What should we require from a production system in construction?

Lauri Koskela* and Glenn Ballard**

*Senior Researcher, VTT Technical Research Centre of Finland, P.O. Box 1800, FIN-02044
VTT, Finland, Phone +358 9 4564556, Fax +358 9 4566251, E-mail lauri.koskela@vtt.fi
**Research Director, Lean Construction Institute, 4536 Fieldbrook Road, Oakland, CA
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94619, 510/530-8656, ballard@leanconstruction.org, and Associate Adjunct Professor,

Construction Eng. & Mgmt. Program, Dept. of Civil & Env. Eng., University of California at
Berkeley

Abstract

The paper endeavors to analyze the requirements to be set for a production system in
construction, starting from first principles or, in other terms, from a theoretical foundation. It
is argued that the theoretical foundation pertaining to construction production consists of three
main parts: theory of production, theory of management and conceptualization of peculiarities
of construction. According to present understanding of the theory of production, there are
three views to production, each providing for a number of principles for the production
system: transformation, flow and value generation. The theory of management implies that
those principles are appropriately realized in all of the three generic managerial actions:
design, operation and improvement of the production system. Furthermore, it is not enough to
adopt generic requirements for the production system in construction, but rather it is required
that the peculiarities of construction, such as one-of-a-kind production, site production and
temporary organization are suitably accommodated. Lastly, it is required that all parts and
aspects of the production system are synergistically coupled: the total optimum is sought,
rather than a sum of local optima.
The resulting theory-led requirements to a construction production system are
summarized and compared to typical, present production systems in construction. It turns out
that the present production systems do not - and are not even meant to - fulfill a number of
crucial requirements. It is argued that this is the root cause of the internationally recognized
malaise of construction. Current work aiming at defining and experimenting with a
production system based on theory-led requirements is briefly reviewed.

Introduction

The first task in any productive endeavor is production system design. Several terms are
presently being used to refer to this stage of production. Hayes et al. (1988) define
manufacturing architecture as including its hardware, material, and information flows, their
coordination, and managerial philosophy. Also Rechtin and Maier (1997) speak of
architecting a manufacturing system. Suh (2001) speaks of design of manufacturing systems.
The underlying idea in these examinations is that the production system is an artifact that
should be designed as carefully as the product it is intended to create, starting from
requirements to be set for it.
The authors have previously presented guidelines for production system design in
construction starting from a theory of production (Ballard et al. 2001). The guidelines are in
the form of ends-means hierarchies that progressively answer the question “What should we
do to achieve a goal?”, moving from the desired ends of maximizing value and minimizing
waste to actionable means. The significance of such an ends-means hierarchy lies in the fact

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 such a hierarchy has both a practical and theoretical dimension. It is most practical, because it
provides guidance for designing a production system towards the ends as prioritized.
However, it is also simultaneously an integrative map of our theoretical knowledge on
production systems. As stated in (Heim & Compton 1992), the theoretical foundations in the
area of manufacturing consist, among others, of action oriented operating principles, the
application of which should be expected to lead to improved performance. Thus, the
principles that indicate how ends are achieved through means are core parts of our theories of
production. However, this observation leads to the conclusion that we should explicitly base
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such ends-means hierarchies on the theories of production we have, instead of starting from a
clean slate. Doing otherwise would equal to admitting the total lack of related theories or to
denying the very role of theories existing in the field.
In this paper, the extension of the guidelines presented in (Ballard et al. 2001) in three
directions is discussed. Firstly, the implications of the theory of management are considered.
Secondly, the requirements for the production system design derived from the peculiarities of
construction are discussed. Thirdly, the need for synergy between the different parts and
aspects of the production system is analyzed. The resulting theory-led requirements to a
construction production system are summarized and compared to typical, present production
systems in construction. Current work aiming at defining and experimenting with a
production system based on theory-led requirements is briefly reviewed.

Requirements flowing from the theory of production

The first author has in prior work (Koskela 2000) argued that the theoretical tradition in
production sciences can be integrated into the TFV (Task/Flow/Value) concept of production
Doing so necessarily involves rejecting the popular conception of production solely in terms
of transformation of inputs to outputs. To this conventional view TFV adds conceptions of
production as consisting of flows of materials and information through networks of
specialists, and the conception of production in terms of the generation of customer value.
Based on the TFV concept of production, the most general requirements for a
production system are as follows:
• deliver the product
• minimize waste
• maximize value.
A further decomposition of these requirements has been presented in (Ballard et al.
2001). By way of example, let us consider one further requirement, associated with both
waste minimization and value maximization: reduce variability. An analysis based on
queueing theory reveals that if it is not possible to reduce variability, one or more of the
following have to be accepted: long lead times and high WIP levels, wasted capacity, lost
output. In the context of queueing theory, there are two types of variability (in the meaning of
random variation): process-time variability and flow variability (Hopp & Spearman 1996).
Process-time variability refers to the time required to process a task at one workstation. Flow
variability means the variability of the arrival of jobs to a single workstation.

Requirements flowing from the theory of management

There are three generic actions in the management of production:

• Design (and realization) of the production system
• Operation of the production system in order to get the intended production realized
(operation may be further divided into planning, controlling and correcting)
• Improvement of the production system.

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 These generic actions can be distinguished on the basis of their temporal relations to
the productive act. Design of the production system must exist before the productive act,
operation takes place during the productive act, and improvement can be realized only after
the productive act, when we have been able to observe how the production system actually
behaves.
The theory of management implies that the requirements are appropriately realized in
all of the three generic managerial actions: design, operation and improvement of the
production system. Let us take a look at the case of variability. Firstly, variability should be
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taken care of in the design of the system - selection of processing units and configuration of
flows between them. For example, we can select a reliable and capable subcontractor, even if
his/her bid is not the lowest one. Secondly, variability should be addressed in the operation of
the production system. We need to control the material and work flows in a way that
minimizes flow variability as well as manage the production units in a way that minimizes
process variability. Thirdly, variability should be addressed in improvement. Fact-based
analysis of the occurrence of variability, investigation of its causes and influencing those
causes in operation or design of the production system are needed1.

Requirements flowing from the characteristic situation

There are two ways to approach the characteristic situation of construction as production. One
way is to view the characteristics as deviations from the norm, as peculiarities. Usually
manufacturing (especially mass production) is offered as the norm. The other way is to select
such a generic conceptualization of a production situation that best fits with construction. In
the following, both ways are discussed.

Peculiarities of construction. From the point of view of operations management, there are
three significant peculiarities of construction: one-of-a-kind nature of projects, site production
and temporary organization (Koskela 2000). It has been argued that these peculiarities are
caused by two deeper properties: fixed position manufacturing and rootedness in place
(Ballard & Howell 1998b). The essence of production management in construction is the
question how these peculiarities are treated when designing, operating and improving
production systems.
By way of example, let us consider how these peculiarities impact the structure and
behavior of material flows (Koskela 2000):
• There are three flow types, (material flow, location flow and assembly flow) in action
on site, in contrast to two types in a factory (material flow, assembly flow)
• There is a high degree of inherent variability, due to construction peculiarities,
associated with these flows
• Production in construction is of assembly type, which is inherently vulnerable to input
flow variability
• Construction is by nature prototype production, normally carried out for debugging
errors in designs or production plans
• Unlike the situation in a factory, a part can be simultaneously at several workstations,
leading to work in suboptimal conditions: this is a waste type characteristic of
construction.
It is not enough to adopt generic requirements for the production system in
construction, but rather it is required that the peculiarities of construction, such as one-of-a-
1
At the level of methods, the Last Planner System for production control (Ballard 2000) is geared towards
stemming both flow and process-time variability in the operation of a production system as well as towards
minimizing variability in the improvement of a production system (Koskela 1999, Koskela & Howell 2002a).

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 kind production, site production and temporary organization are suitably accommodated.
Thus, we know major generic sources of variability in construction, and have to find ways of
handling it.
Which, then, are the options? Firstly, we can design the production system so that
peculiarities and problems due to them are eliminated. In practice, we can eliminate the
peculiarities by adopting such techniques as pre-engineered products, prefabrication and long-
term alliances (Table 1). In this way, construction is transformed into manufacturing. On the
other hand, there are structural solutions that accept the peculiarity but modify the production
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system so that the detrimental impact of the peculiarity is alleviated.

Peculiarity Problems Structural solutions Structural solutions that

which eliminate the accept the peculiarity but
peculiarity alleviate its impact
One-of-a-kind No prototype cycles Pre-engineered Set up artificial cycles
nature of products (mock ups, simulation)
projects
Site production External uncertainties, Prefabrication Use enclosures etc. for
task interdependencies eliminating external
uncertainty
Multi-skilled work teams
Temporary Unreliable exchange of Long-term alliances Team building at the start
organization information across of the project
organizational borders

Table 1. Peculiarities of construction, problems they cause and countermeasures

(modified from (Koskela 1992)).

However, the elimination of a construction peculiarity has a price: the characteristics of the
production system may change so that new problems emerge, even if the problems related to
the peculiarity are alleviated or eliminated (Koskela 2000). Thus, pre-engineered products
may restrict the freedom of selecting building design solutions. The total flow of
prefabrication tends to become longer than in the case of in situ construction. Long-term
alliances prevent utilizing the competition between suppliers. On the other hand, there are
situations where the elimination of a peculiarity is simply not possible.
Thus, in most cases the impact of peculiarities cannot be totally eliminated: the level
of variability is high and the production situation is vulnerable to variability. In consequence,
the role of operations and improvement accentuate. Production should be operated so that
variability propagation is cut back and the disadvantages of penalties of variability are
minimized. Also, the production system and its operation should be improved; in particular
variability should be reduced.

Construction as product development. However, there is another way of seeing construction.

Such a different view might start from product development and realization as the
fundamental form of production system, with primary emphasis on value generation. Thus we
accept the peculiarities as structural characteristic, which emerge depending on the inherent
nature of projects (Groák 1994), but nonetheless aim at operating and improving the
production system towards the primary requirements. This view on construction has rarely
been explicitly considered, and has to be further clarified in future research.

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 Requirements flowing from the need of putting all together

The three views on production (T, F and V) are aspects of the same phenomenon, and thus in
each managerial situation, all the aspects should be acknowledged. In view of the interaction
between principles, we have the following decision problems:
• Balance: In case of contradictory principles, there should be a balanced decision, i.e. a
trade-off (Silveira & Slack 2001).
• Synergy: The synergy between principles should be taken into account and utilized in
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managerial decisions.
• Contingency: It depends on the situation, which view or particular principle becomes
critical for success. All aspects have not necessarily the same weight in each situation.
Another dimension is the integration of design, operation and improvement. The
example of the Toyota Production System suggests that these functions should be tightly
coupled and synergistically applied (Koskela 2001). This means that the design of the
production system should facilitate its operation and improvement. For example, the
production system can be designed to be transparent, which facilitates both operation and
improvement (Formoso et al. 2002). The operation phase should provide empirical data on
the actual behavior of the production system for the improvement phase. In turn,
improvement should address both the operation and the design of the system (Figure 1).

Facilitates
Facilitates
Provides
data
Improve-
Design Operation
ment
Improves
Improves

Figure 1. Coupling of design, operation and improvement of the production system.

Summary of requirements

Now we can summarize the requirements discussed:

A. A production system in construction should be designed to realize at least the following
requirements: delivering the product, minimizing waste and maximizing value.
B. All managerial functions: design, operation and improvement, must contribute to the
realization of these requirements.
C. The generic peculiarities of construction, as well as the situation wise characteristics, must
be taken into account in the realization of these requirements.
D. All parts and aspects of the production system must be integrated: synergies must be
utilized, and contradicting issues must be balanced.
Regarding variability reduction, the requirements A, B and C are illustrated in Figure
2 (the requirement D is a meta requirement; it applies to every other requirement).

Comparison

Doubts could be presented whether the analysis carried out, being on a rather general and
abstract level, can as such be practically useful. However, comparison to typical, present
production systems in construction reveals interesting issues.

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 A Maximize value Minimize waste Deliver the product

Reduce variability
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B
Reduce variability in Mitigate variability Address variability
production system design in operation in improvement

C
Eliminate or reduce Apply concepts, principles and
peculiarities of construction tools of product development and
(”construction as manufacturing”) realization

Figure 2. A partial requirements hierarchy for production systems in construction.

Are all primary requirements covered? Prior research (dos Santos 1999, Koskela 2000)
indicates that both the prescription and practice of construction management covers
systematically only the requirement "Deliver the product". Project planning in construction
has focused primarily on organizational structuring and creation of work breakdown
structures that divide the work to be done into manageable chunks. The requirements
"Maximize value" and "Minimize waste" are left for informal and unsystematic treatment in
production.

Are all managerial functions contributing to requirements realization? In practice, the

emphasis is on production system design, and operation and improvement are weakly
realized. Regarding operation, Ballard and Howell (1998a) argue that construction has had
no theory of production control proper: how the contractor, subcontractor, or department gets
the job done is their own business and is irrelevant as long as they meet their "contractual"
commitments. The proliferation of subcontracting (International Labour Office 2001) seems
to have contributed to the neglect of systematic management at the level of operation. Bennett
and Ferry (1990) find that "...the specialists [contractors] are just thrown together and told to
sort things out between themselves". Midler and Jouini (1996) observe, in their case studies,
the weakness of improvement by feedback in construction. This is corroborated by Fischer
(1997). Koskela and Howell (2002b) note the lack of a function related to learning and
improvement in the present doctrine of project management.

Is the characteristic situation of construction taken into account? Countermeasures to

peculiarities are increasingly and customarily done. However, the countermeasures, typically
realized at the level of production system design, are undermined by the weakness of the
operation and improvement functions. As a result, such initiatives as industrialization,
partnering, design/build, and others have had only a marginal impact (Koskela, forthcoming).

Are all aspects and functions integrated? Generally, integration is hindered already, on the
one hand, by the relative neglect of the requirements "Maximize value" and "Minimize

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 waste", and, on the other hand, by the weakness of management at the level of operation and
improvement. However, under the conditions of poor integration, even seemingly
insignificant decisions on system design may increase variability, as illustrated by the case
described in (Thomas et al. 1999):
There were a number of fabrication errors with steel members. This may have been because the
fabricator subcontracted the detailing of the shop drawings, and the quality of these drawings
seemed subpar.
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Summary of comparison. It turns out that the present production systems do not - and are not
even meant to - fulfill a number of crucial requirements. It is argued that this is the root cause
of the internationally recognized malaise of construction.

Conclusions

It has been shown that a requirements hierarchy for a production system in construction, even
in a partial form and at a general level helps us to analyze the present shortcomings of
construction. Such a hierarchy presents the big picture, on the basis of which we can ensure
that all options for creating an optimal production system are being utilized. Once again, it is
true that "you get what you order". If you miss an important requirement, it is not probable
that it would be realized by itself. Thus, the hierarchy can be used as a diagnostic device when
evaluating existing production systems.
However, there are other practical uses for requirements hierarchies, as outlined in
(Ballard et al. 2001):
• as a tool for selecting priorities of goals on the same hierarchy level
• as a basis for metrics
• as a checklist in production system design
• as a strategy map for a company's production system development
• as a template for simulation.
On the other hand, a requirements hierarchy is an interface between theory and
practice: it encapsulates the practical prescription of our theory. The work on requirements
hierarchies reminds us in a painful way how weak and fragmented the theoretical foundation
in operations management is in general and consequently also in construction. Much more
research is needed for creating a body of knowledge, where tools, methods, principles and
concepts are integrated and empirically validated. First steps in this direction have been taken,
for example, in (Ballard et al. 2002, Koskela et al. 2002), where a new project delivery system
is presented, with the ambition of the realizing such requirements that usually are ignored.

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