Post on 03-Jun-2018
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LEANENTERPRISE IN
THE
CONSTRUCTION
INDUSTRY
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ABSTRACT
Construction firms need new business modelsto meet the change in construction industryenvironment
Lean enterprise model can be applied to anyindustry
Derived from lean aerospace initiative in MIT
Matrix was created that suggested ways toimplement 6 lean tools in constructionindustry
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Construction industry
First construction companies were responsibleonly for technical aspects of design andconstruction
Now they do maintenance and financing too
This paper has also included engineering designfirms, architecture studios, constructionmanagement firms, suppliers and sub
contractors.
Every player that adds value to constructionsupply chain is somehow included.
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Traditional core competences
The construction process involves delivery of
any type of facility or infrastructure to a
customer.
Architects produce a design for the owner
The contractor executes it with the assistance
of subcontractors and suppliers
The traditional process is cost driven
Owners select contractors on lowest price
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Cntd
They select suppliers and subcontractors on
lowest price
The temporary organization of firms expires at
the completion of the project.
Each firm has its expertise and do not cross
the boundaries
Conflicts arise between the parties due to
lack of details
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Relation between firms characterized
by
Low transition frequency
Uncertainty during construction process
Communication/ information problems Win-loose relationship
Poor quality/ late completion
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Competences of current industry
Many changes took place
Project finance, project operation and project
maintenance are provided now.
Innovative delivery methods are adopted
General contract
client gives design and companies follow itand do the job.
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Design-build(DB)
Both design and construction is done
only conceptual design is given
Turnkey(T)
Both design and construction is done
The company is not paid till work is done
Suitable for building factories
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Build-Operate-Transfer(BOT)
Legal right to operate for few years
Toll gates in high waysInfrastructure that can give revenue
Build-Operate-Transfer-Maintain(BOTM)
they also do the maintenance work
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1.NO REPETITION
No two identical projects, characterized by
bring to order.
Not speculative in nature.
Speculative nature of the project adds to the
complexity.
Exceptional : wal-Mart stores
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2.ON SITE PRODUCTION
Production physically takes at the locationwhere the customer wants to have theproduct.
Raw materials are delivered to the customerdesired location and assembled on the site.
Since the locations are different, introduces
complexity. Lack of communication among the site
managers
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3.LONG LIFE CYCLE
Projects are delivered to function for a long
time
Lifecycle cost such as maintenance cost
becomes critical in design phase.
Unfortunately this is not always taken into
account as the end user differs.
Interests not aligned for cheaper design , as
the maintenance costs are very high.
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4.COMPLEXITY OF ORGANIZATION
Involves managing peoples from different
companies that dont know each other.
Not every one is expert together with time
and budget pressures.
New relationships for new projects(lack of
mutual understandings)
Lack of capacity for common learning from
experience.
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5.FRAGMENTED
Construction companies are overwhelming.
800000 companies exist in US, but 600000have a work force of only one or two
employees. Very smaller percentage of market share.
Works only on their regional area of influence
and rarely gets the project. Lack of knowledge of regulations, unions and
contrctors.
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6.NEED FOR OUTSIDE FINANCING
Construction is a very capital intensive
industry.
Projects are always expensive and often need
to advance some cash flows to get start.
In some cases it has to arrange finance for the
whole project due to cash flow problems of
costomer.
Different kind of bonds need to be secured
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Lean principles:
The economy is cyclical. There are periods ofhigh growth followed by recessions.Experience confirms this phenomenon.
Many fail and default but very few manage togo through without being affected that much.
We can design a company that is more robust
to business cycles on the basis of lean thinkingas it is behind some of these successfulstoriesin bad times.
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Lean principles:
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Lean means eliminating waste, lean means
being flexible to change and lean means doing
continuous incremental improvements.
It probably is all those three at the same time
and much more.
Lean principles:
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Toyota Production System:
Mass production system led to an incredible reductionin costs. It worked pretty well while demand was muchhigher than production capacity and every carproduced had a customer ready to buy it
Taiichi Ohno, one of the plant engineers in Toyota atthat time, started to experience and put into practicesome new ideas of production with the goal ofimproving efficiency without increasing productionvolume (that they were not able to sell).
The result of that work is what we call today the ToyotaProduction System (TPS) which was finallyimplemented in Toyota in 1962.
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TPS's goal is to reduce costs without
increasing production volume. The basis to
achieve it is the absolute elimination of waste
(Ohno, 1978).
The two pillars that support the system are:
Just in Time
Autonomation
Toyota Production System:
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APICS Definition of JIT
A philosophy of manufacturing based on
planned elimination of waste and continuous
improvement of productivity. ...
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APICS Definition of JIT
The primary elements of Just-in-Time are to:
have only the required inventory when needed,
improve quality to zero defects,
reduce lead times by reducing setup times, queue
lengths, and lot sizes,
incrementally revise the operations themselves,
andaccomplish these things at minimum cost.
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JIT Synonyms
IBM - Continuous Flow Manufacturing
HP - Stockless Production
Repetitive Manufacturing SystemGE - Management by Sight
Boeing - Lean Manufacturing
Motorola - Short Cycle Manufacturing Japanese - The Toyota System
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Time-Based Competition
It is not enough for firms to be high-qualityand low-cost producers.
Today, they must also be first in getting
products and services to the customer fast.To compete in this new environment, the
order-to-delivery cycle must be drastically
reduced. JIT is the weapon of choice today to reduce
the elapsed time of this cycle.
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Kanban
Manual information system to control
production. Material transportation, and
inventory
Literally means visible record or card
In the the broad sense it is a communication
signal from a downstream process (customer)
to a upstream process (producer)
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Pull Systems
Material
Information
Withdrawal of
material triggers
production
Production schedule is issued only to final assembly line.
Production schedule for each of the preceding process isdetermined by transfer of parts
Parts are pulled through the system from the end of the line
to the start
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Kanbans and Other Signals
There are two types of Kanban cards:
a conveyance card (C-Kanban)
a production card (P-Kanban)
Signals come in many forms other than cards,
including:
an empty crate
an empty designated location on the floor
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Autonomation:
Use of "intelligent" machines that can automatically stopproduction as soon as products are being produced withdefects.
This means that you don't need an operator for eachmachine, watching it work, in case products start beingdefective.
Instead you can have several machines controlled by asingle worker who will act only when a machine has aproblem
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Division of activities within the
production process
Work is divided in value-added and non-value addedactivities.
Value-added activities involve some kind of processingor transformation of the materials towards a next stepin the process.
Non-value added activities do not add value to the
product but have to be done under the presentworking conditions.
Waste is activities that can be eliminated withoutaffecting production at all. They just use resources.
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VA or NVA?
Counting - once?
- more than once?
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Advent of pull production system
In an industry where demand is higher than supply the massproduction system works well because manufacturers can "push"their products into the customers (e.g. products are scarce sowhatever you produce you will sell).
As soon as the market becomes saturated and low growth appears
the industry has to accept orders from each customer and makeproducts that differ according to individual requirements.
In this situation customers are empowered and can "pull" whateverthey want from manufacturers.
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Implementation of TPS:
Although the principles of TPS were defined inthe early 50s by Taiichi Ohno, theimplementation took almost 10 years to reach
the whole company It took further another 10 years to become
common practice among its suppliers.
It takes strong leadership commitment to beable to migrate from mass production to alean production.
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Lean thinking
Customer-focused: customer needs and expectations "pull"enterprise activities. The customer provides an orientation ("truenorth") for the full enterprise.
Knowledge-driven: critical role of people in effectuating value (fullinput from the entire workforce). Draws upon knowledge and
innovation from everyone (workers, suppliers, ... ). Eliminating waste: stresses elimination, not just reduction, of all
types of waste
Creating value: puts premium on "growing the pie", not justreducing costs, to benefit all stakeholders.
Dynamic and continuous: Pursues on-going systemic as well asincremental improvement - both innovation and continualimprovement.
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Lean across fields
Lean is not just a matter of applyingsome tools or procedures.
It is really a change of mindset, achange in how people think andwhat they value, thus a change inhow people behave.
Because lean is about beliefs andbehavior, it is applicable beyond thefactory floor to encompass theentire enterprise, hence leanenterprise is born.
We must recognize the fact thatgreater benefits can be obtainedwhen changing the wholeenterprise towards lean principlesthan just applying some practices inthe production side of business.
If you concentrate only inproduction you will get partialbenefits of the full potential.
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Transition to Lean:
The outcome of Lean Aerospace Initiative s many years of research effortscan be summarized in the development of a lean framework that could beapplied to any given industry.
The framework consists of three key interrelated products:
LEM (Lean Enterprise Model)integrates the lean principles and practices~it addresses the issue of "what" defines a lean enterprise.
TTL Guide (Transition to Lean Guide) addresses the issues ofimplementation. It defines "how" to transition to a lean state.
It provides an organizing agenda for achieving a lean transformation.
LESAT (Lean Enterprise Self-Assessment Tool). Lean transformation is along journey.This tool provides enterprise leaders a way of assessing their progress oncethey follow the TTL Guide. It helps answer the question: how much further is it tolean?
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Ohnos implicit teachings
These concepts are, as waste, evils to avoid and eliminate
Inflexibility: the enterprise has to be able to adapt towhat customers want.
Variability: flow can not be synchronized withoutmaintaining stability. The enterprise must decide its pace.
Leadership has the key role of supporting employees andcontrolling the demand variability so the company keeps
learning in a stable and safe environment.Ultimately how fast can you learn should drive how fastyou can grow.
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Key concepts within the lean
enterprise framework:
Enterprise. Any corporate or business-unit
organization with a distinct mission, market
segment, suit of products or services,
customer base, profit/loss responsibility andset of competitors
Stakeholder. Any group or individual who can
affect or is affected by the achievements ofthe organization's objective..
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Value stream. The specific activities requiredto design, order, and provide a specificproduct, from concept to launch, order to
delivery, and raw materials into the hands ofthe customer.
Extended enterprise. In the lean enterprisecontext enterprise is understood in a holistic
way. All business along the value stream thatcontributes to providing value to a customer.
Key concepts within the lean
enterprise framework:
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Fundamental principles for creating lean
enterprise value are summarized by LAI:
Principle 1: Create lean value by doing the job right and by
doing the right job.
Principle 2: Deliver value only after identifying stakeholder
value and constructing robust value propositions.
Principle 3: Realize lean value only by adopting an enterprise
perspective.
Principle 4: Address the interdependencies across enterprise
levels to increase lean value.
Principle 5: People, not just processes effectuate lean value
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The importance of value:
Value is not fixed- it evolves with stakeholder changes inpriorities.
Understanding stakeholder value is not easy.
Stakeholders can be identified in most cases but not their
view of value which may not be in line with the value of theproduct, service or improvement provided to end users
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Reaching extended enterprise:
A generic lean enterprise process architecturegathers processes in three groups:
Enterprise Leadership Processes: guide and providedirection to the enterprise.
Life Cycle Processes: define the product life cycle Enabling Infrastructure Processes: support otherorganizational units whom they serve as internalcustomers (traditional corporate support functions).
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Overarching lean principles:
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Construction vs Lean
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WHY?
To investigate how close the construction
industry is to the lean enterprise concept.
How lean enterprise principles can be applied
to any construction industry.
How compatible is each of the construction
characteristics with each of the lean principles
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Key construction characteristics
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Key lean enterprise principles
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Key lean enterprise principles
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Construction vs. Lean matrix
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Construction vs. Lean matrix
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ALIGNED PRINCIPLES The first thing that we can notice if we look at
the top left side of the matrix is that several
lean principles are already quite aligned with
some of the construction characteristics.
These principles are customer pull, delivering
value to all stakeholders and seeking stability
of demand.
This alignment is especially strong at the
project level(long lifecycle, site production and
build to order).
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This implies that due to the nature of the
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This implies that due to the nature of the
product that the construction industry delivers
those lean principles can be easily applied and
in some cases are already satisfied (e.g. the fact
that the construction industry is build to order
means that the lean principle of customer pull is
already satisfied).
In other words, the construction industry is
really a services business (as opposed to a
product business) where most revenues comefrom special products or projects(customization)
tailored for new and existing customers.
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NON ALIGNED
Finally we can say that some of the leanprinciples, waste minimization and continuousimprovement, synchronizing flows and mutual
trust relationships) are not aligned at all inany level.
These will be difficult to apply in this industrybasically because learning takes a long time
and there are too many adversarialrelationships.
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Lean in construction
Lean construction is aimed at improving constructionperformance by eliminating wastes that do not addvalue to the customer.
operation and project levels. In conjunction with a concrete contractor, actual
concrete construction projects were observed, andproblem areas contributing to delay and other wasteswere identified.
At the project level, the lack of coordination amongsubcontractors was cited as one of the major factorscontributing to schedule delays.
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At the operation level, a systematic approachof waste identification, operation re-design,
and employee training was applied to reducewastes found in the field operation.
A case study of bulkhead installation wasused to demonstrate this approach, and a 3Danimation was created for employee training.
Lean in construction
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3D Animation:
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Some of the lean principles that are related to
the construction industry are improvements
such as the construction planning process,construction supply chain, and downstream
performance (Howell, 2007)
Lean in construction
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Lean Construction at the Operation
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Lean Construction at the Operation
Level
Observations work procedures,resources and
monitoring
Case study- bulk head framework installation
and removal
A case study to demonstrate the process of
identifying waste, redesigning work
procedures, and retraining employees
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Lean Construction at the Operation
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A bulkhead is a temporary formwork strip
Generally used by the carpenters and generallaborers
Carpenters install as one piece to reduce theprocessing time
However, this makes bulkhead removal
difficult and time consuming In other words there is a coordination issue
between the two teams.
Lean Construction at the Operation
Level
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Lean Construction at the Operation
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Waste can be reduced by revising the process
of the upstream team,
This new procedures involves cutting of
bulkhead into two parts
Significance is that though time for installation
is increased,time required for removing is
drastically reduced
damages to concrete are reduced.
Lean Construction at the Operation
Level
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Training in the Construction industry :
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EFFECTIVE TRAINING
Effective training is very important to reducethe resistance to change by improvingemployees understanding of new work
procedures. The 3D animation was used to train
construction workers on the new workprocedure, and this training method proved to
be very effective in explaining new ideas andencouraging changes.
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INDUSTRY EXAMPLES
Challenges present in implementing lean
philosophy.
Examples give the perspectives of contractor,
developer and the owner.
Global contractors reduce costs by organizing.
Real estate companies trying to create value.
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SKANSKA USA BUILDING Inc
Giant Swedish contractor.
Puts into practice some concepts close to thelean enterprise.
Creates value to all its stakeholders. We respect the diversity of our backgrounds
as we work together to support the success of
our clients, the growth of our company, theempowerment of our people and the interestsof our shareowners.
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CONTINUED
The company is organized in a decentralized
and integrated approach.
The rational is conspicuous as construction is a
local business.
The concept of integration helps them in
establishing a strong brand name.
The organization of its USA building also
follows this principle.
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ORGANIZATIONAL STRUCTURE
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CONTINUED
Vertically,
Composed of 14 operational divisions across the US.
Operate quite independently.
Horizontally, Composed of several functions.
Enable infrastructure processes.
Human resources, legal, communications. These activities lead by headquarters with a minimum
number of people.
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CONTINUED
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CONTINUED
Accounting and IT are centralized in a separatecompany.
Centers of excellence enabling the expertise of the
company to be shared by employees. Availability of virtual networks with employees for
communication.
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EMPOWERMENT OF THE INDIVIDUAL
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EMPOWERMENT OF THE INDIVIDUAL
Inline with lean principles.
Employees encouraged to have individual
initiative to call other divisions to satisfy
customer requirements. Eg allowing an employee at CBE to contact his
counterpart in MAS directly.
Ensures the maintenance of client focus. Very fast communication.
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KNOWLEDGE SHARING
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KNOWLEDGE SHARING
Organizational structure enables the flow oftechnical knowledge through COE.
Assigning of employees to primary and
secondary virtual networks.
Primary networks contribute instantly to
secondary networks.
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THE NEENAN COMPANY
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THE NEENAN COMPANY
Based in Colorado.
Major real state developer, contractor.
Competitive pricing, on-time delivery and high
quality.
Manage site selection and land acquisition.
Collaboration of architects with construction
teams to ensure value to customers.
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DEFINING VALUE TO THE CUSTOMER
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DEFINING VALUE TO THE CUSTOMER.
Collaborative design process to identify scope,price and needs.
Consultations with all the stake holders.
Neenan can conceptually design and estimate anentire project from start to finish.
Guaranteed costs and timelines in just 21 days
unique approach to design and construction
which is to work together as one team to satisfythe goals of the integrated real estate team.
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CONSTRUCTION PROCESS FLOW
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CONSTRUCTION PROCESS FLOW
Neenan Reliability Planning System (NRPS).
Specifically designed to identify and avoid
potential break downs, speed progress and
eliminate wasted effort.
Contains all the major project milestone
phases and activities.
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BAA
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BAA
Based in United Kingdom Considered as the world's leading airport
company.
It owns and operates 7 airports in UK All their airports serve around 120 million
passengers.
UK's principal developers of infrastructure
One of the construction industry's largestcustomer.
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CONTINUED
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CONTINUED
Have revolutionized the way they spend theirmoney and the construction industry
Made the construction companies to adopt
sweeping changes in the way that majorprojects are handled.
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CONCLUSION
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CONCLUSION
Two approaches for applying lean to theconstruction industry, at the
project level and
the enterprise level. Greater benefits can be achieved by applying
it at the enterprise level.
The lean enterprise model allows constructioncompanies to operate with very limitedoverhead.
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CONTINUED
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CONTINUED
The construction industry is a service businesswhere most revenues come from special
projects (customization)
Tailored for new and existing customers.
The key is to understand specific customer
needs as opposed to general customer needs.
Lean implementation requires strongleadership.
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CONTINUED
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CONTINUED
Lean has a weak tie to the bottom line fromthe top management.
Companies top management only has a
superficial view of lean.
Their continuous support and commitment to
lean is absolutely essential for the
transformation to happen.
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CONTINUED
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CONTINUED
Lean imposes a tremendous culture change onContractors.
Identification and elimination wasteful internalprocesses.
With an uncertain economy, contractorspressurized to do things better, faster, andsmarter.
Creating an efficient organization can mean thedifference between success and failure for aconstruction company.