CIVIL 707

CONSTRUCTION LOGISTICS

ASSIGNMENT 1

SEMESTER TWO, 2010

DEPARTMENT OF CIVIL AND ENVIRONMENTAL ENGINEERING,

FACULTY OF ENGINEERING

UNIVERSITY OF AUCKLAND

Lecturer : Dr. Vicente Gonzalez

Due Date & Time : Monday 13th September, 2010 @ 12.00 p.m.

Written by : Matthew Wendt

ID number : 1520059

Assessment Value : 30%

 Contents
1. Introduction.……………………………………………………..……………………………………………………..2
2. Current Nature of Production in Construction………………………………………………………….2
3. Main Components of the Current Construction Industry………………………………..………..4
4. Implications of the New Philosophy to Construction (Koskela)…………………………………5
5. The New Philosophy of Production in Construction (Koskela)…………………………………..8
6. The General Contributions of the Koskela report to Construction Logistics………………8
7. Links between Off-site and On-site Production in Projects (Koskela)………………….....10
8. The main purpose of the Egan Report…………………………………………………………………….10
9. Problems and challenges in the Construction Supply Chain (Egan)…………………………11
10. Problem Analysis of the Koskela and Egan Reports for the Construction Supply Chain
and Logistics Management……………………………………………………………………………………..12
11. Conclusion……………………………………………………………………………………………………………..15
12. List of References…………………………………………………………………………………………………..16

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1.0 Introduction:

Lean production has been a notable achievement of the manufacturing industry today, by the
“do-more-with-less” approach to improving cost efficiency across the market. As product
demand has increased, the need for and complexity of efficient processes have advanced in
order to satisfy this. These needs have all grown out of the want for better quality products, at
optimal value and within the time window required. A common practice philosophy developed
which, while satisfying these requirements was far from efficient in terms of resource
utilization. One of if not the, first to recognize this deficiency and pioneer many concepts such
as Just-In-Time (JIT) and Total-Quality-Control (TQC) out of which the new philosophy would be
born, was the Japanese.

The interesting note to consider here is that since being coined by the Japanese a half-century
ago, recognition and respect for these practices has only been realized through the realization
that their actual value to processes significantly increases efficiencies in any system. Thus, its
success in manufacturing has been sufficiently realized but yet not fully appreciated in
academic circles. This upturn in interest though has drawn attention to its possible applications
in construction, where a proven record of wastage has been recorded, whether of manpower,
material resources, or their associated time/cost.

2.0 The Current Nature of Production in Construction:

According to Koskela (1992), construction practices currently base their production behavior on
the concept of Conversion, which in general states that an input undergoes a process to
produce an output. That is to say, construction is based on a set of activities geared towards
producing a specific output (Koskela, 1992). This process of conversion is currently followed by
the construction industry, whether the final product is a building, a section of highway, a
bridge, or a simple concrete slab.

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 Figure 1: Conventional View of Production as a Conversion Process

Figure 1 illustrates how the activity or production process can be better defined by sub-
processes. This can be compared to the separate activity stages of a construction project where
sub-process A can represent the design of the project and sub-process B the construction or
execution stage. The arrows between them indicate the order or sequence format each must
take place in to satisfy the project requirements.

The value in the products is based on the conversion it takes from its various inputs to become
what it was conceptually perceived to be. As the constituent stages of the project are
formulated initially, their planning or scheduling is such that a sequential chain of events (sub-
processes above) is programmed to occur, and while isolated from each other during their
implementation, they are ultimately to be combined. The intrinsic relation of these events is
sequential because of their belonging to one project, though the activities themselves are
traditionally performed in isolation. Very little consultation is made with other sub-process
teams who may be programmed to execute the next phase of the current works. This lack of
linkage between related parts of the same project can cause delays, rework, poor
workmanship; also worsening safety issues and wasteful resource usage which all have a
bearing on cost. This activity view is shared by both the traditional and newer practices of
construction (Koskela, 1992). This aspect of the current construction industry is responsible for

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inefficient utilization of the resources available due to this approach. Thus, at its best, and while
introducing cost-effective measures to the sub-processes/activities, no significant effort has
been invested into minimizing or eliminating the waste associated with those activities which
do not add value to the product. In this respect, flows are not considered as contributors to the
project and are hence seen as activities which fulfill the same non-value function.

3.0 Main Components of the Current Construction Industry

The current components which make up the construction industry of today are as follows:
3.1 Activities
3.1.1 Design Process
3.1.2 Construction Process
3.2 Flows
3.2.1 Sequential Project Realization Methods – the completion of phases
within a project authorize the start of the next. There are very few
repetitive steps under design, making cycle times longer. Also, no
consideration of successive phases is carried out when defining
constraints, whether they are relevant or excessive. There is little
feedback available due to the segmented nature of each phase, hindering
process transparency and limiting lessons learned, adversely affecting
skill development and causing poor workmanship, and may sometimes
result in rework either in design or construction requirements.

Also in the current construction environment, Koskela discusses the following issues and
identifies them as a barrier to effective construction practice:

3.3 Lack of Quality Considerations – experience/knowledge deficient, neglect, sub-

standard levels set (belief that work is of high quality). The inconsistency in the

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 standard of work increases variability and the neglect of customer requirements,
while decreasing error detectability.
3.4 Segmented Control – Control of this type usually slows down the project as it is
usually hierarchical, specialization generally requires more processes meaning more
WIP between processes due to material or information shortages.
3.5 Critical Path Network Methods – this method requires segmentation of the project
process. It also does not consider the requirements of work teams in subsequent
phases, and how they are expected to react to variations in the original workflow
schedule. It is important to note that this method still follows the traditional and
general sequential mode of construction.

4.0 Implications of the New Philosophy to Construction (Koskela)

The new production philosophy as applied to construction then moves on to consider both the
conversions (activities) and flows of materials within the process and between activities. Great
focus is placed on flow processes here which occur in interaction with identified activities.
Figure 2 illustrates the structure of the new philosophy as based on manufacturing, illustrating
the flows associated with an entire chain of processing links (Koskela, 1992). It views the
production as a flow of processes.

Figure 2: Basic Representation of Production as a Flow Process

The shaded boxes within the figure represent the components which introduce waste and
inefficiency to the production process, and add no value to the product. Note the re-work

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which occurs during the inspection stages, implying the requirement for more resources. Thus,
to improve the efficiency of production, these waste components need to be reduced and/or
eliminated. The following principles are stated by Koskela as playing a vital role in flow process
design and improvement:

4.1 Reducing the share of non value-adding activities – reduction of these activities will
decrease the total resource usage taken over the span of the entire process and
focus these on only those activities which add value to the process. Some simple
examples are waiting, overproduction, surplus inventory and defective component
production.
4.2 Increase output value through systematic consideration of customer requirements –
customer-based analysis of demand will increase “customization” value of the
process and product.
4.3 Reduce variability – increased feedback from stakeholders and utilization of previous
experience with similar projects will enhance understanding and foreseen conflicts
within the project.
4.4 Reduce cycle times – decreasing the overall cycle time to render a product will
increase the volume production, and decrease the nett effect of delay on the entire
chain.
4.5 Simplify by minimizing the number of steps, parts and linkages – as compared to the
supply chain concept, reduction of the lateral tiers of the SC and the number of links
within each tier, reduces the complexity and time spent between and within each
tier, hence reducing the chance of negative impacts caused by variability.
4.6 Increase output flexibility – increase the ability to adapt to changes required by the
downstream or customer link within the chain through constant exchanges and
updating of information.
4.7 Increase process transparency – better understanding of processes enhances the
ability to detect errors whether technical or flow-related

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 4.8 Focus control on the complete process – the even and efficient control of all links of
the process will decrease the chance of delays associated with rework, accidents,
material wastage, and other forms of waste. This also applies to the other phases of
the construction process.
4.9 Build continuous improvement into the process – Encouragement of feedback within
and between links in the chain allows for project self-development in all its
processes.
4.10 Balance flow improvement with conversion improvement – Balancing the efforts
made to develop flows as well as activities of conversion ensures that an imbalance
is not created between the two aspects. It is emphasized in the new philosophy that
the two are symbiotic in relation to each other.
4.11 Benchmark – Following best practices proven by other construction processes
can eliminate any potential waste and inefficiencies not identified in the initial
stages of the project if similar in scale and constraints.

The vital role of flow brings to the fore the importance of integrated logistics management, and
as defined in much of the literature, the flow of information, materials and services must be
managed in integration due to their complexity. Koskela’s report contributes to construction
logistics in the respect that based on manufacturing, parallel references to the principles above
such as repetition, flow, process transparency and cycle time can be related to construction. In
recognizing these, the tools of improvement can be applied to emphasize lean thinking in
construction practice.

By virtue of the recognition of flow, consideration must then be given to information, materials,
inventory, work-in-process and their flows within the construction process. This in a sense
embodies the concept of logistics and how it must be applied and coordinated across all facets
of construction to minimize waste and inefficiency.

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5.0 The New Philosophy of Production in Construction (Koskela)

There are two main processes in construction that are described through the new philosophy
which are:
5.1 Design process – initial stagewise refinement of requirements from needs and
wishes, then through advancement, detailed design drawings and specifications.
Problem-solving techniques employed here bring design to fruition, and help to
identify hidden problems. Can be simplified further by modularizing the design.
5.2 Construction process – composed of three different types of flows:
5.2.1 Materials process involves material flow to site, including processing and
assembling on-site.
5.2.2 Work processes of construction teams. This is the flow of different team
members or teams on the site in relation to staging of design and
mirrored by flow of materials onto site.
5.2.3 Supporting flows
5.2.3.1 Additional flows of control or support include the Project
Management process by the client.
5.2.3.2 Design management process by engineer or design project
manager.
5.2.3.3 Construction management process transforms design into
construction/fabrication plan and day-to-day works and control
processes are formulated either on-site or at a factory.

6.0 The General Contributions of the Koskela report to Construction Logistics

The general contributions of the Koskela report are related to the decrease of the share of non
value-adding activities in all processes. Also, we must increase the efficiency of value-adding
activities through more transparent processes. “In the construction industry, attention to the
new production philosophy has grown slowly.” The ultimate aim of the report is aimed at the

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reduction/elimination of waste and inefficiency introduced through the lack of recognition
given to the importance of flows whether for materials, services, or information.

Quality assurance and TCQ have been adopted by a growing number of organizations in
construction. The general consensus here is that both the JIT and TQM methods have
contributed to the creation of this new philosophy as stated by Koskela, though there is no real
evidence to suggest the supposed success of the theory to construction, it is hoped that by
applying this new philosophy, the same successes that have brought Toyota to the forefront of
manufacturing is seen to benefit construction if this can be realized.

As Koskela has stated the obsolete nature of the current construction philosophy as originating
from the practices of old, with only newer developments in network planning and advances in
technology, it is seen that with the new philosophy, much can be achieved with the aim of the
author seemingly being to analogously apply successes in manufacturing to construction. It can
be seen that the one central and principal key to the success of this new philosophy is the
human factor, upon which a large majority of the uncertainty lies with in the first place.

In saying that, some logistical goals need to be laid down with the ideas of Koskela retained
here. One of the vital points made by the author is that of firefighting and how so many
resources are allocated to this work consuming management resources and leaving little time
to perform any kind of safe study.

The Koskela report has aided construction logistics by effectively identifying and analogizing the
activities and flows occurring in construction to that of the manufacturing cycle. In doing this,
the advances of the manufacturing industry can be applied to construction especially in terms
of the fact that it is integrated logistics management which will play as vital a role as it has in
manufacture. Effective information, materials and services flows within the construction project
will benefit if all stakeholders to the cause are well informed and all relevant considerations and
consultations between various work teams are allowed to take place.

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7.0 Links between Off-site and On-site Production in Projects (Koskela)

There is a clear link in Koskela’s proposal between off-site and on-site production in areas such
as design, pre-fabrication and site processes where if constructability, materials management
and computer-integrated construction are not considered properly waste can still be generated
with loss in value, time, cost and resources eventuating. (Koskela, 1992)

Suffice to say that if proper consultation and flows of information between all relevant parties
occurs, off-site production can greatly benefit the project by reducing times for on-site
fabrication and production, and is supported by other links within the supply chain to achieve
this. If relations and communication with other suppliers for pre-fabrication and other off-site
activities to occur, this philosophy can also be shared or transferred to these links upstream in
the supply chain which will serve to improve and develop their services to the industry. (Arbulu,
2009)

8.0 The main purpose of the Egan Report

The main purpose of the report was to disseminate the findings of the Construction Task Force
chaired by Egan which had been commissioned by the Deputy Prime Minister of the United
Kingdom in 1998. The scope of the report was centered mainly on identifying and advising on
the opportunities that the Construction Industry in the United Kingdom had to improve its
practices.

“In formulating our proposals for improving performance we have studied the experience that
has been gained at the cutting edge of construction and in other industries that have
transformed themselves in recent years. We have learnt that continuous and sustained
improvement is achievable if we focus all our efforts on delivering the value that our customers
need, and if we are prepared to challenge the waste and poor quality arising from our existing

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structures and working practices.” – Sir John Egan, Chairman of the Construction Task Force
(Egan, 1998)

This excerpt from the foreword of Sir John Egan’s report to the Deputy Prime Minister in 1998
encompasses the desire and hence the scope of the commissioned report as researched and
compiled by the task force.

9.0 Problems and challenges in the Construction Supply Chain (Egan)

There are most certainly problems and challenges highlighted by Egan in the commission
report. These issues center mainly on the belief that construction must be changed from its
current ways. It is the way of thinking towards the current philosophy and the possibility of
changes that people must adapt to and support if the new philosophy is to be integrated
successfully into construction, bringing with it the many benefits that have been realized by
highly advanced manufacturing industries such as that of the car production markets, with
Toyota being a prime example.

9.1 Non-repetitive (i.e. unique) processes – This interpretation is one of the factors
preventing the integration of processes in construction. Though these products’ end
processes are fundamentally different in nature, the processes which take place in
order to execute the project will be quite consistent in scope. This means that the
design, planning and functional execution of various parts of the project, though
different by specification, will require the same best practice methods. Technical
guidelines are repetitive as the engineering behind a project must follow standards.
This affects the supply chain in the respect that with no repetitive flows, variability
becomes a major component of the chain, with undefined parameters given
between activities.
9.2 Fragmentation in construction has provided opportunities for more professional
contractors to bid for sub-contractor work. This works to reduce the variability in

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 time constraints and an opportunity to fast-track the project if the need arises.
Unfortunately, the negative impact of this occurrence is that more exposure to
contractual relations has resulted, preventing continuity and the relationship
fostering desired in construction. Waste is introduced here in the form of waiting
due to disputes, client requirements, service conflicts etc.
9.3 Customer dissatisfaction has occurred and can result from many factors such as
fragmentation, quality (defects, errors), resource availability, value for money etc.
Most of all, customer-focus and consultation has been neglected, leaving the
construction to take place based purely on the interpretation and experience of the
engineering company.
9.4 Reliance on contractual relations – means that contractor may change through every
project bidding cycle due to lowest bids, varying this component within the supply
chain constantly. This is seen as a negative impacting factor on the construction
supply chain which limits the development of the chain due to the varying presence
of contractors, designers, and consultants within it. Also, with this varying nature of
organizational structures and practice being introduced to the chain, variability again
becomes a factor.

10.0 Problem Analysis of the Koskela and Egan Reports for the Construction Supply Chain
and Logistics Management
There are common problems identified within both reports which importantly focus on waste
and inefficiency and the efforts which are in constant application currently to address these
issues. The focal industry from which construction attempts to tap strength, is industrialized
manufacturing. The pioneering practices of the Japanese have seen them rise to the top of the
manufacturing world. Thus, these areas are discussed in more detail below:

10.1 Fragmentation and partnering the supply chain – this is very critical to
innovation, incremental and sustained improvement in performance. Thus, open
communications and the fostering of good business relationships between links in
the supply chain will aid in this. This is to say, the exchange of information must be

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 shared amongst all links of the SC to allow the coordination of all activities to be
made possible. Also information should be shared further upstream or downstream
of the focal point (project) to allow closer collaboration on supply and demand just
when needed and where needed.
10.2 Client Dissatisfaction and Customer-oriented service – construction should focus
only on what matters to the client, “Most clients for construction are interested only
in the finished product, its cost, whether it is delivered on time, its quality and
functionality.” (Koskela, 1992) This may arise from defective design, lack of skill or
inexperience during the construction process, inferiority of materials used or lack of
materials required etc. Thus, constant and open communication is required to allow
the client and the supplier to be involved as well in order to make the process
feedback more effective.

Discussed below are more solutions to aid in enhancing the construction supply chain and
logistics management aspects of the new philosophy.

10.3 Drivers of change:

10.3.1 Committed leadership – management commitment to quality and
efficiency
10.3.2 Process, product and team Integration – eliminate waste by focusing all
areas of the project on the needs of the client.
10.3.3 Quality-driven agenda – zero defect driven targets, project completion
within constraint delivery.
10.3.4 People commitment – based on health and safety for workers, fair and
just treatment and mutual respect.
10.3.5 Repetitive processes – practices in the construction stages which can be
repeated. An example of this is the international standards applied to
trades (trade specification), also repair and maintenance work follow a

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 schedule which is repetitive, to ensure consistency and standardized
practices.
10.3.6 Product development – developing a generic product which can be
produced on a mass scale that meets the needs of clients. For example, a
section of road or living unit. Also requires continuity and dedication from
all those involved.
10.3.7 Component Production - detailed planning, management, and sustained
improvement to eliminate waste through efficient logistics management.
This means ensuring the effective flow of materials, services and
information within the supply chain through better logistics management
and coordination of work.
10.3.8 The utilization of IT and technological advancements to increase process
cycle time and quality.

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11.0 Conclusion:

It is clear that the traditional and new philosophies of construction production are comparable
in the respect that they both possess the interpretation of construction as a set of activities
aimed toward production of an output.

The introduction of the new philosophy to construction will improve overall efficiency allowing
productivity to improve significantly while minimizing waste generated through ineffective
application of flow processes within the construction arena.

Both the Koskela and Egan reports come to the conclusion that Construction practices are
currently inefficient and wasteful and must change from its current state in order to reach an
optimum production level. While Koskela utilizes the concept of flow processes within each link
to apply manufacturing principles and lean thinking to construction, Egan views the entire
supply chain from customer/client through to the design stages of the project to expand this
view by highlighting that the links throughout the supply chain must cater to the needs of the
customer/client.

Koskela’s report focuses heavily on the application of manufacturing concepts to the

construction supply chain while Egan’s report, while focusing on this aspect, tends to elude
more to the human influence, role and adaptation to the new philosophy as applied
construction supply chain and its logistical implications. In all, the scope of both reports is
hugely relevant to current construction trends and can aid in the elimination of waste and
inefficiency, with the future looking bright for the industry in its advances toward bigger and
better projects and the challenges to come.

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List of References

1. Arbulu, R., (2009), Application of Integrated Materials Management Strategies,

Taylor & Francis Group, LLC.
2. Egan, J., (1998), Rethinking Construction – The Report of the Construction Task Force,
Crown Copyright, London.
3. Koskela, L., (1992), Application of the New Production Philosophy to Construction,
CIFE, Stanford University.

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