International Door & Operator Industry

NOV-DEC 2017

Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.

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44 International Door & Operator Industry™ MANAGEMENT (continued from page 43) Continued on page 46 Moreover, productivity is lower today than it was in 1968, and investment per employee has fallen over the past decade. The construction sector, as defined by McKinsey, is very broad, including firms as diverse as global infrastructure giants, local house-painters and garage door subcontractors. The evidence of poor construction productivity is widespread. The broadest measure of aggregate construction activity is Annual Value Put-in Place ($1.23 trillion at May 2017 seasonally adjusted annual rate). If that metric is divided by the total hours worked by people in the construction industry and the number is compared across months or years, we have a useful indicator of changes in productivity. Output per hour has dropped by about 13.0% since 2005 and by nearly one-quarter since the late 1970s. A narrower look at productivity notes that in 2016 homebuilders started work on essentially the same number of houses as they did a quarter-century ago, even though there are 36.0% more people working in residential construction now than then. While this suggests complaints about "labor shortages" miss the real issue, it also suggests there has been a severe decline in productivity. Why Has Manufacturing Productivity Grown? Manufacturing is often compared with the construction industry relative to productivity because it's productivity is soaring even while total employment is dropping, and several key factors have made this possible. • Most U.S. manufacturers have adopted high-performance work systems that reduce the need for multiple layers of supervision, while most construction organizations have not followed this model. • "Just in time" materials delivery has made manufacturing much more efficient, eliminating waste and reducing cost while increasing productivity. By contrast, much construction activity is dependent on sequential, often un- coordinated staging of subcontractors. • Most high value manufacturing utilizes outsourcing and coordinated specialty production. Lean construction practices have been tried in construction, but most companies have not adopted the practice at the policy level. • Many of the trades are difficult to automate for example concrete, bricklaying, steel work etc. — tools have improved, but most trades cannot increase productivity through automation Can Construction Productivity Increase? Most construction activity is highly cyclical. Thus, investments in technology and capital improvements that would enhance productivity are typically limited by the rationalization of avoiding fixed costs. Obviously, higher fixed costs increase vulnerability and companies that employ more workers in lieu of capital investments can simply cut their workforces when demand diminishes. However, that strategy inhibits productivity improvements by limiting innovation and automation. A limited number of building firms are experimenting with new techniques, from 3D printing and drones to laser- scanning and remote-controlled equipment (e.g., cranes). Never the less, contractors and subs alike remain reluctant to spend money on the sorts of technologies, from project- management software to mass production, that have revolutionized so many other industries. Construction may be forever subject to the problem of anticipating economic downturns that limit the ability, or willingness, to build higher tech or better capitalized organizations. The aversion to capital investment is both a cause and effect of fragmentation and resistance to change. Most construction firms remain small, project dependent organizations that have little strategic focus beyond completion of the existing backlog. Priority is given to immediate concerns such as generating winning bids, cost cutting wherever possible and assembling and supervising crews. An additional impediment to productivity is the proliferation of rules, regulations and often conflicting building codes. The McKinsey study noted above pointed- out that American counties and municipalities employ up to 93,000 different building codes between them. In short, most construction is highly politicized, which creates delay and continuous compromise of quality and performance for the obsession with lowest price. A narrower look at productivity notes that in 2016 homebuilders started work on essentially the same number of houses as they did a quarter-century ago, even though there are 36.0% more people working in residential construction now than then. While this suggests complaints about "labor shortages" miss the real issue, it also suggests there has been a severe decline in productivity.

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