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Come Over to the Demand Side


A smarter approach to labor management

I started my construction career over 20 years ago as a building scientist. Advanced energy efficiency was primarily pursued by implementing high-efficiency systems like high-SEER HVAC, heat pumps, windmills, photovoltaics, and geothermal.

This supply-side approach to energy management, although intuitive, is costly, and limited in its ability to reduce energy costs. Efficiently supplying a huge energy demand requires sophisticated, expensive systems.

A more cost-effective method to address building energy use is by starting from the demand side by reducing the amount of energy required by the home in the first place. Measures like passive heating and cooling, space optimization, air sealing, and super-insulation dramatically reduce the building’s demand for energy, thus reducing the need for expensive supply systems.

Similarly, in a constrained environment, construction labor is commonly addressed from the supply side, through measures such as recruiting, training, PR, and incentives. Like efficient energy supply systems, these measures are often complex, difficult, and expensive to implement effectively, and still seem to be insufficient in supplying the demand.

As with energy, labor management is more effectively addressed from the demand side.  Reducing the demand for labor makes supplying that demand easier. It’s then less necessary to swim upstream against the trends of aging out of the older generation and changing interests of the younger generation.

RELATED: How jobs-to-be-done theory helps builders do more

The major methods to address labor from a demand perspective —the “air sealing and insulation” of labor, are process optimization, standardization, and automation.

Optimize – Eliminate as much waste as possible from a process. In every process, there are activities that add value for the customer, and activities that do not (Non-Value-Add, or NVA). Identifying then reducing or eliminating NVA activities streamlines the entire process, removes bottlenecks, and significantly reduces the overall labor time required to complete the process. Methods such as value stream mapping, spaghetti diagrams, fishbone diagrams, and 5S are commonly used to optimize processes.

Standardize – The next step to labor demand reduction is standardization: to establish, codify, and publish a consistent form, or standard, for how the process is to be executed. A standardized process can be effectively followed by anyone to produce quality outcomes. This enables more flexibility in labor qualifications and availability. In addition to SOPs and written process standards, one highly-effective form of construction process standardization is prefab/modular construction. By conducting certain processes in a controlled environment, with manufacturing-like standard procedures, the vast majority of the work can be done by even inexperienced workers who’ve been trained in a specific, simple, standardized task.

Automate – The ultimate demand-side measure for labor management is process automation. When a process has been sufficiently optimized and standardized, it can eventually be turned over to a non-human “worker,” e.g., robot, software, etc. This allows your employees to spend their time and higher reasoning accomplishing more complex, higher-value tasks. One word of caution regarding technology though: In my experience in construction, technology is very frequently used as a crutch, or a substitute for process optimization and standardization. Implementing technology in a sub-optimized process will only speed up your bad results, while costing you a lot of money. I believe the bad experiences that result from this cart-first technology approach are a major reason for builders’ distrust of technology and automation.

As with energy, by first reducing your labor DEMAND through process optimization, standardization, and automation, you can drastically and permanently reduce your cost to SUPPLY the labor you need.

Yes, you’ll always need skilled tradespeople. But if you can build a quality house at half the labor cost of your competitors by sidestepping the labor shortage problem altogether, you’ve created a sustainable competitive advantage.

And isn’t that what we’re all looking for?



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