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Industries:  General 

Project Lifecycle cost reduction through Lean Implementation in Construction Industry

By: Rajesh Mohan
Senior Research Analyst

31 Mar 2014

1. Problem Statement: On an average, Waste generated in any construction project escalates the overall project cost by 15-20%.Out of the total waste generated in construction Industry approximately only 15% can be recycled and reused. Improving and refining the performance of construction supply chain and its collaboration is crucial for realizing cost savings as well as attaining long term competitive advantage. 2. Purpose: In construction industry the adoption level of Lean techniques is still very low as compared to manufacturing industry where it has already made stronger inroads. The purpose of this paper is to explore the use of Lean Concepts in Construction as well as to foresee key challenges that can accrue in the long run implementation. 3. Introduction: Lean construction (Lean thinking and approach in construction Industry) as a means of supply chain improvement is only being adopted during the last decade. Post the implementation of lean thinking in Toyota Production System in the latter half of 20th century many organizations especially those in manufacturing and automobile sectors began to widely adopt the lean manufacturing techniques to improve their supply chain performance. Construction Industry which is project based and involves unpredictable conditions such as environmental factors, labor shortages, volatility in material prices and their supply, etc. creates a challenging approach in implementing the lean concepts. Though the core thinking remains the same, modifications are required for instigating them on the ground level for the construction Industry supply chain. 4. Inference/ Recommendation: Implementing lean thinking in construction projects can bring in cost savings of nearly 20-25%. However, Construction firms should carefully analyze the impact on the effectiveness of supply chain management in isolated events as well as project centric nature of construction projects for achieving cost savings. Subcontractors and material suppliers implement Lean with a focus on increasing capacity utilization and efficiency whereas the client wants the project to be completed within the stipulated time and budget. One key practice being followed by the material supplier in the supply chain is to move towards a make-to-order model instead of maintaining stock. This shift is towards cost reduction away from being flexible.

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