Someone who has never heard of “lean construction” would be right to think “lean” means reduced waste, higher productivity, and better profitability. Those benefits alone would be great reasons to adopt the practice, but if you are not practicing lean construction, those reasons probably won’t be the ones that make you take the leap and learn how to do it. When you do adopt lean practices, you’ll likely do it to remain competitive.
Because construction companies practicing lean report its greatest benefit is to win them business.
Here’s the background: Back in 2013, McGraw Hill Construction (now Dodge Data & Analytics) published a SmartMarket Report titled “Lean Construction.” The authors questioned 120 members of the McGraw Hill Construction Contractor Panel and 73 members of the Lean Construction Institute. One of the survey’s discoveries was that people who are not yet applying lean methods view them as summarized above – as ways to raise productivity and profitability.
But companies practicing lean project delivery appreciate lean for its end result, which is more business.
How to Win Business
One reason lean contractors are more competitive is that lean project delivery raises customer expectations, and lean is necessary to meet them. The report says, “Eighty-six percent of Lean practitioners find clients are increasingly expecting the shortened construction schedules enabled by a Lean approach.”
The report provides this insight:
One expert says that Lean has been a contributing factor in the company’s overall financial success in recent years. “I can point to jobs we’ve won because of our experience with Lean,” he said. “We’ve gotten work with repeat clients where we implemented Lean, and they were absolutely thrilled with the results, and they just handed us work. [Emphasis added.]
And the experience above is not just a factor of a growing economy. Because the survey was done during a slow economic period, this quote is telling:
Another contractor states that “if we didn’t do [Lean] we would have struggled [finding] work.” Because they made that commitment, though, he was able to state definitively, “We didn’t have a downturn.”
Pricing and Reliability
Repeat business comes when schedules are met (or beaten) and pricing is low. Regarding pricing, consider this anecdote:
There are examples where trade contractors who have worked with us, have had a better experience on our jobs and as a result we get better pricing.
Trade contractors give lean GCs and CMs more competitive quotes because the work is more consistently profitable. The experience of one advanced trade contractor sums it up:
“Our margins have improved to expectation, so instead of taking a job at 4 or 5%, and being lucky to get 3%, we’re taking the job at 4 or 5%, and we’re making 4 or 5% – maybe getting a little extra, but not going below that.”
This contractor’s experience captures a key benefit of lean construction: its reliability.
The survey has lots of interesting findings; I’ve only quoted a few here. But to summarize, this quote says it all: “As more owners become familiar with the impact of Lean, it may evolve from a competitive advantage to a necessity.”
Where to Start?
Lean construction is a big area, with lots of names: just-in- time, Last Planner® System, pull planning and more. If you’re interested in learning more, where do you start?
Naturally, the Lean Construction Institute is a good place. And in this short blog post I describe how to use a practice you’re already doing as Step One on the road to lean!
Read “Where To Get Start With Lean”
