MP Construction - Supply Chain Report - ABPL90309_2020_SM1

24 May 2020 Nesia Cahyono Business Development Division

MAX PROFIT CONSTRUCTION

SUPPLY CHAIN REPORT

page 2

EXECUTIVE SUMMARY

MP Construction is an Australian-based construction company that is well known for its excellence in quality. Being in the industry for more than twenty years, MP Construction is seeking for a way to improve its cost and time efficiency, while keep maintaining the quality. This report is produced to provide the alternatives for improvement. The key problems in MP Construction are identified, and two key initiatives are proposed accordingly.

KEY PROBLEMS Traditional procurement method

separated from the design teams no incentive for the contractor to innovate long time because of sequential process few points of responsibility unbuildable design inefficient expenses

Competitive Tendering Process

nontransparent relation between project stakeholders

KEY INITIATIVES Just-In-Time - Kanban - Line of Balance - Last Planner System - Prefabrication

compromised quality on the final product

Project-byProject Basis Suppliers

low profit margin wasting time and money project-to-project basis

Traditional On-site Construction Techniques

longer time

TIME COST ACTORS

bigger unexpected risk constrained by the workers availability

28 m 90% 1,730

Redesigned Performance

labour intensive and labour expensive

Poor Workmanship

Partnership - Design & Construct - Reduction of partners - Supply chains consolidation

Current Performance

more expensive

July 2021

July 2025

Dec 2025

JIT practices Partnership: subcontractors assessment process

Partnership: Step 1 - D&C implementation Partnership: Step 2 Reduction in numbers

Partnership: Step 3 - Consolidation of Supply Chains

100% 4,660

KEY MILESTONES July 2020

39.5 m

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TABLE OF CONTENTS

0.0 EXECUTIVE SUMMARY

2

2.0 STEP 1: ASSESS 2.1 Traditional Procurement Method 2.2 Competitive Tendering Process 2.3 Project-by-project Basis 2.4 Traditional On-site Construction 2.5 Poor Workmanship

8 8 8 8 10 10

4.0 STEP 2: REDESIGN 4.1 Monitoring and Control 4.2 Implementation

36 36 38

6.0 TOWARDS RESILIENT BUSINESS

42

8.0 REPORT LIMTATIONS

48

10.0 BIBLIOGRAPHY

50

1.0 INTRODUCTION 1.1 Purpose of the Report 1.2 Company Background 1.3 Definition of Supply Chain 1.4 Method of Approach

4 4 5 6 7

3.0 STEP 2: REDESIGN 3.1 Just-In-Time (JIT) 3.2 Partnership

14 14 30

5.0 STEP 4: IMPROVE

40

7.0 FINANCIAL PLAN

47

9.0 CONCLUSION

49

11.0 APPENDICES

52

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1.0

Introduction 1.1 Purpose of the Report

This report is produced along with the new leadership in the company. Despite the success achieved in the past two decades, the new leader believes that Max Profit (MP) Construction can flourish into a much larger business. This report aims to bring this expectation into reality. Although there are several of key areas to be reviewed, this report concentrates on the supply chain as the first area of improvement in MP Construction.

MP Construction is well known for the excellent finish quality on every project.

The management team claims that this value drives MP Construction to constantly satisfy client’s requirements and brings MP Construction to win a lot of tender bids. Indeed, client satisfaction is essential, especially if the business is aiming for return customers. Yet, it should not be a major indicator of a business success. A company should look at a higher-level parameter, which is profitability. Profitability is not only securing the financial aspect of the business, but more importantly it can be used to develop the business even more. For instance, the research and development that can be conducted if the company makes profit; training for the resources, welfare

PROFITABILITY

of the employee, and many others (Fama & French, 2000). The improvement in the company’s resources will eventually leads to client satisfaction. Therefore, increasing profitability should be the ultimate goal to achieve sustainability in business. This report will provide assessment on the current performance of MP Construction as well as analysis on how to effectively improve company’s profitability.

QUALITY

RETURN CUSTOMER

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1.2 Company Background

“ design for sustainability, build with quality ” Max Profit (MP) Construction is a construction company that focus on delivering small to medium residential and commercial projects in Australia. It was first established in 1999 by an Australian born Italian, Antonio Gurinoz. The influence came from his father, Roberto Gurinoz, who migrated to Australia and started his business as an architect and small house builder. Since then, MP Construction has steadily developed from a 2-employee company to one of the most preeminent familyowned builders in Australia. In the past two decades, MP Construction has been expanding to 3 different states, New South Wales, Victoria and Queensland, with its offices are located at each of the capital cities.

Due to the thoughtful management from the family, MP Construction has forged a reputation as a company that always deliver projects with high

Antonio Gurinoz Founder and CEO 1999 - 2020

quality. This recognition is maintained and believed as the predominant aspect of its success in every competitive tendering. MP Construction is very selective in selecting projects and always meets client’s quality requirements. MP Construction believes that the best quality of works is achieved by closely monitoring and supervising each process. Therefore, undertaking the construction works on site and selecting the specific upstream actors are crucial for MP Construction.

2020 is a big year in the MP Construction’s journey because since January 2020, Antonio has passed his passion in construction to his daughter, Maddalena Gurinoz. Having a background in Construction Management, Maddalena is very passionate on evolving MP Construction into a larger business. She believes MP Construction should maintain what has been achieved yet keep adapting to the ever-changing conditions. Her ultimate goal is to bring MP Construction to be sustainable and resilient business.

However, at this stage, her focus is to improve MP Construction performance.

Maddalena Gurinoz CEO 2020 - present

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1.3 Definition of Supply Chain

“The supply chain is the network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form

”

of products and services in the hands of the ultimate consumer

~~ Christopher 1998, p. 13

In the construction industry, supply chain refers to the link of construction industry actors that are engaged in a mutually beneficial program to deliver certain project (Dekker, 2017). The main actors include client, contractor, consultants, subcontractors, and suppliers, although there are other parties such as service crews and logistic firms. Thus, supply chain management in construction industry is the process of managing the relationship between those actors to successfully deliver the client’s project.

There might be up to five tiers of supply chain in a construction project.

They manage the flow of the raw materials to the finished products on site.

The number of actors from the upstream to the downstream can be depicted as an inverted triangle as shown in Figure 1.1.

Figure 1.1. Five Tiers in Construction SC

The number of tiers in a construction project is not definite. It is highly dependent on the supply chain on each trade. In an ideal condition, good collaboration happens across the tiers in a partnership relation, not an adversarial relation. However, construction industry is now facing the opposite situations.

As stated by Cox and Townsend (1998), construction supply chains are inefficient. Two of the main problems are the adversarial culture and the fragmented industry structure.

The significance of supply chains in construction industry is further reinforced by Egan (1998). Although this report was produced more than two decades ago, the relevance is still emphasised in the today’s construction industry as evident in several articles, such as those by Farmer (2016), Hackitt (2017), and Jones (2018). In his report, he states that the future construction industry will be looking at a competition between supply chains rather than between actors (Egan, 1998). An effective supply chain results in reduction of cost and increase in profitability over a long term, which are what each business should be aiming for.

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1.4 Method of Approach

This report demonstrates the alternative strategies for MP Construction to improve its performance.

These strategies are developed based on a four-stage approach by Vrijhoef and Koskela (1999): assess, redesign, control, and improve (Figure 1.2). This cyclic process leads to continual improvement which is the progressive evolution of the supply chain process. In the following sections, the efficiency of MP Construction’s current practices will be assessed, and new approaches will be proposed on the non-efficient practices accordingly.

Step 1: Assess This section will identify the weaknesses of MP Construction by identifying its current practices. Each of the approaches that have been adopted by MP Construction will be reviewed. The advantages as well as the disadvantages will be analysed.

Figure 1.2. Four-stage approach

Step 2: Redesign The disadvantages will be prioritised and the most effective strategies will be proposed. The strategies are suggested looking at the theoretical and practical aspects.

Each strategy will be supported by at least one case study on how other businesses have successfully implemented it.

Step 3: Control The new performance will be recorded and reported regularly. The success of the strategies will be measured through the predetermined KPIs. Step 4: Improve The strategy that shows a better performance will be adopted as a new standard in the company.

By applying a new standard, MP Construction is able do continual improvement (Figure 1.3). On the other hand, the non-performing strategy will be refined by reassessing the issues.

standards

continuous improvement

Figure 1.3. Continual Improvement

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STEP 1: ASSESS

2.0

Overview of the Current Practices

This section provides assessment on the current performance of MP Construction. The performance is assessed based on five practices in MP Construction: 1. traditional procurement method 2. competitive tendering 3. project-by-project basis 4. traditional on-site construction techniques 5. poor workmanship.

2.1 Traditional Procurement Method The projects in which MP Construction are involved are using traditional procurement method. This practice is indicated by the sequential stages where the design development process is undertaken before the contractor selection. MP Construction is hired as construct only contractor which is separated from the designing process. Traditional procurement method has high level of cost certainty and client involvement in both design and construction phases. These result in low variability and high quality of projects. However, these also make no incentive for the contractor to innovate. As a result, the overall quality is high with client requirements are satisfied, but rarely exceeding the client’s expectations.

2.2 Competitive Tendering Process Most of MP Construction’s projects are won through competitive tendering. The purpose of this process is to have transparent and equal opportunity in the process of building delivery. However, the process of competitive tendering is not time effective and cost efficient (Stanley, 2011) (illustration on the next page). The low profit margin often leads subcontractors and suppliers to keep their costs down by compromising quality and safety. Moreover, competitive tendering process allows the downstream actors to select the upstream actors independently. They are individually involved so that there is no necessities for them to think about the benefits of the project as a whole. Not only does this practice hinder open communication and supply chain integration, but also leads to a non-transparent relationship between project stakeholders.

2.3 Project-by-project Basis MP Construction employs different subcontractors for each project. As the process of competitive tendering is very lengthy, MP Construction repeats this process on every project. Providing that MP Construction has few integrated supply chains for its projects, the allocated time and money can be used to develop the business.

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5,790

hours wasted

$132,250 money wasted

a total of

87% inefficient works and expenses

Selected actors

Hours spent

Hours recovered

Wasted hours

Money spent

Money recovered

Money wasted

% of waste

300

100

200

$6,000

$2,000

$4,000

67%

Subcontractors

2,500

200

2,300

$50,000

$4,000

$46,000

92%

Manufacturers

2,000

120

1,880

$50,000

$3,000

$47,000

94%

Suppliers

1,500

90

1,410

$37,500

$2,250

$35,250

94%

Total

6,300

510

5,790

$143,500

$11,250

$132,250

87%

Contractor

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Overview of the Current Practices (cont.)

Summary of the efficiency level: Traditional Procurement Methods

Competitive Tendering Process

specialised works. Hence it is more labour intensive and labour expensive.

Project-by-Project Basis

Traditional On-site Construction Techniques

Poor Workmanship

MP Construction’s performance: COST

MPC

QUALITY

2.4 Traditional On-site Construction Techniques Traditional construction allows a project to achieve high level of uniqueness. The shape of each component can be customised and is not limited to maximum transport size. This method also provides higher structural integrity especially on the connection points between elements.

However, this process takes longer time and bigger unexpected risk due to the uncertain condition on site. Specialised labours are also required on site to do

TIME

Time and cost overruns occur because of reworks and the efforts to maintain quality on site

2.5 Poor Workmanship Another problem with MP Construction is the workmanship quality. According to Burer (2016), two major causes of low-quality workmanship are poor supervision on site and poor quality of subcontractors.

As MP Construction always gives priority to quality management, the problem should not arise from the supervision process, rather from the subcontractors’ side.

Kasun and Janaka (2006) emphasise the importance of employing skilled and competent workers to elevate the quality, which according to Atkinson (2009), is reasonably difficult in a project with a tight timeframe.

Moreover, Gandu et al. (2009) assert that subcontractors selection process is often given a compressed time. As a result, difficulties in finding the best quality of workers to work on site are encountered. It is reported that to maintain the quality, reworks reoccur significantly in MP Construction’s projects. Aside from delaying the timeline, a study from Simpeh et al. (2015) shows that rework contributes to an average of 5.12% cost overruns. The research also reveals that there is a likelihood of 76% that a project exceeds the average. This problem becomes inevitable in every MP Construction’s project because of its preference to use traditional on-site construction techniques which arises quality dependency to the onsite workers.

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Advantages 1. Traditional Procurement Method

2. Competitive Tendering Process 3. Project-by-Project Basis Suppliers

4. Traditional Onsite Construction Techniques 5. Poor Workmanship

Disadvantages

Priority

1. high cost certainty 2. client involvement in both design and construction 3. low variability 4. high control on quality 5. well-known process

1. separated from the design teams 2. no incentive for the contractor to innovate 3. long time because of sequential process 4. few points of responsibility 5. unbuildable design 6. inefficient expenses

5 Adv 6 Dis

1.

wide range of tenderers 2. contract to be bid on the same basis 3. competitive tender price

1.

3 Adv 5 Dis

1.

1. longer time 2. bigger unexpected risk 3. constrained by the workers availability 4. labour intensive and labour expensive 5. more expensive

2.

3.

4.

5.

high level of uniqueness 2. higher structural integrity

nontransparent relation between project stakeholders compromised quality on the final product low profit margin wasting time and money project-to-project basis

III

II

2 Adv 5 Dis

I

This whiteboard displays the advantages and disadvantages of MP Construction’s current practices. The traditional on-site construction and poor workmanship bring the most disadvantages and the least advantages, hence, first priority is given. It is followed by the competitive tendering process and project-by-project basis suppliers, and traditional procurement method. The disadvantages are further classified in different colors, and solutions are proposed accordingly. Detail for each solution is elaborated in the next section following the current supply chain map on the next page. This map is presented to better visualise the current flows in MP Construction. It will also be compared with the redesigned supply chain map (after adopting the solutions) later in the report.

I

&

II

II

1.

2.

3.

4.

5.

6.

longer time bigger unexpected risk constrained by the workers availability labour intensive and labour expensive more expensive compromised quality on the final product 7. low profit margin 8. wasting time and money 9. inefficient expenses

&

III

1. non transparent relation between project stakeholders

2. project-to-project basis 3. separated from the design teams 4. no incentive for the contractor to innovate

towards resilient business

5. long time because of sequential process

6. few points of responsibility 7. unbuildable design

Solutions / Strategies Just-In-Time (JIT)

Partnership

Long Term Strategy

MAX PROFIT CONSTRUCTION SUPPLY CHAIN MAP

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3.0

STEP 2: Redesign Strategies

3.1 Just-In-Time (JIT) I

1.

2.

3.

4.

5.

6.

7.

8.

9.

&

II

longer time bigger unexpected risk constrained by the workers availability labour intensive and labour expensive more expensive compromised quality on the final product low profit margin wasting time and money inefficient expenses

Inventory Management - Kanban Pull System

wasting time

JustInTime

low productivity wasted money

(JIT)

quality

Total Quality Management - Line of Balance

Production Management - Prefabrication

- Last Planner System

This section analyses the I & II priority group that contains nine problems. These problems can be further classified to four major root causes: low quality, wasted money, low productivity and wasted time.

These root causes are strongly related to the control over the work on site. Two possible conditions are: » bad control from the management team on site, e.g. poor quality, ineffective layout » a number of activities that are beyond the ability of the management team to control, e.g. workers availability, weather condition They can be minimised by increasing the ability to control the work and enhancing the quality of the control.

Just-in-time (JIT) is an inventory strategy that aims for a higher return on investment by reducing in-process inventory (time) and associated carrying costs (money) (Essay, 2018). It increases the productivity as well as the quality of products. (Pheng & Hui, 2010).

Based on this understanding, JIT is a suitable practice to be implemented. This practice is firstly introduced by Toyota in a set of practice named Toyota Production Systems (TPS). Although there are a lot of key aspects in JIT philosophy, this report will focus on the three areas of production management, inventory management and total quality management. These areas are studied as the most effective solution to improve the overall performance. This section will elaborate in detail how the three principles can be implemented in MP Construction’s projects.

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In this report, the process of achieving the ultimate goal, which is the sustainable and resilient business, is illustrated in a process of building a simple high-rise building (Figure 3.1). Each of the processes is equally important that none of them can be left behind. In this process, JIT is depicted as the footings of the building that needs to be constructed first before implementing the second strategy being proposed in the report.

Figure 3.1. Illustration of Resilient Business

TS IN U

E M TI

J

PREFABRICATION

LINE OF BALANCE

KANBAN SYSTEM

LAST PLANNER SYSTEM

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JUST-IN-TIME STRATEGY AND IMPLEMENTATION

Inventory Management

Kanban

Total Quality Management

Line of Balance Last Planner System

Production Management

Pre-fabrication

Inventory is one of the eight types of waste (muda) (Liker, 2003). By definition, inventories mean any goods that are being retained for any length of time, inside or outside the factory. They include excess raw materials, work-inprocess (WIP), defective and finished goods (Liker, 2003).

Inventory on site does take up space that potentially disturb construction flow, and it hides problems. The objective of managing inventory is zero inventory on site.

In his book, Wild (2018) asserts that the best way to achieve organised and efficient inventory is by implementing kanban. The basic concept of kanban is sending a signal back to the source of inventory when an inventory is used.

However, in construction works, dual kanban system is more relevant to be implemented. Schonberger (1983) refers dual kanban system as a system of sending signal for material handling task. In this instance, production kanban and withdrawal kanban are used (Figure 3.2). Production kanban is used to transfer the signal back to the source of inventory after the inventory is handed to the withdrawal kanban. A concrete example of kanban in construction is the use of e-procurement system to pull materials form the manufacturer through suppliers. In this instance, online form performs as the kanban signal between the site and the manufacturer (Khalfan et al., 2008). It results on products made to order and enables just-in-time delivery to the site. The concept of a warehouse is no longer required with this practice (Khalfan et al., 2008).

Figure 3.2. Dual Kanban System

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SUCCESS STORY

PROBUILD Construction Time

“Our Kanban systems ensure that we supply each stage of the build process with the required material when they need it, which stops waste on our projects but also keeps things moving on schedule.” ~~ Luke Stambolis, PROBUILD’s Managing Director

2 mths

5% PROBUILD’s goal to reduce the defects in its apartment buildings is initiated in 2015 (The Urban Developer, 2018). It established a system called PROBUILD Construction System (PCS) as an adoption of Toyota Production System (TPS). It translates TPS in such a way that it eases construction delivery process (Malo, 2018). One of the most effective implementations is the use of stillage by all subcontractors on site. The stillage is customised so that it fits in the hoist. It is used to bring precut materials, and will be taken back empty and hence, be refilled (Bleby, 2018). By using this approach, effective pull system is facilitated with the use of stillage as kanban.

Cut the total of construction time by two months

Reduce the overtime work on residential construction by 5%

Waste Emissions

3000 m3

Cut the volume waste by 3000 cubic meters in a project

Construction Cost $150,000

5%

Save a total of $150,000 for waste shipping cost in a project

Save 2% to 5% on bills to subcontractors and suppliers

Product Quality Extra time to check on quality while still be ahead of schedule

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JUST-IN-TIME STRATEGY AND IMPLEMENTATION

Inventory Management

Kanban

Total Quality Management

Line of Balance Last Planner System

Production Management

Pre-fabrication

Total Quality Management (TQM) is a management system that aims for customer satisfaction by focusing on employees’ engagement in every process. It accentuates the equal power of management and employees, and the role of human resource management (Wilkinson et al., 1998). This practice introduces quality as everyone’s responsibility and emphasises on how to do it right at the first time. A success indicator of TQM is the elimination of quality inspector team in the process (Singh, 2017). In order to achieve this goal, Ishikawa (1985) proposed his view of understanding the presence of internal customer aside from the external customer. Each process in the construction program has a customer to be satisfied (i.e. the successor subcontractors or traders). Therefore, it is important that each subcontractor delivers the work to the required standards at the required time. As an example, delay in facade installation is a failure in satisfying the requirements of fit-out traders as the internal customers. Keeping all subcontractors work to order and at the same productivity rate, especially those who are working in the same area, is very crucial. To keep track on the subcontractor’ productivity rates, MP Construction can use Line of Balance. It indicates subcontractors’ productivity in sloping lines. The objective is to have the same degree for all lines, or in other words, having the same productivity rates for all subcontractors. By incorporating Line of Balance to practice, quality management is accommodated at all stages. All workers are ultimately engaged and unified in serving the final customer (Grant et al, 1994).

Figure 3.3. Line of Balance

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SUCCESS STORY

NCC Construction

(Seppanen & Aalto, 2005)

OPUS Business Park Development [The Line-of-Balance is best implemented with the Last Planner system (explained in the next section). Hene, the success story will also touch on Last Planner System]

Opus Business Park is a sixfloor office building in eastern Helsinki. The whole project consists of two sections that cover 14,500 m2 area. As the main contractor of the project, NCC Construction has brought together a lot of resources to use flowline-based production control system (Soini et al., 2004). The project has reached its completion in December 2005.

In this project, line of balance is applied, and percent plan complete (PPC), part of Last Planner System, is used to measure the performance. The initial performance and the redesigned performance are displayed in Figure 3.4 and 3.5 respectively. In both figures, the master schedule is drawn in solid lines, while the actual situation is in dotted line. The two figures show that there is a change in slope in the dotted lines. The updated line of balance (Figure 3.5) shows a more similar slopes between lines which means that the subcontractors are working with a more similar productivity rate.

Reliability & Productivity

17 %

An increase from 50% to 67% weekly task completion (based on the PPC result)

Figure 3.4. Initial Line of Balance

Figure 3.5. Updated Line of Balance

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JUST-IN-TIME STRATEGY AND IMPLEMENTATION

Inventory Management

Kanban

Total Quality Management

Line of Balance

Last Planner System

Production Management

Pre-fabrication

Last planner system (LPS) is one of the lean construction principles that aims to improve the reliability of the workflow by taking actions at several levels in the planning system. LPS’s key concept is to empower the lowest level of management team, foremen or supervisors, to be involved in the planning process. Four levels of planning in LPS: 1. Master Schedule : includes the project’s critical path and major milestones to determine the overall duration 2. Phase Schedule : maximising value generation of workflow: what should be done, what are needed, where, by whom and how long. Phase Schedule also reviews the flow by assessing through reverse phase scheduling 3. Look-ahead Plan : breaks down task into the level of processes (not operations): what can be done in the next 4-6 weeks. At this stage, constraints should be identified and removed to make tasks ready for execution.

4. Weekly Work Plan (WWP) : filters what can be done to what will be done. Four quality criteria for a task to be performed: • Definition : the details are sufficiently described, the procedure and completion can be determined • Soundness : all prerequisite works and resources are available • Sequence : the sequence matches with the internal logic of the work • Size : the work is at the right amount that the workers are capable to undertake The works that are ready but cannot be assigned are listed under Workable Backlog. The works under this list will be brought up when there are workers who finished their works before the scheduled time.

Figure 3.6. Four Levels of LPS Source: Schimanski et al., 2020

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LPS is well implemented in combination with the obeya and Visual Management Centre (VMC).

Obeya or Big Room is a concept where collaboration with the directly-involved stakeholders happens in a coordination office located on the construction site (Temel et al., 2019).

Visual Management Centre is a communication method where data is displayed in a way that can be easily understood at a glance, self-explanatory, and self-improving (Galsworth, 1997; Greif, 1991) The output of the four levels in LPS are collaboratively discussed and updated accordingly. During the discussion, all stakeholders are at the equal levels to give suggestions and inputs. By combining these three principles, LPS promotes effective co-location in the workplace.

1.

Master Schedule It starts by translating the client’s requirements into a program. Milestones and critical path are assessed

2.

Figure 3.7. Master Schedule

3.

Look-ahead Plan breaks down the tasks into the level of process then to the level of operations for the next 3-4 weeks ahead

Figure 3.9. Look-ahead Plan

Phase Plan develop the network of activities and backwards plan to determine the earliest practical start date

Figure 3.8. Phase Plan

4.

Weekly Work Plan filter what will be done to what can be performed in one week. Non-ready tasks are placed in workable backlog/plan b

Figure 3.10. Weekly Work Plan

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JUST-IN-TIME STRATEGY AND IMPLEMENTATION

Inventory Management

Kanban

Total Quality Management

Line of Balance

Last Planner System

Production Management

Pre-fabrication

An assessment on the WWP is measured through Percent Plan Complete (PPC). PPC is a metric to measure the reliability of the weekly work planning process and the process of making reliable promises. The reliability is measured by tracking the number of commitments made and the realisations. By having PPC, MP Construction can monitor the performance of every subcontractors in the project. This is a very powerful statistic to document, especially when MP Construction is implementing partnership with other supply chain actors (see 3.2 Partnership).

Following a PPC, MP Contractor can develop a Root Cause Analysis for the “promises� that are not undertaken. Root Cause Analysis enables MP Contractor to reflect on the mistakes and undergo continuous improvement for the tasks on the following weeks.

All in all, LPS allows subcontractors to understand the overall construction process better. It drives the subcontractors to work integrated as a team than individually. Professor Ballard states that there are at least 3 benefits of the LPS implementation: 1. reduce cost risk by improving productivity 2. reduce durations by improving coordination between trades 3. develop corporate and individual capability by reflection, learning and continual improvement

Figure 3.11. Promises - PPC

Figure 3.12. Make Ready - PPC

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IMPLEMENTATION CONT. & SUCCESS STORY

PPC compares the tasks that are planned to be done and the tasks that have been completed. A task on PPC board means a commitment from the front-line supervisor to do the task. The simplest measurement is done through an interactive board with sticky notes that can be moved from “promises” to “make ready” (Figure 3.11, Figure 3.12). The PPC for the day is to be calculated at the end of the day.

PPC =

Tasks completed as planned Total tasks planned

x 100%

Although PPC is measured in percentage, it should be understood as a measurement of a team’s ability to reliably plan and execute work rather than a measurement of completed work. Hence, performance analysis and root cause analysis that lead to improvement should follow (Figure 3.13, Figure 3.14). Root cause analysis monitors duration of the executed activities and the reasons why certain activities are performed early, late or are not performed.

Figure 3.13. Performance Analysis

Figure 3.14. Root Cause Analysis

SKANSKA FINLAND (Ballard et al., 2010) This case study combines the implementation of LPS and Location-Based Management System (LBMS), which has the same concept of Line of Balance.

Skanska Finland is one of the construction companies in US. It brings to practice the implementation of LPS and LBMS. This case study is based on Skanska Finland’s project, a 21-story residential building.

The result emphasises the significance of integrating LPS and LBMS in the master scheduling, pull phase scheduling, lookahead scheduling, and weekly planning.

Construction Time

4 days

The tight schedule of 5 days for each floor is further reduced to 4 days for each floor Reliability & Productivity

14 %

An increase from 64% to 78% weekly task completion (based on the PPC result)

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JUST-IN-TIME STRATEGY AND IMPLEMENTATION

Inventory Management

Kanban

Total Quality Management

Line of Balance Last Planner System

Production Management

Pre-fabrication

Prefabrication is a method that supports the application of Just-in-Time philosophy in the industry. Schonberger (1982) defines prefabrication as a process that includes producing finished sub-products off site and delivering to the site to be assembled into a finished product.

Prefabrication is evident to bring higher quality, more effective and efficient construction process. The efficiency is driven by the exclusion from the unconducive on-site conditions. Prefabrication allows each sub-product to be produced under a controlled environment in the factory.

This does not only hinder obstructions by inclement weather, but also by workers availability. Research by Gann 1996; Venables et al. 2004; Lu 2009 also asserts that prefabrication also increase safety performance on site. However, the best practice of prefabrication can be achieved only with mature planning, especially during the design process (Luo et al., 2005). Prefabrication will only be possible if it is included in the design (McGrawHill 2011). The designer team, contractor, suppliers and manufacturers have to work together to ensure the demand from the client is delivered clearly and proceed without any defects.

Planning process becomes very crucial in this practice because prefabrication products are generally leadtime products. Defects and reworks in this practice will significantly prolong the project planned duration. The implementation of prefabrication can be started from the lower degree (non-volumetric products or components) such as unitised curtain wall, wall panel, pracast staircase.

Table 3.1. Levels of Prefabrication

Blismas and Wakefield Smith

-

Non-volumetric preassembly

Volumetric preassembly

Modular building

Material

Component

Panel

Module

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SUCCESS STORY

The success story for prefabrication is taken from a lot of cases instead of one project.

Overall, prefabrication brings advantages such as reduction of waste and dust, reduction of material, reduction of labour demand, and others (Jaillon & Poon, 2013). The full advantages are shown in Figure 3.16.

BUILDING MATERIALS RECYCLABILITY AND CONSTRUCTION WASTE RECYCLABILITY (Pons & Wadel, 2011)

50%

45%

40%

35%

30%

Recyclable construction waste

25%

20% 10%

10%

5%

3%

2%

1% Nonprefabricated

Concrete

Timber

Recyclable building materials

Steel

SOLID WASTE PER BUILDING PHASE (Pons & Wadel, 2011) Nonprefabricated Concrete Timber Steel

Figure 3.15. Solid Waste

TOTAL SOLID WASTE IN BUILDING LIFECYCLE

ADVANTAGES OF USING PRECAST ELEMENTS

(Pons & Wadel, 2011)

(Jaillon & Poon, 2013) Reduction of construction time Reduction of dust

4178 kg/m2 ~ 100%

Reduction of noise

SOLID WASTE

2490 kg/m2 ~ 60%

Improved health and safety

2229 kg/m2

Improved site management

~ 53% 1253 kg/m2

Improved productivity

~ 30% Nonprefabricated

Improved ease of construction

Concrete

Timber

Steel

Reduction of program time Reduction of program time Reduction of material use Improved quality control Reduction of labour demand

Project cost savings

Average score in dense urban environment

Figure 3.16. Advantages of Prefabrication

page 26

3.0

Section 2: Redesign Strategies

3.2 Partnership II

&

III

1. non transparent relation between project 2.

3.

4.

5.

6.

7.

stakeholders project-to-project basis separated from the design teams no incentive for the contractor to innovate long time because of sequential process few points of responsibility unbuildable design

Identification

Implementation 1

separation of team unhealthy relationship

Partnership

wasted time

Implementation 2

Implementation 3

Performance

D&C

Reduction in

Supply chains

assessment

Contract

number

consolidation

Partnership is defined as a commitment by parties to work closely or cooperatively (integration of team) based on trust and respect rather than suspicion and skepticism (healthy relationship) (Gunn, 2002; Australian Government, 2015). The end goal of partnership is coalescence between parties at the organisational level (alliancing), which is rather a long term than at the project-to-project basis (MacDonald, 2005). The implementation of partnership at the organisational level enables the involved parties to save money and time for the competitive tendering (time and money).

The seven problems listed in the II & III priority group can be summarised into three root causes: separation of team, unhealthy relationship, and wasted time. These problems are arisen from MP Construction’s current practices: traditional procurement method, competitive tendering, and projectby-project basis subcontractors and suppliers. By forging partnership with the selected subcontractors and suppliers, MP Construction is able to enhance its performance. MP Construction can start building partnership with its subcontractors and suppliers after implementing JIT philosophy. The steps are as follows: 1. Performance assessment : based on the PPC output from the JIT 2. Design & Construct contract : enter the market of D&C procurement projects to understand the holistic process of project delivery 3. Reduction in number : shortlist the subcontractors and suppliers based on their performance 4. Supply chains consolidation : build and maintain the commitment based on trust This section will elaborate in detail the steps that MP Construction should undertake, and how these steps are effective to overcome the problems listed above.

page 27

IP H S

R E N

T R PA

SUPPLY CHAINS CONSOLIDATION

TS IN U

E M TI

J

REDUCTION IN NUMBER

D&C CONTRACTS

PREFABRICATION

LINE OF BALANCE

KANBAN SYSTEM

LAST PLANNER SYSTEM

page 28

PARTNERSHIP STRATEGY AND IMPLEMENTATION

Identification

Level 1 - Traditional

According to Ellison and Miller (1995), there are four levels of partnership in the industry. From the lowest to the highest, the levels are as follows: 1. Traditional : adversarial arms-length contractual 2. Basic Partnering : collaborative team oriented 3. Full Partnering : value added integrating team 4. Alliancing : synergistic strategic partnership

Implementation

1 - Design and Construct Contract 2 - Reduction in number of partners 3 - Supply chains consolidation

The detail of each term is elaborated in Table 3.2 on the next page. Although the terms partnership and alliancing are often used interchangeably, this table clearly shows that they are different under definitions. Partnership is a commitment where the independence between parties is still retained often by establishing a new entity for the partnering purpose. Alliancing, however, is the most advanced level of partnership. Both parties are jointly coalesced to fully share rewards and risks.

Since its establishment, MP Construction has been maintaining relationship with its subcontractors and suppliers with the following characteristics: contractual relationship with the options of disputes resolution

continuous supervision to maintain quality

interconnected work with independent responsibilities

one off relationship or project-byproject basis

Based on these characteristics, the relationship developed by MP Construction is considered as the level 1 - adversarial arms-length relationship (Table 3.2 on the next page). Ellison and Miller (1995) define this lowest level as “traditional” relationship rather than a “partnership”. This is because the fundamental notion of partnership is trust, which is not yet found in the Level 1 - Traditional relationship.

The recommendation for MP Construction at this stage is to implement Level 2 - Basic Partnership.

Establishing alliancing with the upstream parties will be very challenging as MP Construction has limited experience in this practice. It is suggested that MP Construction improves its relationship gradually. In this instance, MP Construction should take into consideration the readiness of its subcontractors and suppliers. Improving the partnership level step by step ensures that MP Construction and its subcontractors are at a greater readiness.

page 29

Table 3.2. Four levels of partnership Source : Ellison and Miller (1995), adapted from Walker & Hampson (2003) Level 1 – Traditional

Level 2 – Basic Partnering

Level 3 - Full Partnering

Level 4 - Alliancing

Adversarial Arms-

Collaborative Team

Value added Integrating

Synergistic Strategic

length Contract

Oriented

Team

Partnership

Competition

Cooperation

Collaboration

Coalescence

Each side has

• Each side knows and

• One integrated team

• Elements of shared risk

clearly established

commits to the goals of the consisting of both client

also defined

responsibilities

project and to each other’s

and contractors personnel

• Joint sharing of liabilities

• Client ‘monitors and goals – requires a degree

is created – requires a high

for project failure

inspects’ contractor

degree of trust

• Joint sharing of gains

• This team has one set

• Both sides share their

of goals for a successful

goals and cost – requires

project

extremely high trust

of trust

• Little or no trust

• Team often creates a separate organisational entity for the life of the project • Often adversarial

• Significant energy in

• Accountability is

• Curve on benefits is

• Often creates

communications and ‘win-

collective among the

logarithmic – based

disputes, sometimes

win’ conflict resolution

integrated team

on meeting and then

litigation

• Disputes typically

• Both client and

exceeding project goals

resolved in some degree of

contractor provided senior

• The essence of the

compromise and harmony

level ‘sponsors’ to remove

relationship is to increase

barriers and support the

the mutual profitability of

project

both parties • Neither at the expense of the other • Both at creating new and synergistic solutions

Both sides are

• Established for early

Typically included some

• Requires extensive

plagued by schedule

positive intervention

incentive for exceeding

communication,

slips and cost

• Projects often

project goals

collaboration and

overruns

accomplished on schedule

organisational

and within budget

commitment and sponsorship • Creates the opportunities for major breakthrough

current practice in MP Construction

first target for MP Construction

end goal of partnership

page 30

PARTNERSHIP STRATEGY AND IMPLEMENTATION

Identification

Level 1 - Traditional

Implementation

Step 1 - Design and Construct Contract Step 2 - Reduction in number of partners Step 3 - Consolidation in supply chains

Currently, MP Construction is engaged in all projects under traditional type of contract. It is a procurement method that is widely used on simple projects with non-complex management techniques and engineering skills (Seng & Yusof, 2006). This contract requires MP Construction to manage the construction risks from the perspective of a construct-only contractor. MP Construction’s responsibilities are limited mainly due to the fact that the projects are often architect-led, and the design has been fully documented (Cooke & Williams, 2009).

In contrast, Design and Construct (D&C) procurement method, that is experiencing a significant increase in the number of users, allows contractor to have higher control and responsibilities in the overall delivery stages (Hibbert & Djebarni, 2017). Rather than led by the design team, the contractor is the only party engaged by the client. In this instance, the contractor is responsible for the project from the planning process, including the design, to the execution process. A shift from a construct-only contractor to a D&C contractor enables MP Construction to get a complete experience in delivering a project. The learning takeaway that can be obtained are: » balance out the design and buildability » value engineering management to find the most valuable solution in the project » adjust the schedule and program of a project » maintaining and controlling the quality on site (Seng & Yusof, 2006)

Therefore, the recommendation is for MP Construction to gradually reconstruct the organisation to facilitate the practice of D&C in the projects. These are strategies to prepare for D&C procurement:

Set up an inhouse designer team to prepare the design, in case designer is not novated

Set up an in-house value engineering team to achieve the most valuable design and planning process

Hire capable consultant team to provide consultancy and monitor the process

Establish success criteria as benchmark to control and improve performance

Learning and development for all workers about D&C procurement method

page 31

PARTNERSHIP STRATEGY AND IMPLEMENTATION

Identification

Level 1 - Traditional

Implementation

Step 1 - Design and Construct Contract

Although partnership can bring positive impacts to the MP Construction performance, establishing partnership for all subcontractors and suppliers is not feasible. It is because partnership relies on win-win and lose-lose relationship.

Having too many parties will not be profitable for all parties. MP Construction must select the most suitable subcontractors and suppliers to be partnered with. The assessment can be started from the outcome of the PPC assessment from the JIT practice (Figure 3.17). On top of this, MP Construction should assess at least the following factors:

Step 2 - Reduction in number of partners financial condition

managerial competency

quality

cost

business scope

corporate value

Step 3 - Consolidation in supply chains

MP Construction should establish weighting criteria with a benchmark to assess the performance of each subcontractor. A template of the weighting criteria is attached in Appendix F for MP Construction to review.

This matrix can be adjusted to suit MP Construction’s requirements. Based on this score, MP Construction selects the potential partners. It should be kept between:

2 or 3 subcontractors / trade These numbers are suggested with the foundation of Bennet & Jayes‘ research in 1995. Two or three subcontractors are believed as the right number to maintain the level of competition while keep preserving the effective partnership (Bennet & Jayes, 1995). If there is no subcontractors or suppliers that hit the benchmark, MP Construction should conduct further investigation as well as engage consultant to give perspective on this matter.

Figure 3.17. PPC Performance

page 32

PARTNERSHIP STRATEGY AND IMPLEMENTATION

Identification

Level 1 - Traditional

After selecting the subcontractors and suppliers, partnership is commenced by defining the aim, scope, and responsibilities of each party. A new entity can be set up after unanimous goal and strategy are well defined.

The technical strategy to consolidate the supply chains is adopted from the Construction Extension PMBOK (2016).

Implementation

Step 1 - Design and Construct Contract

Monitoring and

Strategy

Initiation

Planning

Execution

based on

Identify partners

Plan partner management

Manage partner engagement

Control and improve partner engagement

Due diligence

Web-based communica-

Information/ progress

Consultation and discussion

tion strategy

updates

Partner engagement

Partner engagement

Updated engagement

plan

matrix

matrix

PMBOK

Controlling

Step 2 - Reduction in number of partners

Industry Application

Step 3 Consolidation in supply chains

Partner register

Outcome/ Output

Mutually beneficial partnership

(see at Appendix G)

(see at Appendix H)

(see at Appendix I)

Dissimilar to the JIT, strategy for partnership is a process that requires longer preparation time. A bit too long is better than a bit too short time because it is critical to ensure MP Construction and its partners are ready to engage in partnership. It is not only their commitment that matters, but also their management, administration, technology, etc. The proposed timeline is shown as follows: July 2020

July 2021

July 2025

Dec 2025

JIT practices Partnership: subcontractors assessment process Partnership: Step 1 - D&C implementation Partnership: Step 2 Reduction in numbers

Partnership: Step 3 - Consolidation of Level 2 - Basic Partnership towards Level 4 - Alliancing

page 33

SUCCESS STORY

SKANSKA & ROCKWOOL

(IMD, 1996)

Skanska was suffering a recession that forced them to lay off 17% of their workers. Its partnership with Rockwool optimised the resources and cost and reduce the lead time. On the other hand, Rockwool was benefited by the reduction of inventory on the factory, hence manufacturing process can be optimised.

For both parties, this partnership leads to long-term security, material flows improvement, cost efficiency, and knowledge improvement.

75 %

Partnership

70-80

Reduction of company retailers from 1000 to around 70 to 80

Construction Cost

10 %

Reduction of cost by 10% on 3,000 construction sites

Loading Time

Waste Emissions

Reduction of 75% in loading time by using palette

Reduction of waste due to the effective packaging

BAA HEATHROW T5

(Pyrke, 2009)

British Airport Authority (BAA) established partnership with its subcontractors in T5 project. BAA took a decision to bear the risks of the other parties so that they did not focus on increasing their profits.

A set of guidelines called Continuous Improvement of the Project Process (CIPP) was made to ensure consistency in the project. The performance of all parties is monitored by BAA through a data capturing system for continual improvement. Turned out, this partnership resulted in favourable outcome as no one expected.

Construction Cost

40 %

The project was on budget, while it was estimated to experience 40% cost overruns Construction Time

2 years

The project was on time despite the estimation of 2 years late

Effective applications of JIT and partnership results in a better performance of the business. After successfully implementing JIT and partnership, MP Construction will have a more effective supply chain map as shown on the next page.

REDESIGNED SUPPLY CHAIN MAP

page 35

page 36

4.0

STEP 3: CONTROL Monitoring and Control

4.1 Significance of Monitoring and Control “the Monitoring and Control Process Group consists of those processes performed to observe project execution so that potential problems can be identified in a timely manner and corrective action can be taken, when necessary, to control the execution of the project.�

~~ Project Management Body of Knowledge, 2016 Following the execution of the strategies, monitoring and control (M&C) process needs to be carried out. At a high level, this process aims to make sure that the execution is still on the track to achieve the desired goals. This sentence emphasises how excellent planning will be fruitless without a good M&C. As much as possible, M&C tries to eliminate the element of surprise during the execution; ensuring each process is under control. Hence, identifying potential problems and keeping everyone informed are keys in this instance.

The process of M&C commences as the project commences. It is made possible by assessing the undertaken works against the predetermined standards. The non-conformances in M&C output will be reported, and preventive and/or corrective actions will be taken accordingly (Figure 4.1).

Monitoring & Control

Initiation

Planning

Execution

Reporting

Closing

Change Request

Figure 4.1. Model of a Project Flow

During the M&C process, the best outcome is achieved when the problem is identified before it becomes a mistake. However, it has to be balanced with a team who is capable to analyse and propose effective preventive actions. The importance of these aspects is emphasised by Bernold and Abourizk (2010) that summarised three characteristics of an effective M&C system:

Provides real-time feedback

Provides feed forward predictions

Provides data for trend analysis

page 37

& L O R T VE N CO PRO IM IH P S R E N T R E PA M I T TS IN JU

CONTINUOUS IMPROVEMENT

KPIs TO CONTROL

SUPPLY CHAINS CONSOLIDATION

REDUCTION IN NUMBER

D&C CONTRACTS

PREFABRICATION

LINE OF BALANCE

KANBAN SYSTEM

LAST PLANNER SYSTEM

page 38

4.2 Implementation In order to identify the performance, MP Construction should establish Key Performance Indicators (KPIs). The KPIs can be adopted from the relevant guidance and standards, generally, or developed from MP Construction’s values, specifically. MP Construction should establish two sets of KPIs to exclusively assess the overall project performance and the performance of each partner. The two sets facilitate the management team to identify the areas of improvement at the project level and at the organisational level.

Table 4.1. Assessment Criteria Project Level

schedule

quality

safety

Organisational Level (partner)

cost

collaboration & engagement

trust & transparency

innovation & improvement

PPC Performance from JIT on site productivity

scope and variations

reworks on project

Referring to Table 4.1, MP Construction should set benchmarks for the parameters set on the first row.

The benchmark should provide a clear line between a good a bad performance. For these parameters, the performance of each partner is assessed against the benchmarks. The three measurements on the second row: on site productivity, scope and variations, and reworks on project are to be assessed at both project level and organisational level. For these parameters, the performance of each partner is assessed relative to the performance of particular criterion at the project level. Performance that is below the project performance is considered as bad performance, and the performance above the project performance is considered as a good performance. It should be noted that all these parameters are to be measured in addition to the PPC performance from the JIT practice. The example of performance indicators can be seen on Table 4.2 and Table 4.3 on the next page.

Another important thing in M&C process is the stakeholders, especially those who are involved on their interests, such as unions, local communities, government authorities, environmental organisations, and NGOs. Their satisfactions are crucial to ensure the project moves forward (PMBOK, 2016). Chinyio & Olomolaiye (2010) further emphasise that a failure to meet stakeholder’s requirements often leads to project failure.

page 39

Table 4.2. Project Performance Indicators PROJECT PERFORMANCE Category Schedule

Parameter

Description

SPI - Schedule

the work earned

Performance Index Quality

Performance Indicators U

NI

ME

S

E

<2

<1

=1

>1

>2

>0.8%

>0.5%

>=0.3%

<0.3%

<0.2%

>=7

>=6.8

<6.8

<6.3

<5.5

>=16

>=15.3

<15.3

<14.8

<14.3

>=35

>=33.5

<32.5

<31.5

<30

<2

<1

=1

>1

>2

>=2.3%

>=1.7%

<1.7%

<1%

<0.6%

<-5.0%

<0%

=0%

>0%

>5.0%

<-1.5%

<0%

=0%

>0%

>1.5%

the work scheduled

Rework %

total rework cost total scheduled cost

Safety

Cost

LTIFR: Lost Time Injury

total lost time injury per million

Frequency Rate

hours worked

TRIF: Total Recordable

total recordable injury per

Injury Frequency

million hours worked

SIF: Serious Incident

total serious incident per

Frequency

million hours worked

CPI: Cost Performance

the work earned

Index

the actual cost spent

Productivity FDS: Foreman Delay Survey Variations

based on questionnaire in the Appendix A and Appendix B

CV%: Cost Variance %

earned work - actual cost earned work

SV%: Scheduled

earned work - scheduled work

Variance %

scheduled work

Table 4.3. Partner Performance Indicators PARTNER PERFORMANCE Category

Parameter

Description

Performance Indicators U

NI

ME

S

Low

Med

High

Trust

transparency

openness to the partnership

Collaboration

No. of disputes

disputes between parties

>5

>2

1-2

0

Communication

% of information received

<70%

<=85%

>85%

>90%

E

>95%

correctly within the time Innovation Quality

Engagement

actively engaged in partnership

Low

Med

High

Shared knowledge

eager to share knowledge

Low

Med

High

Improvement

innovation to improve

Low

Med

High

>0.8%

>0.5%

>=0.3%

<0.3%

<0.2%

>=2.3%

>=1.7%

<1.7%

<1%

<0.6%

<P

=P

>P

<P

=P

>P

Rework % (compare to project)

Productivity Variations

total scheduled cost

FDS: Foreman Delay

based on questionnaire in the

Survey

Appendix A and Appendix B

CV%: Cost Variance %

(compare to project)

total rework cost

earned work - actual cost earned work

SV%: Scheduled Variance %

U : Unsatisfactory NI : Need improvement

earned work - scheduled work scheduled work ME : Meet Expectation S : Satisfactory

E : Excellent

page 40

STEP 4: IMPROVE

5.0

Continuous Improvement

The last step in the supply chain management strategy is to preserve what has been learnt at the organisational level (kaizen). Often, this step is the most challenging after all. In this section, the proposed suggestion is based on the Japanese philosophy of jishuken.

Jishuken literally means study group, or in the manufacturing industry can be defined as a means of learning with subcontractors or suppliers. Jishuken is introduced in Toyota Production System where Toyota supplier association is established consisting of the core Toyota’s suppliers. They regularly meet during the year, share practices, information and concerns. Research shows that this practice results in positive feedback on the overall Toyota production (Dyer & Hatch, 2004).

In MP Construction, jishuken will be implemented in the form of a workshop involving the partners in the partnership. There are two types of workshop to be conducted:

Obeya meeting

main partners

1-2

representatives per partner

1-2x

per month

1

partner

1-2

representatives

Regular Partnership Workshops The general purpose of the workshop is to resolve views and opinions regarding partner’s interests. During this workshop, MP Construction will review the highlights occurred in the project: the issues and the achieved milestones. The project performance and the overall partners’ performance will be discussed based on the predetermined criteria (Table 4.2, Table 4.3).

From this workshop, MP Construction and every partner are able to get general feedback for improvement.

The presence of this workshop is expected to: » ensure a balance between the use of communication technology and the amount of information delivered » maintain trust and transparency » share knowledge » increase understanding about the project » regularly follow up partners and keep them updated » create a culture among the partners to collaboratively think about the project as a whole One-on-one Partnership Meeting In addition to the regular collaborative workshop, occasional one-to-one workshop is suggested to be carried out when needed. MP Construction is suggested to arrange this workshop with partner that gets “NI” or “U” for the same criterion two times in a row (Table 4.3). The workshop is to accommodate consultancy and collaboration with the partner; supporting them to continuously improve as an entity and as a partner in the partnership. If the partner does not show improvement, or more importantly a good intention to improve, MP Construction may consider reassessing the partnership with this partner.

page 41

SUCCESS STORY

Continuous improvement is about establishing a culture. The improvement strategies need to be assessed against the predetermined objectives (Figure 5.1). The strategies that are evident to bring the intended outcome should be adopted a new standard. By implementing this standard, MP Construction is forced to carry out a better normal that leads to continual improvement. set the reviewed strategies as companyâ&#x20AC;&#x2122;s standards continuous improvement review the standards for improvement Figure 5.1. Continuous Improvement

As has been elaborated in this report, a partnership, or rather alliancing, will be able to deliver a project in shorter time, higher profit, and better quality. Hence, balancing the golden triangle of time-costQUALITY quality.

COST

COST

MPC

MPC

TIME

QUALITY

TIME

Figure 5.2. The Golden Triangle

JAPANESE CONTRACTOR (Bennet, 1993) The observation has been done by Bennet in one of the big five contractors in Japan.

TAISEI

KAJIMA

OBAYASHI

SHIMIZU

TAKENAKA

Within the subcontractorâ&#x20AC;&#x2122;s site-based team, a small group of 5-6 people is created. They met 5-12 times within 2 to 5 months to discussed work-related problems. The solutions are then brought up to a bigger presentation with other subcontractors in which report were made into a book of 76 pages.

5-6

people

5-12x

in 2-5 months

10

subcons.

76

pages report

page 42

6.0

TOWARDS RESILIENT BUSINESS Builder and Developer

The strategies to improve the business performance have been discussed. When these strategies are carried out side by side with the implementation of M&C, continual improvement can be achieved in the business. MP Construction and partners will perform as a leading supply chain in construction industry.

My big commitment with MP Construction has made me go beyond the business performance improvement that the board requested. Despite the benefits that it brings, establishing a supply chain in construction industry is not yet the ultimate goal. This is because alliancing still relies on the demand from the client. Alliancing encourages MP Construction to forge as many good relationships as possible in the industry.

The more relationships it builds, the healthier the alliancing will be. Without demand from the market, the business will not run smoothly.

Based on these circumstances, for MP Construction to be a resilient business, a slight shift in the nature of the business should be made in the long run. After having much experience and mastering in alliancing, MP Construction can

I

&

II

II

1.

2.

3.

4.

5.

6.

longer time bigger unexpected risk constrained by the workers availability labour intensive and labour expensive more expensive compromised quality on the final product 7. low profit margin 8. wasting time and money 9. inefficient expenses

&

consider to concurrently provide construction service as well as initiate a project. In other words, the next step is to be a builder and a developer.

The benefits of being both developer and builder are: » loosen MP Construction’s dependency to the project demand; be more resilient in the industry » shorten the overall project timeline by eliminating the time to tender the project to the contractor » reduce potential disputes between client and contractors » speed up communication and clarification of information While this strategy maintains MP Construction sustainability in the long run, the implementation of this strategy is not urgent. This is also not the core actions to improve the business performance.

Therefore, in the illustration, it is depicted as a building envelope that supports the function of a building but does not affect the structural integrity (see the next page). This practice does not change the overall supply chain map except the number of clients that can be reduced.

III

1. non transparent relation between project stakeholders

2. project-to-project basis 3. separated from the design teams 4. no incentive for the contractor to innovate

5. long time because of sequential process

6. few points of responsibility 7. unbuildable design

Solutions / Strategies Just-In-Time (JIT)

towards resilient business

Long Term Strategy Partnership

Builder + Developer

page 43

T C E J O N R P TIO A I T INI & L RO E T N OV O C PR IM IP H S R E N T R E PA M I T TS IN JU

INITIATE PROJECTS

CONTINUOUS IMPROVEMENT

KPIs TO CONTROL

SUPPLY CHAINS CONSOLIDATION

REDUCTION IN NUMBER

D&C CONTRACTS

PREFABRICATION

LINE OF BALANCE

KANBAN SYSTEM

LAST PLANNER SYSTEM

RESILIENT SUPPLY CHAIN MAP

MP Construction becomes less dependent with the client as it starts to initiate its own projects. MP Construction can focus on few clients that MP Construction is comfortable to work with or big clients that own prestigious projects

page 45

page 46

7.0

FINANCIAL PLAN

The cost estimated in the Financial Plan only

$890,000

considers the indirect capital cost. Direct cost such as labour, materials, and task-related equipment are excluded from the estimation.

Kanban - JIT

Prefabrication - JIT

$250,000

$400,000

The cost is calculated based on 30 subcontractors on site (refer to the redesigned supply chain map) times the estimated cost to provide kanban stillage at $5,000 each, and a warehouse to store the stillage.

The cost includes the price of software and hardware, machinery cost (loading-unloading equipment, vertical transportation) and on-site storage. It excludes additional cost of delivery, extra supervisors, maintenance etc. The estimation is based on the research study by Hong et al. (2018) and Antillon, et al. (2014).

Line of Balance - JIT

$40,000 This cost includes the cost of new software and hardware needed. The cost of employees who will do the monitoring and reporting is excluded.

Last Planner System - JIT

$50,000 Last planner system needs a dedicated large room on site to display the VMC and hold daily and weekly meetings.

Partnership

$150,000 The cost is estimated for EDI and single model environment (SME). The cost of specialised consultant or employees required are excluded.

S S E

page 47

N I S

T C E J O N R P TIO IA T I IN & L O R T VE N CO PRO IM IP H S R E N T R E PA IT M IT N S U J

E

I L I

S E R

NT

BU

INITIATE PROJECTS

CONTINUOUS IMPROVEMENT

KPIs TO CONTROL

SUPPLY CHAINS CONSOLIDATION

REDUCTION IN NUMBER

D&C CONTRACTS

PREFABRICATION

LINE OF BALANCE

KANBAN SYSTEM

LAST PLANNER SYSTEM

page 48

REPORT LIMITATIONS

8.0

Despite the evident-based data that have been presented, this report has several limitations:

Limitation 1 - Just-In-Time (JIT) This report only covers four areas which are seen as the most significant aspects to support the Just-In-Time practice in MP Construction. Jidoka philosophy (autonomation) which is another pillar of lean thinking in TPS is not explored. This concept helps in achieving excellent quality by ensuring that product flow is stopped when defects are identified.

Limitation 2 - Partnership This report focuses on the partnership of the downstream actors. The upstream actors are not included in the partnership. As a result, the reduction of time occurs only on the downstream. Further time saving is possible to achieve if the upstream supply chains are also establishing partnership.

Limitation 3 - Supply Chain Map The supply chain map provided in this report is the simplified version and only considers the general nodes on projects. It is not comprehensive nor project specifics.

Hence, the understanding about the flows might be limited. The supply chain map should not be referred as a sole foundation to conduct an action.

Limitation 4 - Constraints This report starts the timeline in June 2020. It does not consider internal or external problems that might hinder MP Construction to delay the implementation of the strategies. The neglected constraints include the unfavourable condition due to COVID-19 pandemic, resources availability and resources capability (workers, fund, materials). It is recommended that MP Construction conducts feasibility study before implementing the strategies

page 49

CONCLUSION

9.0 “Strength and growth come only through continuous effort and struggle.”

– Napoleon Hill

MP Construction shows excellent performance in product quality but low performance in cost and time. The underlying reasons are MP Construction’s current practices of traditional contracts, competitive tendering, project-by-project based, traditional on-site construction method, and poor workmanship. MP Construction’s efforts to maintain the quality gives up its performance in cost and time. This report has assessed the root causes and proposed two strategies to solve the problems.

Just-In-Time (JIT) and partnership are considered as the most effective methods to increase MP Construction performance on cost and time, while keep maintaining the quality. JIT is made possible by implementing four key actions: the use of kanban, line of balance, last planner system, and prefabrication. They enable MP Construction to have bigger control on site, and hence increase productivity and efficiency on site. Partnership is implemented by reducing the number of partners followed by the consolidation of supply chains. This scenario will be facilitated by the comprehensive understanding on the process of delivering a project. Therefore, it is suggested that MP Construction enters the D&C market before going into a partnership. The implementation of JIT and partnership are expected to cut the unnecessary cost and time used by MP Construction to increase the quality.

Going side by side with the improvement strategies, monitoring and control process needs to be carried out. Key performance indicators have to be established, and performance assessment against these KPIs has to be made regularly. Improvement strategy that results in better performance should be adopted to a new company standard to allow for continuous improvement.

Additionally, after these two strategies are entrenched in day-to-day practices, MP Construction may consider striving for a resilient business by being a developer as well as a contractor.

page 50

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10.0

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page 52

APPENDICES

page 53

11.0 Appendix A - FOREMAN DELAY SURVEY (FDS) FORM

54

Appendix B - SAMPLE FOREMAN DELAY SURVEY (FDS) RESULT

55

Appendix C - PROJECT PERFORMANCE INDICATORS

56

Appendix D - PARTNER PERFORMANCE INDICATORS

57

Appendix E - PARTNER PERFORMANCE COMPARISON

58

Appendix F - WEIGHTED AVERAGE SCORE

59

Appendix G - PARTNER REGISTER

62

Appendix H - PARTNER ENGAGEMENT PLAN

63

Appendix I - PARTNER ENGAGEMENT MATRIX

64

page 54

Appendix A FOREMAN DELAY SURVEY (FDS) FORM Person-Hours Lost Problem Causing Area Redoing work (design error or change) Redoing work (prefabrication error) Redoing work (field error or damage) Waiting for materials (warehouse) Waiting for materials (vendor furnished) Waiting for tools Waiting for construction equipment Construction equipment breakdown Waiting for information Waiting for other crews Waiting for fellow crew members Unexplained or unnecessary move Other: Comments:

Made by:

Date:

No. of Hours Lost

No. of Workers

Total PersonHours

page 55

Appendix B SAMPLE FOREMAN DELAY SURVEY (FDS) RESULT Person-Hours Lost

Percentage

Redoing work (design error or change)

122

2.3

Redoing work (prefabrication error)

24

0.5

Redoing work (field error or damage)

52

1.0

Waiting for materials (warehouse)

33

0.6

Waiting for materials (vendor furnished)

22

0.4

Waiting for tools

12

0.2

Waiting for construction equipment

56

1.1

Construction equipment breakdown

15

0.3

Waiting for information

12

0.2

Waiting for other crews

14

0.3

Waiting for fellow crew members

10

0.2

Unexplained or unnecessary move

20

0.4

Other:

70

1.3

Total

462

8.9

Total Work in person-hours

5210

Problem Causing Area

Comments:

Made by:

Date:

page 56

Appendix C PROJECT PERFORMANCE INDICATORS Category Schedule

Parameter SPI - Schedule Performance Index

Quality

Rework %

Performance Indicators

Description the work earned

U

NI

ME

S

E

<2

<1

=1

>1

>2

>0.8%

>0.5%

>=0.3%

<0.3%

<0.2%

>=7

>=6.8

<6.8

<6.3

<5.5

>=16

>=15.3

<15.3

<14.8

<14.3

>=35

>=33.5

<32.5

<31.5

<30

<2

<1

=1

>1

>2

>=2.3%

>=1.7%

<1.7%

<1%

<0.6%

<-5.0%

<0%

=0%

>0%

>5.0%

<-1.5%

<0%

=0%

>0%

>1.5%

the work scheduled total rework cost total scheduled cost

Safety

Cost

LTIFR: Lost Time Injury

total lost time injury per million

Frequency Rate

hours worked

TRIF: Total Recordable

total recordable injury per

Injury Frequency

million hours worked

SIF: Serious Incident

total serious incident per

Frequency

million hours worked

CPI: Cost Performance Index

Productivity FDS: Foreman Delay Survey Variations

CV%: Cost Variance %

the work earned the actual cost spent based on questionnaire in the Appendix A and Appendix B earned work - actual cost earned work

SV%: Scheduled Variance % U : Unsatisfactory NI : Need improvement

earned work - scheduled work scheduled work ME : Meet Expectation S : Satisfactory

E : Excellent

page 57

Appendix D PARTNER PERFORMANCE INDICATORS Category

Parameter

Description

Performance Indicators U

NI

ME

S

Low

Med

High

Trust

transparency

openness to the partnership

Collaboration

No. of disputes

disputes between parties

>5

>2

1-2

0

Communication

% of information received

<70%

<=85%

>85%

>90%

E

>95%

correctly within the time Innovation Quality

Engagement

actively engaged in partnership

Low

Med

High

Shared knowledge

eager to share knowledge

Low

Med

High

Improvement

innovation to improve

Low

Med

High

>0.8%

>0.5%

>=0.3%

<0.3%

<0.2%

>=2.3%

>=1.7%

<1.7%

<1%

<0.6%

<P

=P

>P

<P

=P

>P

Rework % (compare to project)

Productivity Variations

FDS: Foreman Delay

based on questionnaire in the

Survey

Appendix A and Appendix B

CV%: Cost Variance %

(compare to project)

total rework cost total scheduled cost

earned work - actual cost earned work

SV%: Scheduled Variance %

U : Unsatisfactory NI : Need improvement

earned work - scheduled work scheduled work ME : Meet Expectation S : Satisfactory

E : Excellent

page 58

Appendix E PARTNER PERFORMANCE COMPARISON

Category

Performance Indicators (U / NI / ME / S / E)

Parameter Partner 1

Trust

transparency

Collaboration

No. of disputes

Partner 2

Partner 3

Partner 4

Communication Engagement Innovation

Shared knowledge Improvement

Quality

Rework % (compare to project)

Productivity

FDS: Foreman Delay Survey

Variations

CV%: Cost Variance %

(compare to

SV%: Scheduled

project)

Variance % U NI

TOTAL

ME S E

Score Average Score Partner with the most U Partner with the least U Partner with the most E Partner with the least E U : Unsatisfactory NI : Need improvement

ME : Meet Expectation S : Satisfactory

E : Excellent

Partner 5

Partner 6

page 59

Appendix F H - Criteria and Weighted Average Score Appendix 6 Power Avenue, Hawthorn VIC 3122 WEIGHTED AVERAGE SCORE Request for EOI No.

Criteria

Weight Rating

Scoring Method

Score

Assessed By

A. TECHNICAL 1.0 Corporate Capabilities 1.1 Does the contractor's competency

25 4

0-3 3pts = Yes

in engaging design consultants

2pts = Yes, meets tender dates but some detail

provide practicality that assists

missing & needs more information

design feasibility and

1pt = Yes, but lacks detail and logic is

constructability

incomplete/incorrect

0 0

MP Construction

0pts = No, fails to to meet requirements 1.2

Has the contractor provided their

4

3pts = Yes, well demonstrated

experiences in mobilising multi-

2pts = Yes, but lacks certain detail

residential projects while still

1pt = Yes, but more information required to

managing normal project risk, cost

confirm understandings

effectiveness, scope and quality

0pts = No, fails to to meet requirements

0

MP Construction

considerations 1.3

Has the contractor provided

3

3pts = Yes, well demonstrated

documentation or statistical data to

2pts = Yes; considered with minor information to

represent their construction quality

be clarified

and performance

1pt = Yes, but not fully demonstrated and

0

MP Construction

requires for detail 0pts = No, fails to to meet requirements 1.4

Has the contractor provided the

3

3pts = Yes, well demonstrated

evidence of adherence to municipal,

2pts = Yes, but lacks certain detail

state and federal Environmental and

1pt = Yes, but more information required to

Occupational Health and Safety

confirm understandings

policies with all licences of operation

0pts = No, fails to to meet requirements

0

MP Construction

currently valid 1.5

Has the contractor furnished certain

4

3pts = Yes, well demonstrated

financial information demonstrating

2pts = Yes, but lacks certain detail

the Proponent’s (and its financier’s)

1pt = Yes, but more information required to

financial capability, including the

confirm understandings

Tenderer’s proposed funding

0pts = No, fails to to meet requirements

0

MP Construction

approach to the Project.

1.6

Has the contractor provided

3

3pts = Yes, well demonstrated

information showing their

2pts = Yes, but lacks certain detail

understanding of the issues in

1pt = Yes, but more information required to

operating multi-residential projects

confirm understandings

of similar size and character tot the

0pts = No, fails to to meet requirements

0

MP Construction

Project 1.7

Does the contractor demonstrate

4

3pts = Yes

their quality of working relationships

2pts = Yes, meets tender dates but some detail

with all relevant stakeholders as well

missing & needs more information

as accreditation to relevant industry

1pt = Yes, but lacks detail and logic is

bodies

incomplete/incorrect

0

MP Construction

0pts = No, fails to to meet requirements 2.0 Project Delivery Capability 2.1 Does the contractor's proposed

25 5

0-3 3pts = Yes, well demonstrated

program make sense and support

2pts = Yes; considered with minor information to

the given milestones and timeline

be clarified 1pt = Yes, but not fully demonstrated and requires for detail 0pts = No, fails to to meet requirements

0 0

MP Construction

page 60

Appendix F H - Criteria and Weighted Average Score Appendix 6 Power Avenue, Hawthorn VIC 3122

WEIGHTED AVERAGE SCORE (cont.)

Request for EOI No.

Criteria

Weight Rating

Scoring Method

Score

Assessed By

A. TECHNICAL 2.2 Does the contractor have sufficient

5

3pts = Yes, well demonstrated

resources which are capable to

2pts = Yes; System appears adequate but need

deliver the project from the

more information

planning stage to the final

1pt = Yes; System demonstrated but actions are

completion stage

not well elaborated

0

MP Construction

0pts = No, fails to to meet requirements 2.3 Has the contractor done due

5

3pts = Yes, well demonstrated

dilligence and disclosed the possible

2pts = Yes; System appears adequate but need

constraints.

more information

0

MP Construction

1pt = Yes; System demonstrated but actions are not well elaborated 0pts = No, fails to to meet requirements 2.3 Are the contractor's preventive and

5

3pts = Yes, well demonstrated

represive actions to deal with their

2pts = Yes; System appears adequate but need

possible constraints feasible and

more information

effective

1pt = Yes; System demonstrated but actions are

0

MP Construction

not well elaborated 0pts = No, fails to to meet requirements 2.4 Does the contractor consider asset

5

3pts = Yes, well demonstrated

management on site, and is the

2pts = Yes; System appears adequate but need

asset management system effective

more information

in increasing on-site productivity

1pt = Yes; System demonstrated but actions are

0

MP Construction

not well elaborated 0pts = No, fails to to meet requirements 3.0 Stakeholders Management 3.1 Does the contractor provide

15 3

0-3 3pts = Yes, well demonstrated

predictions on how the project can

2pts = Yes, but lacks certain detail

impact the stakeholders and vice

1pt = Yes, but more information required to

versa

confirm understandings

0 0

MP Construction

0pts = No, fails to to meet requirements 3.2 Are the contractor's strategies to

3

3pts = Yes

manage stakeholders effective and

2pts = Yes, with minor acceptable conditions

believed can reduce both predicted

1pt = No, but with acceptable alternatives

and unpredicted issues between

0pts = No, fails to to meet requirements

0

MP Construction

stakeholders?

3.3 Does the contractor demonstrate

3

3pts = Yes

their quality of working relationships

2pts = Yes, with minor acceptable conditions

with all subcontractors and

1pt = No, but with acceptable alternatives

upstream suppliers

0pts = No, fails to to meet requirements

3.4 Does the constractor show its

4

3pts = Yes

credibility not to compromise

2pts = Yes, with minor acceptable conditions

sustainability and quality, while keep

1pt = No, but with acceptable alternatives

maintaining good relationship with

0pts = No, fails to to meet requirements

0

MP Construction

0

MP Construction

all stakeholders 3.5 Has the contractor demonstrated

2

3pts = Yes

resource management procedures

2pts = Yes, with minor acceptable conditions

and experiences from past and

1pt = No, but with acceptable alternatives

current projects which satisfy

0pts = No, fails to to meet requirements

industry standards

0

MP Construction

page 61

Appendix F H - Criteria and Weighted Average Score Appendix 6 Power Avenue, Hawthorn VIC 3122

WEIGHTED AVERAGE SCORE (cont.)

Request for EOI No.

Criteria

Weight Rating

Scoring Method

Score

Assessed By

A. TECHNICAL 4.0 Risk Management 4.1 Does the contractor provide

20 6

0-3

0 0

3pts = Yes

predictions on on-site and off-site

2pts = Yes, with minor acceptable conditions

risks that potentially impact on the

1pt = No, but with acceptable alternatives

project delivery

0pts = No, fails to to meet requirements

4.2 Does the contractor propose clear

7

3pts = Yes

0

strategies to eliminate or mitigate

2pts = Yes, meets tender dates but some detail

the risks

missing & needs more information

MP Construction

MP Construction

1pt = Yes, but lacks detail and logic is incomplete/incorrect 0pts = No, fails to to meet requirements 4.3 Does the contractor show capability

7

3pts = Yes

0

to do its strategies. This also

2pts = Yes, meets tender dates but some detail

considers financial capability,

missing & needs more information

resource capability (labour,

1pt = Yes, but lacks detail and logic is

equipment, materials)

incomplete/incorrect

MP Construction

0pts = No, fails to to meet requirements B. COMMERCIAL 5.0 Commercialisation 5.1 Does the contractor provide a

10 3

0-3

0 0

3pts = Yes

convincing justification on how their

2pts = Yes, meets tender dates but some detail

objectives increase the project's

missing & needs more information

profitability

1pt = Yes, but lacks detail and logic is

MP Construction

incomplete/incorrect 0pts = No, fails to to meet requirements 5.2 Does the contractor provide

3

3pts = Yes

0

strategies to maximise project profit

2pts = Yes, meets tender dates but some detail

margin and ROI

missing & needs more information

MP Construction

1pt = Yes, but lacks detail and logic is incomplete/incorrect 0pts = No, fails to to meet requirements 5.3 Are the contractor's management

4

3pts = Yes

0

strategies effective and can provide

2pts = Yes, meets tender dates but some detail

reliable predictions on how the

missing & needs more information

project can impact the stakeholders

1pt = Yes, but lacks detail and logic is

and vice versa

incomplete/incorrect 0pts = No, fails to to meet requirements

Total Weighted Rating Score =

95

Total Contractor's Score = Maximum Score =

MP Construction

0 285

Appendix G PARTNER REGISTER Project Manager

Partner

P

Contact

Category (Internal / External)

Interest

page 63

Project Phase

Influence

Communication Requirements

Expectations

Low

Medium

High

Appendix H PARTNER ENGAGEMENT PLAN Partner organisation, group or individual

Potential role in the activity

Engagemen engage the

nt strategy: How will you e partner in the activity

page 65

Follow-up strategy plans for feedback or continuous improvement

Appendix I PARTNER ENGAGEMENT MATRIX

Partner

Low

Risk

Medium

Influence (Project Level)

High

Interest (Project Level)

(

Initiatio

page 67

Project Phases (Informed / Consulted / Responsible / Accountable)

on

Planning

Execution

Low

Control

Medium

Close

Engagement Level

High