The construction industry's productivity problem goes far beyond labor

When it comes to project management, there are only two solutions: increase the amount billed to clients or reduce expenses. Ideally, you would be able to increase the price the customer is willing to pay for the product, but most would agree that this is extremely difficult, if not impossible. Each project involves a competitive bidding process where the client seeks to keep the construction cost to a minimum.

However, against a backdrop of high inflation and labor shortages, this clearly represents a real challenge.

Much has already been written about low productivity in the construction sector, as has the lack of progress made over the past 30 years. It is therefore natural to wonder. Some will respond that this is simply an inherent characteristic of this sector, whose activity is made up of distinct, low-volume projects, each located in a different physical location.

What can the manufacturing industry teach us?

Over the past three decades, the manufacturing industry has achieved more productivity gains than the construction sector. These are attributable to its fixed and repeatable processes, automation and the use of standardized materials, which are not present in construction. Due to its specific problems, this sector finds it difficult to achieve comparable progress.

It is nevertheless possible to learn certain lessons from the manufacturing industry and the strong trend towards the industrialization of construction demonstrates that both contractors and clients find advantages in adopting new working methods. Modular construction and prefabrication strategies are undoubtedly booming, with the trend being to reduce work on site and relocate it to production sites or supply centers.

Is workforce productivity the solution?

The costs of a construction project generally fall into four main categories: labor, materials, subcontractors and equipment (cranes, excavators, etc.).

The distribution of costs may vary depending on factors such as the role of each collaborator within the project – project manager, specialized company, supplier of materials or equipment – ​​or whether they carry out the work with their own staff or use subcontractors. Therefore, the areas to focus on to reduce costs differ from company to company and project to project.

There is a trend to focus on labor productivity, but in some cases the costs can be as little as 10% of the project costs. This is why, depending on the project, this is not necessarily the area to be addressed as a priority.

The real solution is undoubtedly not to consider these four types of resources as four independent aspects but rather to adopt a synchronized approach in order to limit costs.

There are many reasons for poor productivity: inadequate forecasting and planning, excessive changes in scope or concept, inexperienced workforce, weather hazards, etc. A recent study on productivity in the construction sector reveals that around 40% of workers' working time is non-productive. The potential for improvement and cost reduction is therefore considerable.

For example, when we measure labor productivity and see idle workers on a construction site, the question is why. In the majority of cases, the problem does not come from their lack of knowledge, skills or hard work but from the fact that they are blocked by the unavailability of other resources (such as materials or equipment). or awaiting the completion of another batch before they can begin or continue their work. This is perhaps the main reason why manufacturing work can be carried out more cheaply and on a more reliable schedule.

Once you accept this argument, then the industry must focus on integrating project and resource planning with structured work packages that can be planned and synchronized to avoid wastage and increase overall resource productivity. This will also improve delivery performance and project margins.

Another possibility of reducing project costs lies in optimizing materials management. In most construction companies, equipment remains idle for extended periods, causing unnecessary costs that directly impact the profitability of the project. By improving the planning and monitoring of materials, costs will be significantly reduced.

Many construction and engineering companies operate multiple divisions, some of which are not project oriented, including service or installation management, asset operations and maintenance. However, for these entities, it is just as important to optimize their resources as their performance.

Faced with inflation, companies are seeking to reduce construction costs. To improve their margins, they rely on certain manufacturing guidelines while using AI; a technology that has become essential for resource planning.

Tribune by Jérémy Jeanjean, Senior Pre-Sales Manager at IFS (LinkedIn).