Supply chain management
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How lean management tools can be used to improve supply chains in construction industries.
Abstract
The main purpose of lean tools and techniques is to eliminate waste from the system. Many companies in the complex and competitive construction industry are involved in the demand for in-time delivery of construction materials at a favorable price. In the last twenty years, supply chain management has been established by construction firms as a new efficient way of doing business. Every contractor in the industry will be driven by the goal of minimizing the cost of construction as well as giving ultimate satisfaction to their clients. However, contractors are faced with many bottlenecks and drawbacks like unreliable deliveries, expensive materials, and unpredictable supply chains. Lean concepts in supply chain management can help minimize waste of time, materials, and effort, which enables the company to generate the highest possible quantity of value. The construction industry has learned and copied the lean journey from the manufacturing companies after witnessing how their supply chains went smoothly. Lack of an effective supply flow and logistics management can negatively affect productivity and the quality of the end product. This study aims to determine lean management tools that can help improve supply chain in the construction sector to minimize wastage. . Therefore, the paper seeks to address the gap in how lean management tools can be used by construction firms to improve supply chain. The construction industry to date has been choked with waste caused by a lack of proper planning and coordination of the supply chain. Myopic management’s problem in the construction supply chains has made many firms close because of poor performance due to delays and increased cost of materials and labor. From research, lean principles can be applied in both residential construction projects and other forms of construction. Better construction performance can be achieved if it synergizes with effective supply chain collaboration. The paper uses the secondary data content analysis method to address how lean management concepts and tools can be used in SC management to enhance collaboration and coordination in the construction industry.
Keywords: supply chain collaboration, lean management, performance improvement, waste, supply chain management, value.
Introduction
For a long time, lean management has been applied in many manufacturing and financial firms to avoid unnecessary costs and wastages. Coordination within a construction firm may not be easy because of many complex activities that happen simultaneously. An effective SC management can be used to achieve efficiency and avoid wastages both in terms of cost, time, and efforts, thereby creating value in their end products. The lean concept, which Jim Womack, Daniel, and Jones, composed in their journal “The machine that changed the world,” was found effective in the Toyota Production System in Japan. The philosophy focused on the expenditure of resources for any goal and not creating value, which might affect the end customer. Value can be defined as any extra cost that the end-user is ready to pay. They would consider revising their chains to improve the coordination and collaboration of their systems to enhance efficiency.
According to Salunkhe (2018), lean construction is a designed production system to reduce waste of time, materials, and energy to generate the ultimate quantity of value. He further argued the need to focus more on the holistic pursuit of continuous and concurrent improvements to best fit the construction industry in all environments. Supply chain management cannot be underestimated in the construction industry because it is very crucial in planning, designing, and managing construction projects collaboratively against the traditional way, which involved decomposition and hierarchical approaches that focused on optimizing individual activities. Further, the construction companies are likely to enjoy economies of scale in the supply chains’ collaborative efforts.
The construction industry is increasingly changing fast because of different customer demands, lowering costs, product varieties, and better-quality end products. SC management is concerned with the management of downstream and upstream integration with potential customers and suppliers in order to satisfy the end-users while still minimizing supply chain costs (Christopher, 2016). Furthermore, SC management is concerned with the coordination of different materials delivered to the construction sites. According to Chris (2016), supply chain management’s main goal is to achieve linkage and coordination of other organizations’ processes, reduce inventory between organizations through information sharing, and ensure trust and cooperation among the parties involved in the supply chain.
Modern construction industries are complex, quick, and uncertain. If the supply chains are not well-coordinated, it can bring interruptions in the flow of physical resources like labor, equipment, and materials, which may bring money wastages. This paper focuses on how lean management principles can be used to mitigate the construction industry’s wastages through an effective supply chain.
Literature review
Supply chain management
SCM refers to an interdependent and interconnected network between organizations working together to manage, control, and improve the materials and information flow between suppliers and clients (Christopher et al., 2016). Supply chain management involves coordination, cooperation, and integration among the chain users. Chris highlighted that for a supply chain to be effective, and it has to ensure efficient coordination and linkages between processes, trust and cooperation, competitive advantage, and removing buffers of inventory through information sharing (Kim et al., 2006).
Lean management concept
The lean concept is a product of the Toyota Production System in Japan that focuses on waste minimization and creating operational efficiency while still increasing the value of the end product. According to Fitzsimmons (2011), the lean concept is guided by three principles:
· Examining the whole process and highlight value-added and non-value added activities.
· Satisfying customer needs through value addition.
· Eliminating or minimizing waste or activities that the customer does not pay for.
Lean concept has evolved over the years to a management system for the whole industry and the supply chain, with a major focus on contingencies and organizational interruptions (Christopher, 2016). In the recent past, lean concepts have been incorporated into different industries to serve different purposes effectively.
Lean construction
Lean construction is how concepts and principles are applied and adopted in the construction industry. Just like in Toyota Production System, lean construction focuses on waste minimization, continuous improvement, and increasing value of the end product (Milberg et al., 2012). It was conceived from three theories of flow, transformation, and value creation. Lean construction establishes a set of objectives for efficient delivery, maximizing performance, and enhances production control in the industry. Koskela (2004) summarized the principles of lean construction;
· accurately specify the value of by specific product
· establish the value stream of individual products
· ensure value flows without disruptions or interruptions
· to enable customer highlight value from the producer
· to pursue production perfection.
Lean ‘wastes.’
Waste is any inefficiency that leads to the usage of more resources than necessary in production. Therefore, wastes include the incidence of physical resources losses and additional work, which attracts an additional cost, but they do not increase any value (Koskela, 2004). Waste is anything that does not add any value to the end-user. According to liker (2004), wastes include overproduction wastes, waste of waiting, waste of transport, motion waste, inventory waste, defect waste, and unutilized people waste.
Lean tools
Different tools have been established based on the lean concept. They include Kanban, Kaizen, and 5s. 5s is a set of techniques designed to strengthen performance, increase efficiency, and provide successive improvements in different industries. The technique goes through numerous processes like set in order, shine, sort, standardize, and sustain (Aziz et al., 2013). Kaizen involves asking stakeholders to come up with small improvements from time to time to improve the entire process. On the other hand, Kanban, which means ‘signboard,’ is focused on creating collaborative and self-managed teams.
The supply chain in the construction industry
The construction supply chain idea is relatively new, dating back to the 1990s. It has been noticed from the manufacturing sector that it can influence materials logistics, management, and other system engineering theories. According to Akintoye (1995), relationships between the flow of materials and productivity have been influenced by the supply chain. This has changed the structure of construction management by increasing efficiency and productivity. Many authors have urged customers to understand their supply chains’ structural features to make it more smooth and better managed. Taylor (1999) argued that rationalizing the construction supply chain was dependent on two strategies, namely, differentiation and leadership in cost. Further, (Tommelein et al., 1999) discussed customer concentration and vertical integration. He also argued that the construction supply chain is more inclined to the main contractor and not the customer. The supply changes depending on the nature of the construction project. London (2000) introduced two types of construction chains based on terms of the construction companies involved, behavioral and structural relationships, and their characteristics. Each method consists of the demand for a particular construction element by the customer or the main contractor. Figure 1 shows the nature of the horizontal structure of the construction supply chain, where the client is usually considered the demand or central organization.
Figure 1: Structure of the horizontal supply chain in the construction industry (London, 2000)
According to the model in figure 1, the client is the demand, or the central organization is equivalent to the chief manufacturer in the traditional Toyota Production Service supply chain. The contemporary construction supply chain is more logical because it considers financial risk, longevity, and customer specifications. It further puts the customer as a critical member of the chain. Each level of the construction supply chain controls the preceding level; thus, the central organization or the customer has little input or control of the chain. However, the vertical structure has many challenges, including the integration of construction companies at different levels. Another problem with the vertical method is enterprise integration, which affects coordination, management, and configuration of different supply chains in the construction industry.
Horizontal structure
In figure 1, elements of the horizontal supply chain structure are grouped on both sides to produce the construction products. On one side of the structure is the production suppliers, which involves the main contractor, advisors, and consultants. On the opposite side, we have subcontractors or secondary advisors. The third link composes of suppliers of specific construction and auxiliary materials in the industry. Finally, the fourth link composes of multiple suppliers for each company.
Table 1 shows the significant characteristics of the construction supply chain.
RELATIONSHIP
ATTRIBUTES
STRUCTURAL
Horizontal
· number of firms in the chain
· position of each firm in relation to the central organization
· location of grouped firms
· size of each construction firms in the chain
Vertical
· number of firms in the market
· categorization and location of the firms
· level of both vertical and horizontal integration
· distribution by size of firms
BEHAVIORAL
Features based on contractual relationships
· duration
· purpose
· level of relationships between companies
· number and location of each contracting method and type of relationship
Table 1: Descriptors of a supply chain in the construction industry (London, 2000)
Sources of waste in construction works
Clients nowadays want high quality, low cost, reliable schedule, and shorter execution duration, which has made construction firms to be creative enough to satisfy the customer fully. According to a Ghanaian construction company, a study was conducted targeting the level of coordination and collaboration in the planning of construction activities and waste sources in a construction firm.
Item
Source of waste
Percentage
A
Delays in arrival of materials, plant, and workers
32
B
Slow decision-making and consultants instructions
27
C
Waste of materials
14
D
Usage of unnecessary materials or work
14
E
Poor quality of materials
10
F
Shortage of materials
3
Table 2: Sources of waste in the Ghanaian construction firms (Randhawa, 2017)
According to Randhawa (2017), some of the waste sources highlighted in table 2 can be mitigated through the application of lean management tools in the construction supply chains. He further urged companies to deploy efficient waste reduction programs. It is necessary to establish these wastes sources and engage the supply chain to identify how each waste can be controlled. The construction personnel should identify amounts of wastages and manage them for better productivity. However, information and communication management, low quality, competitive relationships, and late completions remain major problems affecting the construction industries in different regions.
Methodology
The study adopted a content analysis method using secondary data aimed at establishing how lean management tools can be used to enhance coordination and collaboration through supply chain management in the construction industry. A descriptive survey research design was also used to collect information that could be used for comparison purposes. Secondary data was collected from different internet sites and journals. Using the research instrument was justified by seeking opinions of different construction firms’ experiences in their supply chains and using the lean management concept. Data collected was analyzed qualitatively through a one-on-one evaluation. The researcher read about multiple ongoing projects in the industry and made conclusions. Further, other scholarly works were used to create a more convincing theory based on reliable evidence.
Results
Location of the Cities
The construction company outsources building materials from three two different factories, located in the two cities: Cambridge and Fenway. Further, the construction company has three warehouses in Boston from where it accesses the materials to begin prefabrication.
Figure 2: A map of the Boston city, where materials are sourced and shipped to warehouses
Producer A has a capacity is 40 units, while Producer B’s capacity is 60 units. The materials are shipped to warehouses located near the construction factory with capabilities of storage as follows. Warehouse 1has a capacity of 20, warehouse II has 45, while warehouse III has 35. Hence, this optimization model works by developing a linear optimization problem for shipping, developing a feasible solution, and using the least cost method to model a feasible solution.
Warehouse 1
Producer 1
Warehouse 2
Producer 2
Warehouse 3
Figure 3:
Equation Components
Since manufactures are 2 and warehouses 3,
Let that X11 = shipment from Producer A to Warehouse 1 cost 90
X12 = Items shipped from Producer A to Warehouse 2 cost 85
X13 = Items shipped from Producer A to Warehouse 3 cost 70
X21 = Items shipped from Producer B to Warehouse 1 cost 75
X22 = Items shipped from Producer B to Warehouse 2 cost 80
X23 = Items shipped from Producer B to Warehouse 3 cost 85
The linear programming equation will follow as
Minimize C = 90X11 + 85X12+70X13+75X21+80X22 +85X23
Subject to
X12 + X12 + X13 ? 40
X11 + X21 = 20
X21 + X22 + X23 ? 60
X12 + 22 = 45
X13 + X23 = 35
Using simplex,
This problem can be expressed in the table as follows
Table 1 W1(20) W2(30) W3 (35)
Producer I
90
85
70
20
40 20
Producer II
75
80
85
60
30
50
20
20
Producer I
90
85
20
70
20
40 20
Producer II
75
80
30
85
60 30
30
50 30
20
20
Producer I
90
85
20
70
20
40 20
Producer II
75
30
80
30
85
60 30
30
50 30
20
20
Using the Northwest Corner Method, the number of allocations goes to the upper left box, and continued to the next vacant left upper box to place something in the box.
Shipping cost = 20 x 85 + 20 x 70 + 30 x 75 + 30 x 80 = 7750
The application of the northwest corner method does not consider the costs incurred. Hence, a lest cost method can still be used to determine the optimum solution. The model proceeds as follows
WH 1
WH 2
WH 3
Producer I
90
85
(20)
70
(20)
40
Producer II
75
(30)
80
(30)
85
60 30
30
50
20
WH 1
WH 2
WH 3
Producer I
90
85
(20)
70
(20)
40 30
Producer II
75
(30)
80
(30)
85
60 30
30
50 20
20
The cost of shipping for this pattern yields
Cost of shipping = 30 x 75 + 20 x 85 + 30 x 80 + 20 x 70
Minimum Cost of shipping = 7,750
Whichever method used, the results generate a feasible the solution of 7,750 as cost of transportation. This is the minimized cost of shipping items from the producers to the company warehouses for production of concreate fabrications. This model eases he supply process for shipping items from the supplies. It adoption is an effective way of minimizing wastage.
Regression Model
A regression equation can be used to predict demand and supply for the decision making on construction productivity. The building developers produced prefabricated parts to meet the construction needs. The equation examines the R squared value, t-statistics, coefficient, and the slope.
Y = a + b1X1 + b2x2 + + bn Xn
This model works only if the variables comply with the requirement of non-collinearity. This attribute suggests the variables being measured should present minimal correlation. The correlation method estimates the costs of transportation. A regression model is useful for this analysis as it helps forecast future costs of transporting from the two manufacturing locations to the operating base.
Various materials are used in a regression model involving the production of concrete precasts for construction in Boston. They include ballast, cement, silica, steel, wires, and mesh. The variables are closely related. However, the influence of the quantity used and costs involved in the fabricated concrete precast’s overall cost can be determined in a regression model. In this way, engineers seeking to manufacture more precast can apply the model to predict the number of materials to be ordered from different suppliers at prevailing costs.
Table 2: Regression model for production costs the precast
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.974540651
R Square
0.94972948
Adjusted R Square
0.906640463
Standard Error
22.30161105
Observations
14
y = Cost of Precast
ANOVA
df
SS
MS
F
Significance F
Regression
6
65774.424
10962.404
22.0411
0.000325
Residual
7
3481.533
497.361856
Total
13
69255.957
Coefficients
Standard Error
t Stat
P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept
264.0492225
160.32134
1.64699981
0.143551
-115.051
643.149
-115.051
643.149
X Ballast
-1.849222443
1.7556269
-1.05331177
0.327193
-6.00062
2.302175
-6.00062
2.302175
X Cement
36.99691989
9.0548012
4.08588981
0.004655
15.58572
58.40812
15.58572
58.40812
X Silica
-0.40756789
1.6173773
-0.25199309
0.808285
-4.23206
3.416922
-4.23206
3.416922
X Steel
-2.006759097
3.3642835
-0.5964893
0.569628
-9.96203
5.948507
-9.96203
5.948507
X Wires
-4.259111576
5.6044708
-0.75994893
0.472099
-17.5116
8.993356
-17.5116
8.993356
X Mesh
13.35286619
5.2633449
2.53695442
0.038836
0.907033
25.7987
0.907033
25.7987
In the regression output shown in table 2, the independent variable controls the dependent variable’s cost cost of precast. Hence the regression equation model will be as follows,
Cost of concrete Precast (y) = 264.04 +1.849 Ballast + 36.997 Cement 0.408 Silica 2.2001 Steel 4.259 Wires + 13.353 Mesh
Any future costs of the materials can be estimated to determine the quantity to be ordered from the suppliers, hence save costs and prevent wastages.
Recommendation
A construction firm can reduce wastes by using an efficient supply chain. Most of the wastages in constructions come from lack of proper transport logistics and delivering the wrong products. The construction industry involves many parties who need to be interconnected so that work goes perfectly well. In this paper’s recommendations, waste minimization refers to reducing wastages both in time and money in a construction firm due to an inefficient supply chain. For a firm to achieve waste minimization, various players in the supply chain must work together. These players include suppliers of different construction materials, contractors, subcontractors, government agencies, consultants, financial institutions, and developers.
To facilitate waste reduction, a number of issues must be assessed as priorities. They include the cost of construction materials, transport costs, and demand-driven fabrication sites ready to deliver the required materials on time. Having a well-integrated supply chain system reduces costs of delivery and waste of time while sourcing for materials. Further, a pre-fabrication site enables a company to reduce wastages, which normally occur at the contraction site during installing structures. Further, in the site, there can be reusing of some materials like metal and timber. On the other hand, consultants come in time to give advice on efficient construction methods and how the firm can enjoy economies of scale. Therefore, construction firms can utilize economies of scale, such as instructing the financial instruction to pay the firms dues all together, transporting ready construction materials to the site, and having a specific pre-fabrication site away from the construction site, which relieves the contractor the warehousing costs.
Conclusion
Civil engineers can lower construction costs by adopting lean manufacturing that embraces efficiency to save costs and minimize wastage. Reliable models should focus on the supply chain to minimize logistic costs. Ordered quality materials from the various producers can arrive while monitoring movement using the transportation model. When solved using the simplex method, it helps assign the materials to the nearest warehouses for the buyer’s convenience. Additionally, instead of ordering unregulated quantities as per costs, the concrete precast manufacturer can utilize the OLS regression model to predict the expected quantity of materials based on the overall expected production costs. Hence, manufacture in the construction industry should regulate the cost of the process using lean manufacturing.
Aluminum cladding, drilling, and painting. Suppliers.
Government institutions like land and constructions authority
Individual customers
Suppliers of construction elements like cement, steel, concrete mixture
Construction site and structure installation
Offsite pre-fabrication
Developers
Corporate customers
Glass, rivets, and sealing suppliers
Financial institutions and consultancy firms
Diagram 2: A schematic representation of an efficient supply chain in a construction firm.
Diagram 2 above shows a very efficient supply chain that can be useful to a construction firm with increased waste problems. The supply chain starts with raw materials and other by-products suppliers supplying items to suppliers of construction elements like cement, steel, and concrete mixture. The suppliers of these elements send construction materials to the pre-fabrication site. The pre-fabrication site is usually away from the construction site. Its main purpose is to prepare all structures needed by the construction firms like doors, windows, roofing materials, and other items that need preparation. Other suppliers who provide special services like painting, welding, drilling, glass cutting, sealing, punching, and cutting come into the supply chain through the main suppliers. The construction engineer usually gives these suppliers the construction needs. The construction site engineer has direct communication with the main supplier. Then the site engineer has direct contact with the developers and keeps on updating them on the construction progress. At the construction site, the structure’s installation is done by junior engineers and foremen who are assigned a group of laborers. Work on the site is coordinated by the engineer in charge of the construction. Further, to make the construction efficient, there are several support institutions. One of the support institutions is government institutions for land and construction approvals. Another support institution is consultancy firms and financial institutions. These support institutions are well integrated with the main suppliers and the developers. In the end, the developers can be engaging with their corporate and individual customers. The essence of this kind of supply chain is to save the waste of time, materials, and money.
The supply chain in Diagram 2 can solve various wastages in different levels of construction. First, in design, through the incorporation of consultants with direct contact with the main supplier, the supply chain is likely to solve the wastages of changes in design, specifications, and sizing of products, error in contracts, lack of knowledge of construction wastes. Also, at the sourcing and procurement level, the supply chain can solve wastages like ordering errors, excess materials left over, and bulk purchase requirements. At the material handling level, the supply chain will solve mishandling, careless delivery, inappropriate handling, and damage of materials during transportation. Finally, at the construction site level, because of having qualified engineers and foremen, the chain will solve problems like installation errors, cost of rework which may be brought by poor workmanship or using wrong materials, vandalism, phasing of building and site office wastages. The above supply chain model in Diagram 2 will be so effective in solving wastages in a building construction site.
References
Aziz, R. F., & Hafez, S. M. (2013). Applying lean thinking in construction and performance improvement. Alexandria Engineering Journal, 52(4), 679-695.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Fitzsimmons, J. R., & Douglas, E. J. (2011). Interaction between feasibility and desirability in the formation of entrepreneurial intentions. Journal of business venturing, 26(4), 431-440.
Kim, D., & Park, H. S. (2006). Innovative construction management method: Assessment of lean construction implementation. KSCE Journal of Civil Engineering, 10(6), 381-388.
Koskela, L. (2004). Making-doThe eighth category of waste.
Liker, J. (2004). The toyota way. Esensi.
Meng, X. (2019). Lean management in the context of construction supply chains. International Journal of Production Research, 57(11), 3784-3798.
Milberg, C., & Walsh, K. D. (2012). Exploring lean construction practice, research, and education. Engineering, Construction, and Architectural Management.
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