Industrialization of Construction

[00:00:00] Gary Fischer: I’d like to introduce Todd Zabelle. He doesn’t need much of an introduction. He’s kind of, kind of a brainchild behind a lot of this and we’re really pleased that he’s got some deep thinking to share with us here. If you haven’t met Todd, he’s the founder and president of Strategic Project Solutions and the founder of the Project Production Institute.

[00:00:24] Gary Fischer: Prior to SPS, he founded Pacific Contracting, which was recognized in the mid 90s for its use of various innovations, including lean construction and virtual design and construction. And over the past two decades, Todd’s authored numerous papers on the topic of optimizing engineering, fabrication, and construction.

[00:00:42] Gary Fischer: And he, he’s got some great insights and thoughts to share with us today. So Todd, I’ll turn it over to you.

[00:00:49] Todd Zabelle: Okay, thank you, Gary. So we, we ponder the question, what type of production is construction and we’re going to take a little bit of a trip down a road. That’s not fully joined in, but hopefully there’s some nuggets in here that you’ll be able to take away.

[00:01:07] Todd Zabelle: So, starting off here. You know, it seems that and our discussions and observations within the engineering and construction industry and it’s customers, owners are frustrated. There’s a lot of talk amongst owners about we’re going to move to a factory model, make this stuff off site, get it out of here.

[00:01:30] Todd Zabelle: I, I’ve been told I’m not going to have the necessary. Labor to do the work that I need to do. We need to standardize, we need to modularize we need to do something. And so what we’ve seen is a lot of discussion recently on this idea of factory models. And build off site. I can’t tell you how many times we hear we’re going to adopt the factory model.

[00:01:53] Todd Zabelle: It’s a factory model. What we’re doing is we’ve moved to a factory model and as Gary asked earlier, what actually is a factory model and how do you go do a factory model of construction? I think so far today. We’ve had a fair amount of insight into that topic for others. They as modularization. We’re going to go do a build.

[00:02:13] Todd Zabelle: This job is a modularization and as. Thank you. Probably not as bad as the software industry is the construction industry likes to take words and twist them into things that fit what they want to describe and I’m not certain modularization is necessarily a good word. So we’re going to propose a little bit later that it really gets down to automation and and where you do things.

[00:02:37] Todd Zabelle: Okay, so much to the point where C. I. I. Construction Industry Institute. Has through, I believe it was research team 283 came out and with a report and this is, I think a version two of it talking about the benefits of modularization and it’s interesting in the the total installed cost graph.

[00:02:59] Todd Zabelle: They say that it’s going to cost you a little bit early, a little bit more money early on, but of course as, as CII always does in the end, modular is going to allow you to cost less and Hey, it might even go faster. So, you know, who wouldn’t want to do this, but I must say, I’m enamored with the construction industry Institute.

[00:03:22] Todd Zabelle: We call it by the people for the people when we ask major investors. In capital infrastructure, what benefit are you getting from a cost and schedule perspective for modular? They simply say there is no benefit. We do that because we feel that we’re working in a remote location. We don’t have access to skilled labor and that is our primary reason for doing it We didn’t ever think that we would get a cost and schedule, benefit from that.

[00:03:51] Todd Zabelle: But again the sense of being chance to be provocative we We’d be interested in seeing what data ci actually has that shows doing things as what they call modular is going to take less time and cost less. And basically if you understand the, the fundamentals of project production management and operation science, you can see why that may not actually be the case.

[00:04:20] Todd Zabelle: So because of all this activity, contractors see an opportunity. And many are hiring what we would call manufacturing production engineers. We have some on the line with us today and their job is to figure out how do we industrialize. What is currently going on it’s interesting to watch the manufacturing production engineers observe the guys, the, the, the, the project managers and engineers and vice versa trying to figure out how to make all this work.

[00:04:55] Todd Zabelle: But as Gary asked earlier, you know, not only adding to it, what is a factory model? But does adopting a factory model and moving work off site solve the problem? And if the problem obviously we’re saying is is better performance In the form of less use of costs. I mean less use of cash lower costs and more time We’re hearing from some of even the people on the line today.

[00:05:23] Todd Zabelle: We see the time The schedule compression, we’re not necessarily seeing the cost again hopefully at the end of this presentation, some of that will be vetted as to why that might not be the case. When we push back on what is a factory model interestingly enough, a factory model to a lot of people that are involved in engineering and construction is just really standardization of products or the assets.

[00:05:51] Todd Zabelle: And we’re very fortunate to have a good friend of mine. Mark Reynolds on who is going to talk later. He’s the CEO of Mace what I’d say is probably one of the best construction management firms in the world. And you know, Mark and I were involved with BA 20 years ago or 20 plus years ago, where BA took a a modular design to standard products.

[00:06:17] Todd Zabelle: And there was the multi story car park and the pier and so on and so forth. So, you know, a lot of this is not new. People have been moving work off the construction site for a long time. I know one of the original movements was led by a guy that used to run McDonald’s facilities in, in Europe.

[00:06:40] Todd Zabelle: Richard Ogden, I believe, that started something called Build Offsite in the objective was to get the the lorries that were delivering materials into central London off the roads. Okay, again, it wasn’t necessarily about cost. But it was about solving a different problem that, that, that probably assisted in, but for the most people or, but for most people, a factory model really means we’re gonna have standard products or standard assets.

[00:07:07] Todd Zabelle: Now that’s different than what we might call the adoption of advanced production thinking that we’re going to continue to explore as this particular session goes on with, with, with all the speakers. Interestingly enough to me, though, and you just heard it, is the automotive industry that’s fairly advanced is pushing for personalization through configuration.

[00:07:30] Todd Zabelle: And I don’t know if you’ve ever had the experience where you go to log on and you’re just thinking that maybe you might consider buying a new car and you start selecting all the buttons and you get fairly confused as to this one, deletes that one, but adds this one and should I get this or not? And you’re trying to figure this out and it goes on and on and on.

[00:07:47] Todd Zabelle: And and the point there is they understand that they need to have personalization through configuration and that the days of the model T you can have any color you want, as long as it’s your black, isn’t going to work. The customers aren’t going to buy that. All right. So it’s really interesting and very valuable to understand what they’re doing because they have standard platforms.

[00:08:09] Todd Zabelle: They have a bill of material and a bill of process that they’re using to create pretty close to customizable products within, within reason. Okay. So, you know, the question really is what type of production is construction? And it could be any type of production that we wanna make it, but we’ve made it a very specific type of production.

[00:08:36] Todd Zabelle: And I think these are some of the attributes that, that we might agree on. It’s, it’s high cost, right? So we’re talking about big stuff that’s expensive. We’re not, we’re not making pens or, or paper. It’s one off mostly custom products that are built to order using a highly skilled workforce. That skill uses flexible, simple tools.

[00:09:00] Todd Zabelle: That’s changing a little bit, but for the most part. There’s still a lot of tool belts being worn, worn out there. A lot of tinkering and rework, a lot of tinkering and rework. I got a little project going on in my house. I’m reminded of how the person who’s doing the technical work is both an architect and an engineer from two leading universities.

[00:09:22] Todd Zabelle: And boy, do these guys do, they are highly skilled. We get whatever tools we need and the architect engineer and the craft guys are constantly tinkering and rework. And it’s amazing to watch how they want to work. No matter how hard I try to get them to move a little bit a little bit further into where we might want to be.

[00:09:45] Todd Zabelle: And then there’s this thing about field measure that make, so it’s always best. To measure it in the field and then go make it I need to buy a little bit of stone and the stone guy, you know, he’s convinced that unless I want to guarantee the measurements, which I’m willing to do we better measure it in the field.

[00:10:04] Todd Zabelle: So what does all this really mean? It means that we’re deeply rooted in craft production. Ed Pound this morning said at PPI, our research has indicated there’s been no improvement. And productivity since the turn of the last century that shouldn’t be surprising because we really haven’t changed anything and we’re a craft based industry as let’s say, compared to what you just saw in the automotive sector and we’re organized and we operate as such.

[00:10:33] Todd Zabelle: And so what does this mean? fragmentation.

[00:10:42] Todd Zabelle: There are endless disciplines and trades especially in the building sector. Lots and lots of people need to be involved. I was talking to Gary earlier. He’s going to go build a house. I said, you got to really watch those bathrooms and kitchens. Unbelievable amount of trades that move through there.

[00:11:02] Todd Zabelle: Of course there’s lots of contractors that are involved. I mean, when you get into technology energy, automotive you’re not talking about endless numbers of players. That are involved, especially when you get into energy and an automotive construction. It’s just everybody on every corner has some interest.

[00:11:27] Todd Zabelle: It seems in doing something with construction, the business model service based versus delivering a product. Some of our speakers are going to talk about how they’re looking at changing that a little bit after this presentation. It’s based on cost plus profit equals price. Thank you. Versus let’s say a product based industry where you start off with how much are they willing to pay and what do we need to give them?

[00:11:49] Todd Zabelle: Minus our cost equals our profit. All right? There’s customer threats from the gc community and and so if I’m a subcontractor and I wanna make a move and I wanna break out and say, Hey, I could take all this production capability I have, whether it’s to deliver data centers because I’m a big electrical contractor.

[00:12:11] Todd Zabelle: I’m a precast company. I want to be able to deliver turnkey facilities. You always have somebody who’s your, your middleman, the broker in between the owner and you saying, well, I’m not going to give you any other projects. If you do that, performance measures are all about productivity factor, earned hours, so on and so forth.

[00:12:28] Todd Zabelle: Gary alluded to what that might look like at somewhere like Ford where and even MUTU talked about this idea of of matching tack time and cycle time. The tack time being the demand, the cycle time being the response. Liability and risk. It’s incredible, at least in the U. S. And U. S. Based companies how there’s this complete avoidance of means and methods, the insurance companies and the attorneys that advise engineering companies, architectural companies tell them do not.

[00:12:59] Todd Zabelle: You are not allowed and owners to deal around with means and methods. The process of how you do the work is the one that’s fraught with all the risk and it’s just bizarre to think that you could design a precast building and not assume that someone’s, you’re not dictating the means and methods, right?

[00:13:17] Todd Zabelle: If you say that the steel is going to be welded, you’re, you’re dictating the means and methods. Lots of administration focus on contracting and risk. I think everybody’s their, their experience of that that’s involved in engineering construction processes and tools are designed to support craft based work.

[00:13:36] Todd Zabelle: Not a lot of precision. They don’t use float and manufacturing the tack times 57 seconds. It’s like the time needs to be 57 seconds. They don’t say, Hey, let’s just make the the tag time a minute 42 and let’s shoot for a tag time of 37 seconds. But if it comes out of four minutes, that’s cool too.

[00:13:54] Todd Zabelle: We’ll just submit a claim. And then all this tying it back to Neil said is that there’s underlying mental models. People believe that there’s a time cost trade off or an iron triangle. And there’s a lot of confusion about fundamental production concepts. But all that being said probably the simplest way to put it.

[00:14:14] Todd Zabelle: And thanks to all you guys over the last 25 years that have been saying, how do you simplify it? How do you simplify it? How do you simplify it? We propose to you that project management focuses on what, who, and when, and if you think about how you create a, how you prepare a contract who does that contract go to?

[00:14:33] Todd Zabelle: When do you need them to do it? What exactly do you want them to do? And if you put together a schedule, you do the same thing. It says, here’s what needs to be done by who, when, okay. And so it’s a whole world of what, who, and when, and what’s missing is how and where. And so when we say there’s a gap that Gary alluded to earlier, the gap is how do we do the work?

[00:14:57] Todd Zabelle: Yes. The means and methods and where do we do the work? So a little different view of that might look like this. And where this whole debate is going on between factory models, modularization, off site, is really between fabricating or making things, delivering them, and installing them. Alright, that’s, that’s where the action is.

[00:15:20] Todd Zabelle: I think you could go back and you could argue that you know, when they built the Empire State Building, Golden Gate Bridge, U. S. Steel or whomever it was at the time, actually was all the way over to the process, they were processing the material to make the steel upon which they were fabricating, upon which they delivered, they installed, all this has been fragmented out and there’s many players Of course, there’s people that make steel.

[00:15:46] Todd Zabelle: There’s people that fabricate steel to make steel members. There’s another company that delivers it. There’s people that erect it. And so many players in, in the value chain, if you will. And, you know, this little value chain is actually pretty interesting because When you get to industrial construction, especially stuff around chemicals and oil and gas, et cetera, it is just basically one big massive steel value stream that is occurring.

[00:16:15] Todd Zabelle: Right. And so there can be very sophisticated valves or vessels. Reactors, or it could just be a dumb piece of a structural member, but a lot of what’s flowing through here is steel. So again, we’ve shown this probably many, many times but really what we need to think about is that this, these five levers on how we design the product, whether again, it’s just a a connection or it’s a complete facility.

[00:16:43] Todd Zabelle: How we design the work processes to create that and you saw some of that D. F. M. A. Design for Manufacturing Assembly through MUTU is really important, but it’s also important to think about how we allocating our capacity and think about the contributors being labor, equipment and space, the relationship with inventory stocks, things that might be inbound raw materials or outbound finished goods, and most importantly, the whip or work in process, And then finally, the, the relationship with variability, I think most of the people on the line understand all this, so we’re not going to spend too much time, but what we can say is inventory, which is not considered a project management.

[00:17:26] Todd Zabelle: Anywhere in the methods and processes. Inventory is a proxy for time, so if you want to predict what might happen, if you want to know what’s going to happen in the schedule, if you measure the inventory, specifically the work in process, you can actually predict how long it’s going to take. All right. Again, we’re not gonna spend too much time on this.

[00:17:47] Todd Zabelle: I think most people’s core fairly advanced. And of course, there’s these relationships or curves that we talk about that are very important to. What we’re doing here, especially with regard to industrialized production and its application to construction. The higher the utilization, the the greater the cycle time.

[00:18:09] Todd Zabelle: So, you know, it doesn’t make sense to have everybody working as hard as they can. And Gary alluded to that at Ford. If you increase variability, it gets worse. Throughput will eventually get maxed out. No matter how much whip you throw at it, as a matter of fact, you might not only get less out you might drive the cycle time up, but it might take longer.

[00:18:31] Todd Zabelle: To do that in the meantime, you’re significantly increasing costs and the use of cash because you believe that We could actually get more done if we put more in and so again on the manufacturing side What we call industrialized construction tack time is what is the demand? Cycle time is how fast can we produce those are the interesting measurements?

[00:18:56] Todd Zabelle: You can’t change The throughput and you can’t change the cycle time. All right, so any of you guys are playing around with industrialization of production Throughput is a measurement cycle time is a measurement You cannot do anything with those other than look at them and read them all that you can play with is utilization of the capacity management of inventory Especially the web and what you’re doing variability Okay, time is a function and the throughput the amount of stuff you got a system is what?

[00:19:34] Todd Zabelle: you’re doing around capacity utilization, WIP, and management of variability. All right. So what type of production is construction? Well, a construction project is actually a, I don’t know what the word might be, but is a whole bunch of stuff that comes together, different types of production and a very useful tool for understanding this that you might want to, to take away is.

[00:20:00] Todd Zabelle: It’s called the product process matrix, originally developed by Hayes and Wheelwright. And then Schmader here added a project to the the matrix. And so what the matrix is telling you is that there’s different types of production. On the bottom right is continuous flow, so if you’re involved in pharmaceutical goods.

[00:20:21] Todd Zabelle: Refining, you’re probably very well versed in continuous flow type systems or production systems, if you will. And these things make, again, food, pharmaceuticals and process hydrocarbons, maybe chemicals, so on and so forth. You have line flow, which is what Mutu was alluding to and what they’re doing in automotive.

[00:20:42] Todd Zabelle: It’s in this first example here, it’s machine pace, which means that the assembly line. Was not necessarily designed, developed by Ford or invented, but was perfected by Ford sets the pace as the work moves through the, through the line, and then you can have a worker paced line flow. So when you see these videos of people in China that are all stacked up in these large production facilities, that would be more of a worker paced line flow.

[00:21:11] Todd Zabelle: You have batch flow, where you put a bunch of stuff together and run it at once. You do call it a concrete batcher, and then you have a job shop. And so, think about in a job shop, structural steel, okay? And then finally you have a project, which you know, we might say that maybe a project sits on top of all this.

[00:21:31] Todd Zabelle: It’s really about understanding what kind of production system is that particular supply chain or value stream that you’re dealing with, right? Now, for this presentation, we developed something that we thought might be interesting to you. And this was really to understand what are people actually trying to do out there.

[00:21:48] Todd Zabelle: And so we put together a little spectrum here that says there is people are trying to move work from on site to off site. There are people that are trying to move work from craft based to automated. All right. And so what that might look like is these photographs here here we could clearly see craft based on site work.

[00:22:10] Todd Zabelle: Somebody’s working with their hands. They’re installing some masonry units, brick, whatever the case may be. And now somebody’s made a decision to move that kind of work off site. And we see craft based work in a warehouse off site. Where somebody’s looks to be assembling some some walls or maybe a ceiling because it’s a lighting fixture that’s going in.

[00:22:31] Todd Zabelle: But there’s also a movement to automate on site. And here we can see a robotic drilling machine that Hilti’s just announced. So we have automation on site. Then we have, and this, this happens to be from Katerra. So give proper notation to them. This is automated off site production, all right?

[00:22:57] Todd Zabelle: And so we’re proposing to you that it would be, it is a value to understand what is it I’m actually trying to do. Am I trying to automate things or am I trying to move things off site? And you might be surprised on which one of these things is, is the most the most dangerous, if you will, to your financial health.

[00:23:22] Todd Zabelle: And so we’re looking to develop, and this is almost a piece of PPI research, if you will, a spectrum that puts more color on this. It says, okay, there’s on site, then there’s on site within the site boundaries. Then we start moving to offsite where we’re going over the road. Then we really go to offsite where we go overseas.

[00:23:41] Todd Zabelle: Okay. And so because we’re production guys, and we think a lot about variability, obviously the further we go to the offsite, the more risk we have of variability coming into the production system. The same could be true for the craft versus automated perspective. And that is we start off with hand tools.

[00:24:04] Todd Zabelle: We move to power tools. Then maybe we go to computer numerically controlled machinery tools. And finally, robotics, right? And so again, this is just trying to put a little bit more color on what this might look like. So what we’re saying is, is You know, which direction are you moving and, you know, in hindsight, we probably should have put a pool of a poll on this, but and pulled the audience, but, you know, where are we moving?

[00:24:29] Todd Zabelle: Are we moving work offsite? We just want to get it out of here for some reason, and we’ll still do a craft based, which, hey, if you’ve been in a lot of fabrication facilities, and I’ve been in a lot really all that’s happened there is just moving the same work offsite. Okay. Are we again move it? Are we keeping it on site, but we’re automating it, or are we we’re moving it off site and automating it?

[00:24:54] Todd Zabelle: And I, I like to talk about the gutter king, and the gutter king to me is interesting. And think about what the gutter king is doing and this particular instance is gutter magic LLC, if you will. Gutter magic can pull up at your house. Could measure how much gutter you need for your roof, can hand you an estimate or a quotation, you can approve it, and the gutter king can knock that thing out in a few hours, drive away and go down the road.

[00:25:26] Todd Zabelle: Now, there definitely is a question on what color the gutter king can provide, but that could probably be answered in advance. Hey, I’m going to be out there at 11 o’clock today, is there a particular color that you’re interested in? But the gutter king’s got a mobile factory here that allows them to very quickly and efficiently create stuff using what we might call automation on site to some extent, right?

[00:25:54] Todd Zabelle: Now contrast this to someone who would have a shop and even if they had a shop, they would have to go out field measure, create some kind of communication back to the people in the shop that are going to make the stuff, have it made. Find a way to temporarily support it or short or whatever you want to do, ship it back out and then put it in place.

[00:26:15] Todd Zabelle: Okay, so I think

[00:26:20] Gary Fischer: you’re giving you a 4 minute

[00:26:21] Todd Zabelle: call here. Okay, perfect. So I think there’s something there, and thinking through, if we go back, what the gutter king is doing, and what this might all mean when we come back to this idea of modularization. Alright? So, clearly, there’s the opportunity of concurrency at work.

[00:26:40] Todd Zabelle: You could be building things or making things while you’re preparing the site. Okay. But you got to take an account that there’s a cost of doing that. And there’s a cost of inventory, which is you have to amass, handle, hold, preserve, and deal with damage theft. Meaning people are taking parts, not necessarily burglary, and then the threat of obsolescence.

[00:27:00] Todd Zabelle: You also have to think about additional costs related to. Disassemble, reassemble, structural support, protection, and then the poor use of transport capacity. You’re giving something up. And we can go all the way back to Ford, who said, look, I’m not going to ship the cars assembled. I’m going to ship the cars disassembled.

[00:27:22] Todd Zabelle: And what IKEA does with their flat packs, right? So again, I think what we’re trying to communicate here is a word of caution to taking everything off site and attempting to fully automate things. Where that’s not always the best practice, I’m going to go through a really quick presentation here and two minutes and then I’m going to wrap it up.

[00:27:45] Todd Zabelle: Okay. So if we go back 20 years ago, and Mark, you’ll appreciate this to Heathrow terminal 5. This was a project that actually the company was taken over by a guy that ran Jaguar in the UK. So it had a high volume perspective to how they want to deliver the project, but some interesting specs, if you will.

[00:28:04] Todd Zabelle: Delivery to site every 30 seconds couldn’t make any difference between sign seven to nine and four and six single road. Storage was one day or less. The majority of work occurred after nine 11. So there was all sorts of crazy stuff going on, but the design of the production system used two logistics centers to buffer upstream variability, to house material and what we’re able to do through using modern production.

[00:28:29] Todd Zabelle: This is 20 years ago was due to detailed engineering for the rebar in three days. The fabrication assembly of cages in two days and the delivery of installation in two days with a total cycle time of seven days. All right. That ability to go from six weeks down to five days, which was brought back up to seven days, was all done in about a two hour planning period, okay, looking at the production system.

[00:28:55] Todd Zabelle: And really quick here, finally, we also used what Mutu alluded to, this concurrent digital engineering, to design the foundation, the piles, and the factory that was going to produce the, the, the piles all simultaneously. And found that there were some issues with the machines and their ability to actually do the job, which was rectified in advance well before anything was bought or purchased.

[00:29:20] Todd Zabelle: And to be able to get to that level of detailed engineering so fast, standards were set up as a platform, if you will, on the modularization as a design requirement for the structural steel. And then the fixers were brought in early using immersive reality to figure out, can we or can we not do that work?

[00:29:41] Todd Zabelle: And so finally, again, here is offsite fabrication coming into a precast facility. And you can see there’s old Greg looking for stuff. The rebar is all rusted out and moving to a capacity based model, right? With a minimal amount of inbound materials, provided way more flexibility, a lot safer environment there.

[00:30:01] Todd Zabelle: So, you know, lots of interesting activity around automation offsite. Challenges this challenges current practice due to lack of understanding how where we do the work And we’re proposing to you that ppm is foundation of operation sciences provides the needed framework with that. I will hand it back.