Resultaatverbetering door procesgericht werken in Bouw en Infra

The economic crisis has had a significant impact on the construction sector. Year after year, construction output has declined sharply (2013: 7.5%, 2014: 6%), and the outlook remains subdued. The main causes of this ongoing contraction are a decline in confidence among both consumers and businesses. This situation is expected to persist in the coming years, making it unrealistic to return to pre-financial crisis production levels.

As a result of this contraction, intense competition has emerged for the limited number of projects available on the market. Although tender procedures increasingly take into account factors such as quality, safety, environmental considerations and collaboration, price still carries the greatest weight in the awarding of long-term contracts. This has forced the sector to adapt considerably, which is not easy in such a traditionally structured environment. One of the key developments being pursued within the sector is supply chain collaboration. For years, various stakeholders in the construction chain have advocated closer cooperation. By involving all parties in the construction process, from design and engineering through to execution and even maintenance and repairs, it should be possible to achieve better designs at lower costs.

In practice, however, the concept of supply chain collaboration often remains little more than a stated intention, with limited concrete implementation.

The aim of this article is to share practical project experiences and, above all, to demonstrate how these developments can be translated into concrete actions that ultimately lead to improved results. It provides several practical approaches that can be applied in a variety of situations.

1. Analyse the current situation

When margins on awarded projects are very thin, there is an increasing need to operate with extreme efficiency. The effects of this can be seen in three concrete areas.

a. Failure costs
As a response to thin margins, organisations look creatively for ways to carry out the work with a “low-cost workforce”. This does not support the quality of preparation and execution, leading to failure costs. Failure costs include all costs that are unnecessarily incurred in producing the final product. Research by USP shows that failure costs in construction account for approximately 5 to 13% of turnover on average, while the average profit margin is around 2%. A key cause identified is insufficient coordination between parties in the supply chain. A familiar example is rework, repeating or correcting an activity that has already been carried out.

b. Difficult collaboration between clients and contractors
Another clear example of operating under pressure can be seen in the very sharp negotiations over additional work, which often lead to prolonged disputes. When conflicting interests arise between client and contractor, poor communication quickly becomes evident.

In addition, insufficient use is made of the opportunity to share information. Despite increasing digitalisation in the sector, which enhances the possibilities for system integration, organisations still fail to fully benefit from it. Much data is recorded multiple times within a single company, across different departments. However, when viewed from a supply chain perspective, this reveals a large “hidden factory” of unnecessary activities. The often short duration of projects or contracts further reinforces this issue.

c. Rhythm and lead time
Traditionally, the construction sector has been used to thinking in weekly cycles. Work is collected, processed and settled on a weekly basis, and meetings are aligned to this rhythm. This creates a recognisable pattern, ensuring that all parties are attuned to the same cadence within the chain.

However, there are also pitfalls. If one party cannot keep up with the rhythm, others are inevitably drawn into the disruption. Rework, in particular, proves damaging: work is delivered in week 1, an error is identified in week 2, the correction is submitted in week 3, and so on. There are also activities with very short processing times, yet the next handover moment to another party may not occur until a week later. Once again, rework exacerbates this issue.

Negative effects
In addition to low or even non-existent profit margins, the so-called “work in progress” becomes a major burden. All costs incurred during the execution of work, such as maintaining inventory or engineering hours, are only recovered afterwards, once the work is completed. However, due to rework, prolonged disputes and poorly aligned rhythms, project lead times are extended, requiring pre-financing. This work-in-progress position has caused many construction companies to face serious working capital problems or even bankruptcy, often dragging other companies down with them.

2. Performance inprovements through process-oriented working

As the supply of work in the construction sector has declined due to the crisis, there is a strong case for executing projects as efficiently as possible. As a result, the concept of ‘operational excellence’ has emerged in many strategic visions of construction companies. This involves maximising operational profit: on the one hand by minimising costs, and on the other by adding as much value as possible and creating added value for the customer, thereby increasing revenues.

By focusing on process-oriented working, organisations can give concrete form to the ambition of operational excellence.

a. Process design
The ambition to achieve supply chain collaboration begins with the need to understand one’s own internal processes and ensure they function efficiently. In practice, it often becomes clear that collaboration between departments is a major challenge, or even an obstacle, to achieving good process outcomes.

Lean and efficient design
By analysing the process together with employees from all relevant departments, a ‘supply chain dialogue’ emerges. What were once mutual reproaches become opportunities for improvement. Understanding of each other’s roles increases. A valuable tool in this analysis is lean design: identifying what adds value from a customer perspective and eliminating waste. In practical terms, it is advisable at this stage to focus on unnecessary and duplicate activities. Is every registration actually needed? Could better preparation of work result in savings for three subsequent roles in the process?

Process–IT alignment
A specific aspect of improving process design is the interaction between the process and the supporting systems. Increasingly, the level of alignment proves to be crucial for process performance. Does the supporting system create additional work, or does it eliminate repetitive actions such as re-entering data? This is particularly evident in field automation. With the use of tablets, GPS, photos, scanners and measuring equipment, the distinction between on-site execution and project administration in the office is disappearing.

Process teams
The previously mentioned supply chain dialogue is often applied only temporarily. After a period of attention to the end-to-end process, people tend to revert to their familiar departmental perspective. However, there is a growing trend towards giving process teams a permanent place within the organisation. These multidisciplinary, horizontally organised teams continuously monitor process performance, identify improvement opportunities and drive change. Even when organisational control remains vertically structured, hybrid forms of working emerge that better support the entire process from start to finish.

b. Analysis of lead time and project or contract rhythms
A specific analysis that can be carried out on the supply chain process concerns the impact of timing agreements and deadlines defined in contracts. In the construction sector, it is common for multiple clients and multiple contractors to be involved in a single project. While the contract provides a shared foundation, there is often insufficient attention to optimising the overall rhythm of the process.

For this analysis, it is essential to understand all process activities, particularly the handover points between different parties. How much processing time does each party require? At what moment can a scheduled handover to the next party take place? And is that party actually ready at that moment to proceed?

When the insights from this analysis are properly incorporated into the process design, waiting times can be significantly reduced. The potential is considerable, and improvements in overall lead time can often be realised quickly. Once the various parties in the chain recognise these benefits, there is greater willingness to address and align project rhythms collaboratively.

c. Improved control of the work
The result of a well-designed process and a tightly managed process rhythm is reflected in improved control over execution. Shorter lead times prevent ‘disconnects’ between activities. Processing and settlement are kept as close as possible to the actual execution of work, avoiding discrepancies between the ‘inside’ and ‘outside’ worlds. Errors and rework are reduced, as are prolonged disputes between clients and contractors.

d. Where are these improvements visible?
The first performance indicator to respond is working capital. The volume of work in progress is reduced, and the time between pre-financing and settlement is shortened. Reductions of more than 60 percent in outstanding production have been achieved.

The second indicator that improves is client and customer satisfaction. End users benefit from higher quality and shorter delivery times. These tangible improvements contribute to client satisfaction, but an additional factor is the improvement in supply chain collaboration. Enhancing overall chain performance requires an inclusive mindset – one where success is not achieved at the expense of others. At the same time, improved results further strengthen collaboration within the chain.

3. Recommendation: continuous improvement

In summary, improving supply chain performance and overall results lies in carefully designing the supply chain process, with the shortest possible lead time and minimal waste. When market demand declines and margins on projects are thin, efficient execution of the process becomes essential. This requires continuous attention and should therefore not be confined to a temporary project setting.

To achieve this, the development of process teams is crucial. This ensures that the various participants within the internal business process remain jointly focused on execution and potential improvements. Establish these process teams and ensure they meet regularly. Use process outcomes such as profitability, lead time and working capital as performance indicators, and make these visible to the team on a daily basis.

Encourage the identification of process improvements and give the process team the space to experiment. Unlock the improvement potential that exists within every process team. As a forward-looking perspective, when a process team grows in its own maturity and gains better control over the internal process, it will also naturally strengthen its position within the wider supply chain process.