry. Another report regarding construction logistics is Rethinking Construction by Egan. Its main purpose is to provide the scope for improving construction quality and efficiency in terms of supply chain management. Therefore, the report reviews traditional approaches to construction and provides suggestions for improvement of the industrys logistics.

CONSTRUCTION LOGISTICS In order to achieve this goal, the author identifies some problems and challenges that arise within the supply chain in construction. First of all, the supply chain in construction industry is highly fragmented, involves separated processes, and relies on contractual and confrontational culture. Thus, the supply chain lacks integrity (Egan, 1998, p. 19). Also, Egan points to the fact that while sequential construction process minimizes

constructors risks by defining exact steps of further participants (e.g. designers, constructors, or suppliers) through contracts and specifications, clients are less protected. Moreover, sequential approach does not provide an opportunity for constructors and suppliers to participate in project planning and project design (Egan, 1998, p. 19), which may disrupt production processes later. Another crucial challenge on the way of construction logistics improvement is client choice. The matter is that clients can equate project price with its cost, selecting constructors based on cost parameters (Egan, 1998, p. 7). Moreover, continuous choice of new designer, supplier, or constructor teams for every new construction project inhibits learning and development of these teams and hinders innovation. Consequently, there is less opportunity for the development of experienced and skilled teams in the industry (Egan, 1998, p. 19). In this context, it should be mentioned that there is a crisis in industry workers training. Naturally, construction logistics requires construction employees to have respective skills. They include top management skills, project management skills (especially skills in project integration and performance improvement leadership), supervisor and designer skills, multi-skilling, and continuous learning (Egan, 1998, p. 26). However, a decline in the share and number of construction workforce trainees can cause skill (including technical and managerial skills) shortages in the industry. Moreover, the problem is accompanied by the absence of a proper career structure in construction industry (Egan, 1998, pp. 7).

CONSTRUCTION LOGISTICS Obviously, all these challenges and problems, together with leadership commitment to organizational improvement, consideration of future clients needs (company and industry

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image), and problems caused by lower focus on quality and commitment to people (Egan, 1998, pp. 13-14), point to the need of construction logistics improvement and systematization. The latter is caused by the fact that 80% of inputs into buildings are repeated, especially designing and planning processes, as well as repair and maintenance works (Egan, 1998, p. 18). That is why Egan suggests that construction supply chain should be standardized. Standardization can improve the design stage of construction, while simplifying the complex construction process. Also, standardization makes production processes more predictable in terms of what, how, when, and by whom is performed. However, this does not necessarily mean the creation of monotonous buildings with poor aesthetics (Egan, 1998, pp. 27-28). Herewith, the whole construction process should be explicit and transparent and involve the whole construction team and its skills to ensure the delivery of value to clients (Egan, 1998, p. 18). Moreover, the report suggests that a new logistics approach should have a bigger focus on end-customers and end-products, as this helps to view construction process in a more integrated way and get a better understanding of what should be done (Egan, 1998, p. 27). Naturally, construction improvement requires respective changes in logistics and organizational culture and structure, including design approaches, technology use, company relationships, working conditions, skills and training, etc. First of all, this means production process integration. So, teams of constructors, designers, and suppliers should work together on product development and implementation, creation of supply chain partnership, component production, waste elimination, innovation, and learning. For example, product team integration assumes the establishment of close links to the supply chain through which the skills of

CONSTRUCTION LOGISTICS suppliers and their innovations can be assessed and provision of access to market research. Meanwhile, project implementation team (involving key suppliers) should participate in such processes as design of engineering systems, selection of key components, and pre-planning construction, manufacture, and commissioning (Egan, 1998, pp. 19-20).

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Herewith, Egan points to the special importance of design integration in construction and performance in use. In this context, designer collaboration with other project participants is vital, while design teams should involve suppliers and subcontractors. Herewith, in order to ensure the best use of designer creative and analytical skills, they should be aware of the specificity of the manufacturing and assembling processes. Moreover, construction design should consider all project costs, including energy and maintenance costs, as well as sustainability issues. The reason is that clients are becoming more aware of and more interested in sustainability issues of construction industry, beginning from materials used to final decommissioning. On the whole, Egan believes that construction industry should develop a concept of design for construction, as an equivalent of the concept of design for manufacture, thus ensuring construction production efficiency and quality (Egan, 1998, p. 27). Consequently, construction improvement assumes the establishment of long-term relationships and alliances between different participants within construction supply chain. Partnership relationships should cover all participants of product creation and delivery processes, beginning from client need identification to meeting the need itself. Being based on mutual interests, such relationships will ensure continuity and cooperation in team learning and product improvement (Egan, 1998, p. 29). Naturally, this approach requires certain changes in supply chain management. First of all, the partners should be chosen based on the criterion of best overall value for money, rather

CONSTRUCTION LOGISTICS than the lowest price. Other useful criteria include team-working skills, innovativeness, and ability to suggest effective solutions. Secondly, all the participants should share success depending on their share in the creation of customer value. Herewith, effective partnership should be based on the recognition of parties mutual interdependence, rather than formal contracts, as the latter are likely to increase project cost, while adding no value for clients. Finally, discipline between project teams, suppliers, other contractors, and clients should be ensured. Therefore, performance measurement and competition against quality, cost, and timeline targets should be introduced (Egan, 1998, pp. 29-30). Herewith, partnering within the supply chain in construction industry requires the recognition of client and constructor interdependence, the establishment of open relationships, effective performance measurement, and commitment to improvement (Egan, 1998, p. 20). Additionally, the report addresses such logistics issues as component production and delivery. Effective logistics management should ensure detailed planning, management, and improvement of operational process in order to ensure the production and delivery of the right components at the right time, in the right order, and without defects (Egan, 1998, p. 21). Another important aspect of an effective production process is ensuring quality design. Designing defects and snagging before construction helps to design buildings and components right first time and thus, to avoid waste and excess costs (Egan, 1998, p. 27). Naturally, such policy is in line with a holistic approach to production. Also, the experience provided by completed projects, especially such issues as client

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satisfaction, control systems effectiveness, and components durability, should be shared. This helps to get a better understanding of construction production processes and logistics and ensure better management (Egan, 1998, p. 27).

CONSTRUCTION LOGISTICS Herewith, it should be stated that construction improvement should not rely on technology alone. As construction efficiency depends on the organization of production processes, organizational culture should be changed and various processes should be improved and only then, technology can be applied to support these transformations and improvements. Process improvements may include pre-planning with suppliers, subcontractors, or component manufacturers in order to minimize the time of certain activities and time spent on site. Meanwhile, technologies can improve the process of building and component design, make information exchange easier, and eliminate waste and rework (Egan, 1998, p. 28).

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Finally, it should be mentioned that Egan views construction workforce as a most crucial asset for construction industry improvement. That is why people should be valued and provided with proper working conditions. The easiest thing to do this is on site (i.e. through the provision of proper facilities, uniforms, and rest areas). Also, ensuring that workers are properly trained and work within the production process has dual consequences. First of all, this provides better operational results, because trained employees performing their job properly and on time are able to create a better end product. Also, this saves production costs in terms of lost work time, potential prosecutions, and closure of construction sites. Secondly, this helps to increase health and safety records (Egan, 1998, p. 25), thus ensuring the execution of social standards. Thus, Egans report provides recommendations regarding supply chain logistics in construction industry in order to increase the efficiency of the latter. In fact, both reports, Application of the New Production Philosophy to Construction by Koskela and Rethinking Construction by Egan, are linked by their topics and objectives, as they address the problems of construction supply chain and logistics management and solutions to them.

CONSTRUCTION LOGISTICS Probably, the basic and the most important issue concerning construction supply chain and logistics is the traditional approach to production process. While being sequential and

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somewhat fragmented (due to the focus on sub-processes and the use segmented control), it lacks overall integrity and systemic consistency. Herewith, while Koskela analyzes the whole problem vaster, viewing its features, components, and various consequences, Egan focuses on the major effect of this approach, namely disruptions of production flows. In this context, we should also mention that integrity is viewed in terms of supply chain partnership and cooperation between different participants and the problem of work teams in construction (as they are temporary, varied, and lack cooperation ties). Also, both authors agree on the problem of insufficient internal improvement and innovation within the production process in construction industry. However, they focus on different causes of this. For example, Koskela views sequential approach and construction projects peculiarities, namely one-of-a-kind nature and the use of temporary multiorganizations as major causes. Meanwhile, Egan views client choice as a determinant factor. On the other hand, this choice is strongly connected to the two features of industry production process, which are mentioned above. While demanding for somewhat unique projects, clients often choose new varied teams. So, we can say that Egans report partially transformed and developed the understanding of the problem of construction improvement. Similar problems were mentioned in the Strategic Forum for Construction report (2005). According to this report, major supply chain and logistic problems in construction industry include effective use of skilled workforce, construction product management (including inventory storage and resource transportation), coordination of different contractors work, waste management, and overall production process organization. In turn, these problems create other

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challenges for construction industry, namely additional costs and wastes in production process, decreased quality of end-products, delays in operational process, and increased risks to health and safety (SFfC, 2005, pp. 3-4). Additionally, one of the big challenges within construction industry production is the lack of understanding of supply chain constraints, as well as lack of trust and confidence in supply chain delivery. This problem is accompanied by information unreliability, as it is mostly estimate rather than precise (SFfC, 2005, p. 7). Probably, the first and the simplest step to increase construction logistics effectiveness is to create a more integrated production process and supply chain. Both reports paid special attention to this approach. Though this is not directly stated, it is assumed that a considerable amount of waste is incurred in the industry as a result of poor logistics (SFfC, 2002, as cited in in SFfC 2005, p. 2). Meanwhile, an integrated logistic system improves supply chain management through just-in-time deliveries, elimination of most material handling and on-site storage, and elimination of causes of work stoppage (Sobotka, Czarnigowska, and Stefaniak, 2005, pp. 215). However, Koskela views integration mostly in terms of combination of conversion (value-adding) and flow (non-value-adding) processes (a flow model). Naturally, the report suggests the improvement of production in construction industry through the improvement of both these components and solution of flow problems. Herewith, this can be ensured through the use of non-segmented process control. Meanwhile, Egan focuses on ensuring integration through the creation of long-term partnership relationships within construction supply chain and especially, integration of construction design. Naturally, this requires changes in supply chain design and organizational structure and culture. On the other hand, Kaskela views the

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establishment of partnership relationships as a crucial tool of solving the challenges of temporary multiorganizations. Indeed, partnership within construction production is vital, as it determines project success. The reason is that combination (and even centralization) of participants efforts is able to provide a synergetic effect (Stevans, 1989, as cited in Sobotka, Czarnigowska, and Stefaniak, 2005, pp. 206, 215). Additionally, these reports pay attention to such a challenge as project uniqueness and possibilities of production process standardization. Both authors agree that despite the fact that all construction projects have their specific features and client requirements, some components and processes can be standardized. Moreover, Koskela believes that this step can help to balance on-site and off-site production, making construction logistics more effective. Also, standardization can help to deal with the constraints caused by one-of-a-king projects nature. However, there are some additional solutions that Egans report suggests. For instance, Egan pointed to the problem of construction workforce, namely lack of trainees, absence of career structure, and effective use of employee skills. Indeed, being an important aspect of construction logistics, workforce has a great impact on production process improvement. Also, Egans report indicates that within construction industry improvement, the use of technologies is not the most important and can be only one of the tools. The reason is that first of all, effective production process requires proper construction logistics, which depends on how different processes, relationships, and communication are organized and controlled. So, both Koskelas and Egans reports point to the importance of the use of a holistic approach to production and interconnections within supply chain participants. This helps to solve numerous problems which arise within a traditional approach to construction process and to

CONSTRUCTION LOGISTICS increase construction projects efficiency in terms of time, costs, quality, and consumer needs. Moreover, this fosters the creation of a better competitive image of the whole industry.

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CONSTRUCTION LOGISTICS References

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Egan, J. (1998). Rethinking Construction. The Report of the Construction Task Force. Retrieved from http://www.architecture.com/Files/RIBAHoldings/PolicyAndInternationalRelations/ Policy/PublicAffairs/RethinkingConstruction.pdf. Koskela, L. (1992, September). Application of the New Production Philosophy to Construction. Technical Report # 72. Center for Integrated Facility Engineering. Retrieved from http://www.leanconstruction.org/pdf/Koskela-TR72.pdf. SFfC. (2005, August). Improving Construction Logistics. Report of the Strategic Forum for Construction Logistics Group. Retrieved from http://www.strategicforum.org.uk/pdf/Logistics%20Report%20August%202005.pdf. Sobotka, A., Czarnigowska, A., and Stefaniak, K. (2005). Logistics of Construction Projects. Foundations of Civil and Environmental Engineering, 6, 203-216. Retrieved from http://almamater.ikb.poznan.pl/fcee/2005.06/full/fcee_2005-06_203216_logistics_of_construction.pdf.