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Can Lean Construction Help Decrease Late Payments?

Can Lean Construction Help Decrease Late Payments?

April 6, 2021

The construction industry is vast. From start to finish, it includes initial planning to building to marketing and selling. With a team of architects, designers, contractors, engineers, and real estate agents, even just one project includes countless professionals. As the number of participants increases, businesses and individuals may see repercussions.

Overproduction, a lack of communication, and poor timing or planning — these issues are some of the most unproductive and harmful. They could cause a domino effect. Poor planning, for instance, can lead to structural issues that will inevitably need fixing immediately or down the line.

However, payments are a subtler topic that sees ripples from poor construction practices.

Payments keep the industry going. On an individual project, you could be working one day and waiting for parts to come in the next. What’s the holdup? If late payments occur, then supply levels drop and the entire process slows down. In the era of constant innovation, this kind of sluggishness is unacceptable.

The solution is lean construction. This methodology emphasizes increasing communication and collaboration while decreasing waste of all kinds. With the right execution, you could see lean construction decrease late payments.

The Values of Lean Construction

Lean construction emphasizes the importance of resources. Time, money, energy, and physical materials are all key elements for construction. When these factors go to waste, the industry is no longer productive and impactful. Instead, lean construction puts forth the idea that those resources need a collective commitment from everyone in the field.

To dedicate yourself to lean construction values, you can prioritize communication and collaboration. These two areas are the most important for eventually decreasing late payments. Constant feedback across businesses is the key.

Lean construction involves cutting back on waste, which starts with more sustainable and practical investments. Think of this scenario — a developer wants to turn a plot of land into an apartment complex but the urban planner puts forth the idea to include green spaces instead of developing the whole plot.

This form of communication reduces the number of materials to purchase and, therefore, decreases waste. Ultimately, having fewer materials compels businesses to make cost-effective and more manageable purchases.

This idea is the basis for how lean construction can decrease late payments. However, it’s first critical to expand on why solutions for late payments are vital.

Why Late Payments Harm the Industry

You may be familiar with how many steps and moving parts construction requires, like transportation, inventory, personnel of all backgrounds, and countless deals, purchases, and payments. Of course, it’s unlikely that each phase or transaction will operate smoothly. When someone pays late, it can cause a chain reaction.

One late payment may hold up the rest of the project. You won’t be able to move forward with building if the manager hasn’t purchased the correct materials because the developer is late in paying them. The same concept applies to independent contractors and other project participants.

People can end up quitting if late payments affect them enough. Others may stop putting as much effort into the project if they aren’t receiving the funding they need or aren’t getting paychecks. This will drag any form of construction down and cause a waste of otherwise productive time.

How Lean Construction Can Help

The ripple effects of late payments can sometimes be subtle, but they always require solutions. Lean construction provides those answers in a few different ways.

  1. Communication and Collaboration

    Communication and collaboration are the two pillars of lean construction. At its core, this type of construction and work ethic tries to create as much innovation and economic upside as possible. Without these, you wouldn’t be able to branch out and find startups or individuals with new ideas.

    To begin, start by making sure you communicate clearly with your client and understand their values. Would they rather stay on-budget and go over-schedule? Are high-quality materials more important than keeping costs low? Understanding your client’s expectations and desires from the beginning will ensure that you plan the project correctly from the beginning.

    Communication is vital once the project starts as well. Specifically, each member of the team needs to stay in contact regarding every idea and decision. The decisions could be something as routinary as transportation methods or something as foundational as materials — pertinent stakeholders must be in-the-know regardless.

    That way, if someone has a more cost-effective or less wasteful idea, they can suggest it and everyone can provide feedback. Once you have this dynamic down, you’ll notice the operation will run more efficiently. People know exactly what they have to do and how much it will cost. When everyone is in agreement, there is better clarity on all levels of the project, and this promotes timely payments across the board.

    Sometimes, communication and collaboration can eliminate costs altogether. For instance, with prefabricated construction in a controlled environment, you won’t have to worry about excessive transportation costs to and from the worksite. It all happens in one spot, thanks to lean construction standards.

  2. A Focus on Sustainability

    Since lean construction focuses on cutting out all kinds of waste, sustainability is inherently a game-changer. The materials that ultimately go unused and tossed away are a costly and environmentally detrimental form of waste. The negative impacts increase if these materials are unsustainable or if their fabrication process emits pollution.

    Concrete is one instance. Though a staple in the construction industry, the cement-mixing process uses significant amounts of water and gives off carbon dioxide emissions. Innovators in the industry are now turning to more sustainable alternatives, like fly ash. Finding creative and less harmful methods of building is the end goal.

    From innovation and creativity comes a commitment to the craft. You want to push boundaries and expand upon what’s possible for the industry — especially when construction accounts for 39% of energy-based carbon emissions.

    Ultimately, this focus on sustainability brings about better economic outcomes. Renewables like solar and wind are decreasing in cost quickly, reaching fossil fuel-level affordability. In the longer run, sustainability is inexpensive and leads to easier, on-time payments. Plus, you can work with startups that are eager to get in the game and ready to pay on time.

  3. Taking Accountability

    Lean construction is a practice, and practices require commitment. It’s not always likely that everyone will stick to high standards and expectations of communicating, collaborating, and eliminating waste as a way to pay on time. That’s why the third way lean construction can help decrease late payments is through its emphasis on accountability.

    Sometimes, deals and purchases may feel casual enough that they don’t require a contract or written agreement. These areas are the ones where late payments occur the most. It’s time to get on top of these deals with binding documentation. This accountability is part of the new culture of lean construction.

    You’ll find that contracts and agreements already exist for these situations. For example, ConsensusDocs 300 and 305 is one example of a contract designed specifically for lean construction. You can also read up on the Integrated Agreement for Lean Project Delivery to see how lean construction delivery should operate.

    These contracts and agreements are just two examples of the types of documentation you can integrate into your setup. Once you have legally binding contracts, everyone can hold each other accountable for paying on time.

Expanding Upon the Benefits

When it comes to making lean construction the norm in the industry, the benefits are clear. Without late payments, everything will run more smoothly, kicking waste of all kinds to the curb. Then, you’ll see better work ethics and efficiency from employees in each phase of construction, from designers to suppliers to engineers. Receiving money on time results in better focus and fewer problem areas.

However, to fully realize these benefits, there must be more of a collective commitment to lean construction. Right now, lean construction is sometimes more theoretical than practical. It’s still working its way into the mainstream, and it takes effort to master.

Changing the attitude of the industry and drawing up contracts to hold each professional accountable is a good place to start. With the right direction, the theories of lean construction and eliminating late payments can become realities.

 

This article is a guest post from our friends at Renovated.