Earlier this month, the American Society of Civil Engineers reported that the US will require $4.6 Trillion of investment in its infrastructure over the next 10 years. This would seem to be an opportunity of a generation for the construction industry but it remains to be seen if it is actually capable of meeting such a large need. Consulting firm McKinsey & Company reports that US productivity in manufacturing, retail and agriculture has grown by as much as 1,500% since 1945. Construction productivity? Hardly any improvement at all in more than 70 years! What's up with that?
In its report released last month entitled Reinventing Construction: A Route to Higher Productivity, McKinsey offers seven ways that the industry will need to become more productive in order to meet the infrastructure needs of the US and the world. It's recommendations are threaded with two common themes... supply chain collaboration and integration of technology... that are consistent with what we are already seeing among precast and prestressed concrete manufacturers:
1. Reshape regulation and raise transparency
Rather than simply calling for relaxed regulations, the report calls for streamlining permitting and approval processes and the implementation of key performance indicators to easily review the effectiveness of the permitting process. It also calls for requiring the use of technology (i.e., BIM) for all public projects.
2. Rewire the contractual framework
Restructure the context of contracts to encourage... even require... collaboration throughout the supply chain. Apportion risk to the parties that are most effective in mitigating it and provide incentives for productivity measures. (Report estimates 8-9% productivity gain from this.)
3. Rethink design and engineering processes
A more collaborative approach to design and engineering will tap the productivity potential of each party in the value chain. Standardization, where possible, will also produce more efficiency. (Estimated 8-10% productivity gain.)
4. Improve procurement and supply-chain management
Tightening supply chain integration will provide the same type of productivity improvements produced by the just-in-time elements of Lean Manufacturing principles. The North Carolina Department of Transportation has been a leader in this regard. The DOT estimates it will save over $1.2 million annually by requiring its concrete vendors to provide product information and concrete test results through Idencia's web hosted system. In turn, NC DOT offers inspection results to municipalities through its web site. (Estimated 7-8% productivity gain.)
5. Improve on-site execution
Collaboration is once again the key here, including integrated planning, project mobilization and performance review. The report emphasizes that this is critical to reducing wastes of time and resources. Industry-wide adoption of Lean Construction principles would make a big impact here. (Estimated 6-10% productivity gain.)
6. Infuse digital technology and advanced automation
The industry needs to commit to leading instead of lagging in technology adoption. To start, the report calls for 3D BIM becoming the universal standard for project (and product) design. It needs to take full advantage of the mobile platform (for more effective communication and collaboration in the field) and web-hosted systems for supply chain integration. In addition to improved collaboration, technology will improve internal productivity such as enabling paperless QC and providing real-time inventory control. (Estimated 14-15% productivity gain!)
7. Reskill the workforce
The biggest labor issue in construction is not a lack of jobs; it is a lack of skilled workers. The Associated General Contractors of America found that 69% of 1,500 firms surveyed had trouble filling hourly craft positions. This is, of course, a primary impediment to productivity. The report calls for more in-house training, apprenticeship programs and implementation of systems for retaining institutional knowledge. (Estimated 5-7% productivity gain.)
McKinsey estimates that successful implementation of all seven measures will produce a cumulative productivity gain of 48-60%. Given that anticipated funding sources over the next 10 years fall about $2 trillion short of the $4.6 trillion infrastructure investment required, the industry will have to improve its productivity by this kind of scale in order to effectively address the need.
About Idencia
Our purpose at Idencia is to offer precast RFID tracking solutions that improve productivity throughout the value chain. Our subscription offering applies RFID and bar code tracking to products from the time of manufacture through end-of-life. As a cloud-hosted product tracking system that is seamless between manufacturers, contractors and asset managers, Idencia adds information value to all, eliminates redundancy and saves time. If you would like to learn more, click below.
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