Construction Logistics, a personal view - how much has changed in five years?

Rick Ballard CMILT

In April 2004 the CILT’s Construction Industry Supply Chain Forum was established and I took on the task of moving it forward as the Forum’s first Chairman.  Our aims were simply to help improve the up-take of good logistics and supply chain management practices in the UK construction industry and to encourage debate on the subject.  In the five years since then the Forum has made steady, if at times slow progress, with an enthusiastic and committed band of members.  Indeed, the regular Forum Committee meetings now has one of the best attendance records of any of the Institutes Forums.  After five years I am handing over the chairmanship to Stephen Bacon and now seems a good time to reflect on how logistics has developed in the UK’s construction industry and what the Forum has achieved.

Uptake is slow

In April 2001, well before the idea of the Construction Forum was conceived, I wrote an article for Logistics Focus which on reflection was rather full of optimism about the opportunities for improving construction logistics.  It described the work that THE LOGISTICS BUSINESS had undertaken with BRE (formerly the Building Research Establishment) to investigate the logistics of supply and delivery of materials to construction sites and I started the article by commenting that a few enlightened companies within the construction industry had begun to see that good logistics practices were essential to the achievement of sustainable improvement.  However, I also noted that most construction companies had yet to recognise the benefits that could be realised.  At that time I was of the view that it would not be too long before many of the major construction contractors would be developing logistics improvement programmes and learning from other sectors, such as motor manufacturing and retail distribution, just how important supply chain management would be for gaining a competitive advantage.  But if I was taking the long view it was clearly not long enough, and I think it’s fair to say that whilst indeed some enlightened companies have continued to make progress, on the whole the industry is not much further forward now than it was eight years ago.  Karl Hudson and Stephen Bacon, both highly experienced individuals working within the construction sector certainly think that things have not improved.  In their recent article published in Focus they are damning in their comments on the construction industry’s uptake of good logistics practices and conclude that the industry still uses “archaic supply chains”.

Who is taking the initiative?

So what is happening and who is taking the initiative?  For businesses the key incentive to improve supply chains should be the desire to increase profits through more effective operation.  But this is the first stumbling block.  Mention logistics to many construction managers and they think only of costs; the costs of preliminaries (fencing and staff facilities) the costs of employing staff to manage vehicles movements, and the costs of finding space to store goods where there is limited space available at the construction site.  For example, one leading construction company is building two hospitals in London.  One of these is on a site which has restricted road access and very limited storage space on site; hence some excellent logistics principles are being applied to control the delivery of materials, including the use of off-site consolidation.  The other site does not have these same constraints, so no similar logistics principles are being applied.  In other words good logistics practice is not being seen as beneficial for the construction project as a whole but merely as a means to overcome delivery constraints.  It is too early to see what the impact might be on the overall outcome of these projects but simply walking around the sites would show you the difference.  The first site is well ordered with relatively small amounts of material waiting to be used whereas the second is far more untidy with large quantities of material lying around, just waiting to be damaged or go missing.

As Karl Hudson and Stephen Bacon have stated “construction industry logistics are immature” and the construction industry simply does not understand how logistics can add value.  Hence, it is only a few companies who see that experience in improved logistics and more effective supply chains is actually an investment which will lead to reduced waste and higher profits, and will actually result in a competitive advantage.  Other sectors have seen it, so why not construction?   I wish I had the answer to that question but perhaps it has something to do with the training of the professionals in the industry (architects, designers and construction managers) who, in my experience, have very little understanding of what supply chain management is all about.

High levels of construction waste

One result of the poor supply chain management is that the level of waste generated by the construction sector is staggering.  Typically 10% to 15% of total materials ordered for construction projects are either unused or end up as waste, and for some materials the figure can be as high as 45%.  According to WRAP (Waste and Resources Action Programme) a 35% reduction in this material wastage could be achieved by adopting more efficient logistics practices.  Waste seems to be taken for granted on construction projects and to a large extent is embedded in the project costing so that the quantities are based on an expectation that there will be significant damage and other losses.  As an example of the levels of waste that are common consider this.  Construction logistics specialist, Wilson James, which runs the London Construction Consolidation Centre (CCC) reported that on completion of one construction project in London, some 38, 26 tonne lorry loads of unused, good quality plant and materials with a value close to £1/4 million were returned from site to the CCC.  The benefits of the CCC were that this waste could be controlled and managed, and ultimately most of it was re-used on other projects.  On other less well managed projects this material would simply have been skipped and probably sent to  landfill.  The cost of such waste is normally just built into the project cost, increasing the cost to the client, or perhaps it is not built in, in which case contractor margins are reduced.

One of the most significant initiatives under way at the moment is that being promoted by WRAP and funded by Government through DEFRA.  WRAP has an active programme in hand, driven by targets for waste reduction, to promote much improved logistics in UK construction.  WRAP’s programme has resulted in the development of a number of tools to help construction companies with their logistics plans and is actively supporting a number of projects which are seen as exemplars for the industry as a whole   WRAP’s work is important and is delivering results, but in the overall scheme of things the total effort is small.

Productivity improvement

WRAP’s programme is aimed at reducing physical waste and CO2 emissions, but as important for improved profitability are the gains in productivity that improved supply chain management can provide.  Can you imagine a manufacturing plant where the skilled workers spend half their time walking to and from storage areas to find the material they need?  Probably not, but that’s just what happens on most construction sites; skilled workers from numerous sub-contractors all managing their own small, inefficient supply chains with no overall logistics plan.  The idea that kits of parts can be delivered to the point of use has been shown to work on construction sites but examples are few and far between.  There are many other tools and techniques that could be used on construction projects but their application needs to be driven from top management with an overall plan for improving the supply chain.  Supply chain management can add value, it can reduce waste and it can improve productivity - why is it so difficult to persuade construction companies to embrace it?  There is much more that needs to be done and ultimately it must be for construction clients and major contractors to drive forward the change.  Unfortunately I see little of this change taking place and I wondered just what is needed to make it happen.  Perhaps the current recession will prove the incentives to seek further performance improvements and perhaps those who may take up the challenge will be the ones that survive.

Forum achievements

So what has the CILT’s Construction Supply Chain Forum achieved?  Well it’s the usual story, we have achieved much, but not as much as we would have liked.  At the outset one of our objectives was to pick up the recommendations of the Task Group on Logistics set up by the Strategic Forum for Construction.  I sat on that Task Group and although the recommendations  were no more than what the Group saw as common sense, their adoption would certainly be of great benefit to the construction industry.  We have probably not made much progress with the Task Group recommendations at a detailed level, but over the years the Forum has run a number of well attended events and in particular we have had some success in engaging with relevant Government departments in an attempt to gain support for change.   This has taken time for a number of reasons, not least of which has been the changes of Minister with construction industry responsibility and changes to Government departments.  However, we have at last made progress and we are now engaged with BERR who have agreed to host an event that we will run jointly with CIPS later this year.  Details of the event are being finalised but the broad objectives will be to promote the benefits of good supply chain management practices in construction and show the successful outcomes that have been delivered by the more forward looking companies.

Although change is much slower than I had expected in the views                                                                                                                                                                                                                                                                                                                                                                                                                                             expressed in my 2001 article, I still firmly believe that change is necessary.  I am less confident than I was that it will happen in anything like the short term I am confident that the Forum has an important role to play.  From the CILT’s perspective there is a major sector of the UK economy which is effectively untouched by the hand of supply chain management, and for a sector where margins are low and the history of delivery to programme is poor, there is a golden opportunity to improve performance and for individual companies to gain significant competitive advantage.

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