User:Christian Rojas Ponce/sandbox

Innovative Management Concepts applied into the Construction Industry

The context of VALUE MANAGEMENT (VM) is to translate the needs and wants of those with an interest in the building into functions; that is, what the users need and want the building to do, therefore flexibility is key to achieve a good practice of VM.

One of the biggest mistakes that are made within VM is to confuse it with cost reduction. It is a design process instead. The fact that cost reduction often comes about as a result of value management is more a consequence of it than an objective.

Finally, this tool is of great importance for every infrastructure projects where their benefits are either short-term or long-term oriented. The benefits of these projects such as highways, hospitals, etc, that are constructed with the aim of contributing in the development of a city or a society, must not be measured from the constructor perspective, nor from the client’s but from the user’s position (the public transport, the handicap people, the citizen, etc). Although the cost of erecting a high standard highway or hospital applying the value management concept could increase in its initiation stages, all that investment is paid back due to improving the cost-of-operations systems, minimizing failures and future costs and it could even result on savings from 10% to 25% on each project[i].

CONSTRUCTABILITY is about managing the deployment of resources to their optimum effect. Although this concept has been explored some decades ago, yet it has not been fully put in practice, as the other construction management concepts.

There are countries from emerging economies that due to the lack of communication between the designers (consultants) and the contractors (builders), there cannot be distinguished any kind of constructability criteria. Unfortunately, in this media most of the procurement methods used are just of the traditional type, where the tendering process awards to a team the design and to another team the construction of the project. There are no agreements in ways of improving the easing of construction, the renewal of the project, or any added value that could arise in its life cycle. On the top of that, corruption, a social issue in those countries, damage deeply the industry.

Constructability is not just achieving a single construction process through well planned designs but also has to do with the quality of the outcome and goes beyond the construction or design, up to the occupancy and maintenance of the project or building.

BENCHMARKING has not yet been fully applied. Many researches have found that its principles underlies in quality management theory. It has to be understood that simply identifying the best practices without importing them to ones own organization is not benchmarking and it has to be recognized the threats and challenges that this might implicate such as time constraints, competitive barriers, lack of both management commitment and professional human resources, resistance to change, poor planning and short-term expectation as key problems[ii]. Any innovative technique has always struggled to achieve its goals on its first steps since maturity has to come to its conception among the scholars and the practitioners. Garnett for example assures that benchmarking would be useful to the industry in achieving up to 30% cost reduction[iii] due to its effectiveness. We tend to oppose to this criteria since such a cost reduction would never be attained by focusing just on a single technique. We strongly think that such a reduction is feasible but requires a broad, exhaustive and complicate process of REENGINEERING that may involve new TOTAL QUIALITY MANGEMENT techniques and the implementation of new frameworks that could link all these management tools. The main objective of this dissertation is to contribute on its development.

Although the essence of BPR is the novelty of its approach, the use of management tools such as Total Quality Management, Benchmarking and Lean construction are essential components of the reengineering approach. Many surveys in the early 1990s found that nearly 70% of BPR initiatives had actually failed[iv] or delivered less than they had promised. Such poor outcomes can be attributed to several reasons such as expecting too much too soon, undertaking projects without a comprehensive cost-benefit analysis, lack of expertise on redesigning a set of related activities, and lack of partnership between internal information technology (IT) department and other parts of firms[v]. Many other factors have also been mentioned, and what we consider a pitfall is the lack of congruence in BPR’s concept perceived by the practitioners. The concept says that it is a revolutionary, radical process. Since it is “radical” most of the teams that carry out BPR in their organisations expect “radical” results too soon by following a recipe. We strongly believe that the result might not come radically but the “decision to change”. We have mentioned before that reengineering is a fundamental process that must be approached as a study of a system as whole. No system is to change by focusing on individual sections or individual sciences. Reengineering, to our understanding, is the most powerful and abstracted tool for management changes. It encompasses in its structure every other management tool such as VM, BM, constructability, customer satisfaction and profits through a sustainable strategy.

Total Quality Management is not considered anymore as an innovative measure in order to improve an organisation’s performance. It has become a must-implemented philosophy which allows us to keep apace with the competition. In this 21st. century most of the companies have acquired tools and methods to improve their end products’ quality. This might be the mistake of many of those that failed; to perceive TQM as a method and not as a philosophy, which involves different business processes related one to the other. To apply TQM is a decisive step in an organisation’s cycle. It could lead to an improvement on its systems and as a result an improvement in its financial performance, increase of its market share, development of a company’s culture and sustainable strategies. On the other hand, if it is not implemented successfully, it could lead to many cultural, social and managerial problems rooted in the resistance to change by the employees due to lack of awareness of this philosophy. Commitment is a main factor that plays an important role at any radical or gradual change, at all levels, thus TQM is not different and needs to be managed carefully. In contrast of reengineering processes, TQM does not expect quick changes, or immediate results, but can be perfectly involved with an evaluation and radical change of processes and systems.

SUPPLY CHAIN MANAGEMENT SCM is basically a concept that can only be applied when business relationships between actors along the chain are fully understood. Throughout all we have seen, we can realize that business relationships between customer and suppliers largely rely upon the relative degree of power that suppliers have within their own market. This may be the reason of the new importance that has been given to SCM since just two decades ago. A new vision of SCM is required within the construction industry. It has to be perceived as a different way of competing in the market that falls between transactional type relationships and acquisition and assumes a variety of economic organisation forms. In this way special attention must be paid to the structural market forces that underpin the supply chains and their impact upon the nature of the competition within those markets that tend to impact directly on the relationships between customers and suppliers. This competitive environment affects directly to the procurement methods and the sourcing strategies that one organization could adopt.

Construction industries struggle to create core competencies that can provide them a competitive advantage among their environment. The only way is looking after their product’s quality. Being able of coordinating and planning effectively their supply chain would contribute significantly to achieve this end.

PARTNERING is not just about high ideals and creating an atmosphere of mutual trust; it also has to do with having good organisational systems in place and emphasising tasks of a routine nature, such as the keeping of proper records. It has not to be assumed that all signatories to a partnering charter will be winners. The concept of alliancing, which has been described as “partnering underpinned with economic rationalism”, is an attempt to solve this dilemma.

A continuous barrier for these two philosophies is the clients’ expectations of attaining the lowest price for a project rather than maximising value. They just focus on one short-term benefit that is a potential 30% saving of total costs. As a consequence they insist that Main Contractors use a competitive tendering process to secure subcontractors. Any the procurement or tendering process be selected, the main criteria of setting up a partnering or alliancing relationship must not be influenced by the price but by the strengths and skills each party can contribute to the project. Relationships based on price or performance metrics tend to be misleading since they are not focused on pragmatic objectives. German philosopher Ludwig Wittgenstein family-resemblance’s concept regarding alliancing is the ideal framework within these relationships, however this implicate a mental evolution from all the participants in the deal. It can be attained by pursuing a change in mentality and innovating through systems thinking approaches.

RISK ANALYSIS may depend on the Manager that is in charge. It extensively depends on what sort of person the Risk Manager is, either a risk taker, or a risk avoider. It also depends on the situation; it has to be analyzed carefully and thoroughly. The decision made usually depends on the decision criterion and can be different for different criteria.

The issue here is not to have a Risk Manager better than other because is a risk taker or plays safe, the issue is to have a Risk Manager that foresees  possible events that can harm the organisation, and the one who takes actions in advance to mitigate these risks. This by no means, implicates that with these measures, risk will be reduced to Neil. Unexpected events can still occur, but the point is to be prepared for this. That is all about, to be fully aware of the environment, foresee potential problems and generate contingency plans to mitigate their effects on our project or organisation.

[i] Bowen P. Edwards P. Cattell K. Jay I. The awareness and practice of value management by South African consulting engineers: Preliminary research survey findings. International Journal of Project Management xxx (2009) xxx–xxx

[ii] Kozak M. What is Benchmarking? Understanding its philosophy. Retrieved September 09, 2006. Available from website: .

[iii] Garnett N, Pickrell S. Benchmarking for construction: theory and practice. Construct Manage Econom 2000;18(1):55–63.

[iv] Kleiner A. Revisiting reengineering. Strat Business 2000;20:27–31.

[v] Martinez EV. Successful reengineering demands IS/business partnerships. Sloan Manage Rev 1995;36(4):51–60.