A not-very-funny thing happened on the way to the site – you wasted £3bn. That’s the amount poor logistics costs construction every year. Rod Sweet asks: what can be done about it?

A new report has put a price tag on construction’s allegedly appalling logistics — £3bn a year*.

Highly-paid tradesmen waiting for materials, stockpiled goods damaged or spoilt from being shifted on site, and things delivered to the wrong place because of poor communication: these are just some of the common scenarios that are costing the industry dear, according to the logistics task force of the Strategic Forum.

And apart from wasting money, poor logistics is bad for the environment, bad for safety and bad for the industry’s public image, the task force concludes.

So what do we do?

Well, not all that much, according to Strategic Forum chair Peter Rogers.

“The good news is that we do not have to make large changes in order to obtain considerable benefit,” he says.

That said, the report provides clear action for all parties in the construction supply chain.

Clients should ask contractors for a Logistics Plan at the start of a project, and pressure all parties to sign up to it. Further, the task force wants the Construction Clients Group to give this Logistics Plan a mention in its Client’s Charter, and write a best practice guide.

Designers should draw up a process map outlining the flow of materials and ways of minimising stockholding. However, the task force admits that maybe quantity surveyors would be better at this.

Professional institutions should press for logistics CPD modules, and universities and colleges should teach it.

Construction managers should take responsibility for the Logistics Plan, and make sure specialists chip in, spelling out exactly how they’ll make best use of skilled labour on site.

Manufacturers, as well as contributing to the Logistics Plan at the start of a project, need to make the costs of transporting materials and components transparent, instead of hiding it in the overall price. If the price of logistics is identified, they can work with customers on reducing it.

The report outlines the principle barriers to improving construction logistics.

Every project is a one-off for the people involved. The team comes together, then breaks up. That means it’s harder to establish “standard” ways of doing things.

It’s not clear who’ll benefit because construction is so fragmented. There may be £3bn of savings to be had, but by whom? Will the parties bearing the brunt of change profit?

There is little trust in the supply chain. Would you really trust a builder’s merchant to deliver the sand at the exact time you needed it?

We don’t put a price on logistics. All parties hide it because that’s advantageous in a tendering system. So we’re not used to scrutinising the cost to bring it down.

There is not enough time budgeted for planning logistics at the start of a project.

Still, the task force wants believes these barriers can be overcome. It wants the Construction Confederation to get together with manufacturers and specialist contractor bodies to make improvements. It also wants CITBConstructionSkills to develop training in the techniques of logistics.

The task force believes that savings of up to 30% can be realised if the industry gets its act together, but is calling for more case studies to demonstrate the benefits. Bovis Lend Lease made its Mid-City Place project in London a good example for logistics and reported 35% less waste, 675,000 staff hours without a reportable accident and 11 weeks shaved off the programme.

The task force recommends greater use of IT as well. As a typical example, the CITB attempted to trial bar codes for tracing panes of glass but, ironically, the supply chain partners couldn’t get organised to do the pilot.

How the food retail industry did it

The Strategic Forum’s logistics task force says we should learn from retailers. Forty years ago, logistics in this sector were nearly as chaotic as they are in construction today. But consolidation meant the rise of retail giants who stopped messing around with middlemen and started sourcing goods directly from producers and manufacturers.
Supermarkets deal in high-volume, low-value goods and any way of cutting the cost of getting these goods to consumers had to be scrutinised closely. They pioneered consolidation centres, electronic ordering and up-to-the-minute inventory monitoring.

Now, each big retailer is a sizable distribution business in its own right, according to Tarun Patel, logistics programme manager for the food retail thinktank IGD.

Like a bowl of hungry goldfish this competitive community snaps up any advance in technique or IT. While to this day construction can’t get its act together sufficiently even to trial barcodes, food retailers were baying for them in the 1970s.

The Next Big Thing is radio frequency identification tags (RFID), small chips that contain data about the product, which can be read by RFID readers. The big advance on bar codes, according to Patel, is speed and accuracy of data collection. With bar codes, operatives faced with a pallet of boxes have to scan one and then do a count, while a pallet of boxes with RFID tags can pass through an RFID gateway that registers all the items instantly.

Strangely, retailers are cautious about RFID. The lack of take-up has delayed the mass production of tags, so they’re still pricey. Observers have been hailing the tipping point for a decade now, but the barcode is still king.

Are “consolidation centres” the answer?

Four construction projects in the City of London are about to get their first taste of “grown-up” logistics as a consolidation centre trial gets underway this month.

The sites will take delivery of customised packs containing everything trade contractors need to keep them busy the next day as part of a pilot undertaken by logistics specialist Wilson James, developer Stanhope and contractor Bovis Lend Lease.

With part-funding from Transport for London, which is keen to reduce emissions and the number of lorries grinding through London’s streets to construction jobs, Wilson James has taken a three-year lease on an existing distribution centre off the A2. It will take bulk deliveries from all over the world, and warehouse operatives will assemble the daypacks working from orders submitted by site managers 48 hours in advance.

“A normal construction project can take up to 100 deliveries a day, because the lorries are only part loaded, but we will be sending between 15 and 20 a day,” said Wilson James MD Gary Sullivan.

On-site logistics teams will take the packs right to the work faces. The drivers will also take away pallets, cable drums and other waste for return to the manufacturers.

“Drivers will like this because they won’t be wasting time looking for the sites, waiting to be unloaded, or doing another circuit because the site isn’t ready for them. They’ll pull up to the consolidation centre, unload in 10 minutes, and be off,” Sullivan added.

Wilson James operates a similar consolidation centre at the Terminal Five project at Heathrow airport.

Source

Construction Manager

Postscript

* Total UK construction output is £100bn per year. Site operations count for 30% of that (£30bn). BSRIA research suggests 10% of a worker’s day is wasted due to poor logistics (£3bn).