Labor and materials are a precarious pair in the construction industry.

Workforce constraints are a regular occurrence. Surges in nonresidential buildings, the Wall Street Journal reports [1], are perpetuating a worrying trend where demand outpaces supply for skilled trade workers [2].

Meanwhile, materials pricing, the BLS’ recent Producer Price Index for construction manufacturing prices outlines, is rising (via Dodge Data & Analytics [3]). Albeit slight, fluctuation is noteworthy in an industry that is known for high overhead [4] and razor-thin profit margins; Dodge’s own advice, similarly, calls out this very phenomenon. “This moderate increase still signals inflationary pressures in the economy,” Dodge’s report reads, “[…] As we navigate these uncertain times, construction firms must remain vigilant and adapt to evolving market conditions by closely monitoring their costs and adjusting their pricing strategies to stay competitive.”

With such uncertainty, lean management principles have never been more critical. “Prefab helps you to manage materials shortages more effectively,” says Alan Gasvoda, an End User Productivity/Continuous Improvement Leader for Milwaukee Tool.

“I would say that visibility and control are key aspects,” he says. “When they are onsite and in your control, you can be more effective at ensuring that you have what you need and where you need it. It also gives you the ability to be more agile on how you respond to the needs of the field. Not to mention that it helps to reduce waste, scrap, and other losses.”

“Another key,” he adds, “is that it allows you to be more thoughtful on how you spend money on your projects, giving you the ability to spread out the spend over time instead of all at once.”

“When done correctly, with the right information, you’re going to have less waste throughout the process and it will allow the right flow of materials to the jobsite, which will give you better predictability and control over when you need a material, and how you get it to the jobsite,” he explains. Gasvoda is an expert at finding solutions to help customers improve prefab, but he also looks across their operations for opportunities for improving workflows, systems, and integrations.

One way the industry can move forward, he believes, is looking to Industrial Construction (IC). At a high level, he explains that industrialized construction moves beyond projects to productization [5], “building products and no longer just building everything as a one-off the first time you’ve ever built it.”

The Benefits (and Problems with) Prefab

Prefab is nothing new. Some of the earliest applications of prefabricated architecture date back to the first and second industrial revolutions, Tian Wang writing for Architizer notes [6]. This versatility and affordability, prime for mass markets, resulted in early adoption in Madison, Wisconsin [7], from none other than renowned architect Frank Lloyd Wright.

The benefits of moving construction offsite [8] are known to increase build speed, cut down on costs, and create opportunities for better quality assurance through controlled production lines. Shifting to a third-party prefab solution provider may help general contractors execute projects more quickly and predictably while solving some of the resourcing problems. Building your own prefab infrastructure can help to maintain operational control and support productization quality goals.

That said, properly integrating prefab into a company’s operations, like any new process, requires upfront discovery. There are plenty of opportunities where businesses can improve productivity within the prefab space, Gasvoda explains. “Companies are satisfied with moving existing work from the field into a warehouse without looking at ‘how do I make it better.’”

There are typically three pitfalls that Gasvoda sees companies experiencing with their prefab operations:

Poor Workflows

When companies simply shift their operations to a warehouse, he explains, “they often deal with less-than-optimal workflows, which often leads to not being able to capitalize on efficiencies.”

Companies can avoid these pitfalls by focusing on workflow optimization:

1. Audit existing processes to determine what is working and what could be improved (e.g., through automation [9], removing manual entry, etc.)
2. Establishing priority-based tracking (e.g., using a project management tool)
3. Maximize operational efficiency – schedule work, assign staff to specific tasks, track prefab shop inventory [10], increase communication, etc.
4. Standardizing processes and onboarding staff

Lack of Measurements

If prefab problems arise at the onset—with businesses trying to fly the plane while they’re still building it—problems only multiply when there’s no baseline measurement established, Gasvoda explains. “How do they measure the success of those new prefab environments? What does success look like? They don’t have a daily feel.”

What success looks like may differ significantly on the company and what they determine to be organizationally important.

However, some of the metrics companies may measure success by include:

• Lead Time – How much time does it take, from start to finish, to assemble prefab units for customers, and how might the team increase production output?
• Production Capacity – How many prefab units can you complete in a given time period, and what organizational process improvements (e.g., workforce optimization, technology adoption, automation, etc.) are needed to increase your production capacity?
• Customer Satisfaction – Are customers happy with the finished product? Would they refer a friend or provide a testimonial? And if they’re not satisfied, what feedback can you request from them to improve their experience and avoid similar problems in the future?
• Defect Rate – The percentage of prefab units that are defective or require rework, and how can you reduce this rate – e.g., can you create a design/production workflow efficiency that bring “concept to fabricate [11]” and empower the team to have more control over the process?
• Cost Per Unit – How much does it cost for the team to manufacture each unit, and how can you bring those costs down (e.g., via construction job costing [12])
• Return on Investment – The profitability associated with the investments you’ve made within your operations. Increasing production capacity helps reinvest back into the business for future growth, infrastructure, and continuous improvement to ensure customer satisfaction that scales as you grow.
• Takt time – Measurable beat time, rate time, or heartbeat. In Lean, Takt time is the rate at which a finished product needs to be completed in order to meet customer demand (field demand). When you produce to a specific takt, this allows you to truly flow product through your shop to the field with minimal inventory along the way.

Lack of a Systemic Approach

Prefab often “adds another layer of complexity that they haven’t managed well before,” Gasvoda explains.

Adopting tools and systems to address the complexity is key:

• Integration: Integration between systems (e.g., between project management, design, inventory management platforms, etc.) can help create greater organizational efficiencies, increase collaboration and communication between teams (e.g., design, project management, and the C-suite)
• Digital Twins and Automation: Digital twins [13], largely used in lean manufacturing, can be applied to construction to realize new efficiencies, identify risk, and prevent operational failure. They could likewise be integrated with your materials management and artificial intelligence to help deliver predictive analytics that can be used to make data-driven purchasing decisions.

Bottom Line

Construction faces many headwinds. Combining lean management principles, advanced technologies, and productization systems can help navigate workforce challenges, improve processes, output, and customer satisfaction in one fell swoop – when properly implemented.

References

[1] Tita, Bob. “Construction Industry Has Work, Needs More Workers.” The Wall Street Journal. April 10, 2023. https://www.wsj.com/articles/construction-industry-has-work-needs-more-workers-da763703 (Accessed May 12, 2023).

[2] Martensen, Lisa. “How to Be Competitive for Jobseekers in an Industry Facing Labor Shortages.” Connectivity Blog (blog). Milwaukee Tool. September 14, 2022. https://onekeyresources.milwaukeetool.com/en/tips-for-attracting-skilled-trades-in-demand

[3] Dodge Data & Analytics. “Construction Industry Navigates Challenges as April 2023 PPI Shows Slight Increase.” Accessed May 12, 2023 https://www.construction.com/news/April23PPI

[4] Simmons, Alex. “Construction Overhead: What Is It & 7 Ways to Maximize Profits.” Connectivity Blog (blog). Milwaukee Tool. May 5, 2023. https://onekeyresources.milwaukeetool.com/en/construction-overhead

[5] Marshall, Lucas. “What Is Industrialized Construction (IC)? Projects to Products. Connectivity Blog (blog). Milwaukee Tool. March 9, 2023. https://onekeyresources.milwaukeetool.com/en/industrialized-construction

[6] Wang, Tian. “A Brief History of Prefabricated Architecture.” Architizer (blog). (n.d.) https://architizer.com/blog/inspiration/industry/history-of-prefab-architecture/

[7] White, Laurel. “Madison home to early Frank Lloyd Wright 'prefab' work.” The Cap Times. January 9, 2015. https://captimes.com/entertainment/madison-home-to-early-frank-lloyd-wright-prefab-work/article_6bd4d0fd-98eb-5789-bca3-f58fec11c9c4.html (Accessed May 12, 2023).

[8] Martensen, Lisa. “The Rise of Offsite Construction.” Connectivity Blog (blog). Milwaukee Tool. December 20, 2021. https://onekeyresources.milwaukeetool.com/en/offsite-construction

[9] Marshall, Lucas. “Construction Automation: How to Simplify Repetitive, Dangerous Tasks.” Connectivity Blog (blog). Milwaukee Tool. May 5, 2023. https://onekeyresources.milwaukeetool.com/en/automation-in-construction

[10] Marshall, Lucas. “How Prefab Shops May Use ONE-KEY™ to Manage Inventory.” Connectivity Blog (blog). Milwaukee Tool. April 15, 2023. https://onekeyresources.milwaukeetool.com/en/prefab-construction-inventory

[11] “Integrated BIM Workflows in Modular Prefabricated Construction: Concept to Fabricate.” Autodesk. (n.d.) https://www.autodesk.com/autodesk-university/article/Integrated-BIM-Workflows-Modular-Prefabricated-Construction-Concept-Fabricate-2020

[12] Simmons, Alex. “Inventory Best Practices: What Is Job Costing in Construction Projects?” Connectivity Blog (blog). Milwaukee Tool. January 27, 2023. https://onekeyresources.milwaukeetool.com/en/construction-job-costing

[13] Marshall, Lucas. “Construction Robots: Nifty Helper or Jobsite Nemesis?” Connectivity Blog (blog). Milwaukee Tool. July 28, 2021. https://onekeyresources.milwaukeetool.com/en/construction-robots-and-job-market