5 Lean Principles Construction Firms Can Steal from Manufacturers for Modular Construction

Are you looking to improve the speed, efficiency, and reliability of your next project? More construction firms are looking to modular construction to fill that need. Also known as offsite construction, panelization, and prefabrication, modular construction is the offsite manufacturing, fabrication or assembly of standardized building components, which will later be installed at a construction site.

This is more like an Engineer-to-Order (ETO) manufacturing model than the traditional construction Build-to-Order approach. An ETO model is more complex, requiring process planning, inventory management, and manufacturing best practices to ensure quality and to meet project timelines.

Learn how lean manufacturing strategies combined with digital solutions, like Dynamics 365 Business Central, can help you make more informed and data-driven decisions in your next modular construction build.

Why Modular Construction is Sweeping the Construction Industry

The past several years of record-high construction demand, new builds, and tight deadlines amid a dysfunctional supply chain have placed intense pressure on construction firms.

One way that companies can overcome operational challenges like these is to take a page from the manufacturer’s playbook and implement an assembly-line process into their project builds. By manufacturing modular and prefabricated panels and components offsite and then assembling them onsite, construction firms can achieve faster and more profitable project builds.

In fact, a recent McKinsey report stated that modular construction projects have already established a solid track record of accelerating project timelines by 20%-50%, saving time and resources.

Not only does this practice allow construction companies to operate more efficiently, but it also results in stronger construction components as each part is engineered to exact specifications. What’s more, some builds require greater creativity due to space constraints but have been limited by traditional construction methods. Since modular components are constructed to exact specs, they offer architects and builders limitless design opportunities, greater freedom and flexibility in their projects.

However, as more construction firms look to embark into modular manufacturing, many are experiencing unexpected bottlenecks when it comes to executing offsite builds.

Our recent survey of 113 senior construction professionals reported the four main factors holding back their ETO projects were lack of automation, ineffective material resource planning, costing, and real-time shop floor data collection. And just 1 in 10 construction executives reported that their current enterprise resource planning (ERP) provides full visibility and analytic insight into offsite ETO manufacturing.

View the results of that survey.

As uncertainty and complexity in the building sector continue, some construction firms are experiencing relief through the implementation of lean manufacturing processes commonly used in manufacturing plants.

What is lean manufacturing?

Lean manufacturing is a set of production processes that maximizes productivity while minimizing waste within a manufacturing operation. It’s a continuous improvement principle that simplifies operational processes, making them easier to understand, perform, and manage. Examples of lean manufacturing processes in action can include communication tools like these:

  • Point-of-use Kanban systems (visual cards denoting the status of production)
  • Value-stream mapping (visual map of manufacturing processes)
  • 5S visual management tools (color-coding/floor/wall marking/bins)
  • Total Productive Maintenance (systems that predict, prevent, and automate equipment or tool maintenance)

In addition to better communication, some of the benefits that lean manufacturing can provide include:

  • Reduced waste
  • Increased production speed
  • Improved safety
  • Better performance and quality
  • Reduced costs and better financial tracking
  • Fewer errors and rework

5 Stages of Lean Manufacturing that Can Improve Modular Construction

We often think about the use of lean manufacturing principles at work within large manufacturing facilities but may overlook how it can improve communication and efficiency in modular construction.

With proper lean management strategies, construction firms can essentially mistake-proof production and spot defects before they become a problem on the job site. However, because modular construction takes place in multiple locations, it has slightly different lean management requirements than one may see in a manufacturing facility.

Here are five ways the construction industry can implement lean manufacturing strategies in modular projects, according to a recent review published by the American Society of Civil Engineers:

  1. Lean Design Management involves the use of standardizations to minimize customizations and complexity in product design and layout.
  2. Lean Supply Chain Management involves the use of inventory management systems and software to track raw materials and supply usage across your business. Additionally, data is used for better planning with suppliers to alleviate supply shortages, extended lead times, and shipment delays.
  3. Lean Production Management uses lean strategies such as value mapping to create and analyze production workflows and work in progress, improve safety, and create a more efficient manufacturing space.
  4. Lean Transportation Management monitors logistics such as travel distance from the manufacturing facility to the construction site, weather conditions, site access, and road congestion to create more reliable and cost-effective storage and transport.
  5. Lean Site Assembly Management implements the use of 5S principles to reduce manpower, improve ergonomics, spot defects, and improve production flow during assembly.

Note: Traditional BTO software systems are often limited in their capabilities to execute the above items. For instance, most construction software solutions are not built to manage inventory, manage machines and work centers, or manage the transportation and assembly of offsite components. Choosing the right software solutions can make or break your lean strategy.

Driving Lean with the Right Technology

The construction industry has long been considered a conservative industry that is slow to adopt new technologies. As a result, the industry has lagged many others when it comes to efficiency, productivity, and sustainability.

However, as uncertainty in the industry continues, construction companies are beginning to invest in and adopt digital technologies that enable them to embark on new ventures like off-site modular manufacturing.

But if a construction company wants to operate with the same level of operational efficiency as a manufacturer, then they will need to invest in applications and technology that correspond to those of a manufacturer. Unfortunately, many construction companies try to get by with standalone systems for accounting, job costing, scheduling, and servicing. Because these systems lack connectivity and communication between applications, it often results in significant insight gaps and substandard decision-making capabilities.

To get the most out of these projects, construction firms must integrate technologies that help them successfully employ lean management. Solutions such as Microsoft Dynamics 365 Business Central can centralize critical business data, analyze that data, and offer customizable reporting dashboards that help businesses make better operational decisions.

By going digital, firms can do away with data silos to bring much-needed visibility in the process and improve operations – all with the goal of reducing inefficiencies, streamlining processes, and improving workflows.

How Microsoft Dynamics 365 Business Central Supports Modular Construction

Dynamics 365 Business Central is a powerful, all-in-one ERP solution designed to future-ready your construction business through industry-specific solutions for:

  • Accounting and invoicing
  • Compliance and regulatory
  • Customer resource management (CRM)
  • Inventory management
  • Cloud-based mobile applications
  • Planning and forecasting

Business Central includes manufacturing functionalities within its Premium Licensing. Those include robust functionalities that construction firms can take advantage of, including:

  • Production Orders
  • Production Bill of Materials
  • Version Management
  • and Work Centers
  • Basic Capacity Planning
  • Finite Loading
  • Material Resource Planning

Sikich’s Engineer-to-Order solution goes further, with features such as:

  • Project management capabilities
  • Costing
  • Hybrid production
  • Greater transparency across projects, costs, vendors, and schedules
  • Integration with AutoCAD for BOM and routing information

You can also extend Business Central’s core functionality with extensions and integrations to suit your modular construction business needs. With the right data, your lean management strategies can yield greater efficiency and profitability in your next project.

Next Steps

Sikich’s Engineer-to-Order solution, built on Microsoft Dynamics 365 Business Central, is a powerful tool that can help the construction industry make informed and strategic operational decisions. By working alongside a trusted partner like Sikich, you receive ongoing support for employee training, preparation of existing systems for migration, and assistance on any post-launch issues.

Contact one of our specialists to learn more about Microsoft Dynamics 365 Business Central and how a personalized solution can help make your construction, including modular construction, business more efficient and effective.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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