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PicardConsult LLCA leader in labor productivity measurement and analysis
Labor Productivity
Measurement and
Analysis on
Heavy Construction
Projects
PicardConsult LLC Next
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Our purpose is to help project management achieve their goal of completing
their project as early, cost-effectively, and safely as possible.
Dr. Hans Picard
PicardConsult LLC
Welcome!
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Contents
The Productivity Challenge 3
The Opportunity 4
The Approach: Measure Workforce Activity 5
Key Performance Measures 6
Where Are Labor Dollars Spent? 7
Continuous Improvement 8
Sample Results 9
Best Practices (Part I) 10
Best Practices (Part II) 11
Summary 12
Conclusions 13
For More Information 14
Click a chapter title to advance to that page
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC 3
The Productivity Challenge
For decades, the trend of construction labor productivity
has remained stagnant in comparison to all non-farm
productivity (see the figure at right).
The high costs associated with budget and schedule
overruns in the heavy construction industry can often
be traced to low worker productivity. Labor cost is less
predictable and runs a greater chance of overruns thaneither equipment or material costs. As labor costs can
amount to 50 percent or more of construction project
costs, management of the work process presents the
greatest opportunity to reduce project cost.
Improving labor productivity results in reduced labor
costs, faster job completion time, and direct savings
at the bottom line. Conversely, cost overruns are the
result of low productivity, more workers, and longer
completion times.
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%1969 1968 1972 1976 1980 1988 1992 1996 2000
Construction & Non-Farm Labor Productivity Index (1964-2003)Constant $ of contracts/workhours of hourly workers Sources: US Dept. of Commerce, Bureau of Labor Statistics
Construction Productivity Index
(1964 = 100%)
Non-Farm Productivity Index(1964 = 100%)
In the last 40 years, construction productivity has
lagged behind productivity in other industries.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
The Opportunity
Significant gains can be realized by enabling craft workers to become more efficient, and by enabling project managers
and field supervision to execute effectively. Ignoring these potential gains represents a lost opportunity.
The best way to improve labor productivity is to examine the work process from the workers perspective. How can
assigned tasks be completed more easily, efficiently, and safely? The goals are to enable:
Craft labor to spend maximum time workinginstead of walking or waiting
Field management to provide all the tools, materials, and guidance when and where craft labor need them
This approach serves craft labor as customers of the management system.
4
PicardConsult LLC worked with Dynegy on
a successful project of continuous process
improvement at the Baldwin Energy Complex in2010. This is an excerpt of a video on that project.
Used by permission. See www.dynegy.comfor more
information.
t Click on the video to play a short video about Dynegys take on
the opportunity to enhance efficiency in large construction projects.
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PicardConsult LLC A leader in labor productivity measurement and analysis
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The Approach: Measure Workforce Activity
While typical project reports show progress and results compared to estimates, and are after the fact, they are usuallyproduced too late to provide timely information that can be used to adjust the work process. Useful data about the
effectiveness of field management and contract labor productivity requires a system of data collection, storage,
and information retrieval that measures and assesses the actual work process. To meet this need, PicardConsult LLC
commissioned development of a contractor performance measurement system that was designed to meet these specific
requirements. PicardConsult LLC then implemented this system on its construction and major maintenance outage projects.
Not surprisingly, measurable differences were found between the labor productivity of various contractors and projects.
A critical component of this system is daily measurement reports, which enable management to drill down and analyze the
actual labor activities performed to a granular level. Using this near-real time information, management and supervision
can take prompt corrective action, when required. Daily measurement provides the necessary insight into daily variation in
the work process, as shown in the figure.
The focus on measuring work process performance
provides a link between field managements
decisions and productive or value-added labor.
These highly visible links not only raise awareness,
but speak loudly and clearly to indicate
opportunities for improvement of the work
process.
90
85
80
75
7065
60
55
50
45
40
1/3/02 1/11/02 1/21/02 1/29/02 2/6/02 2/14/02 2/22/02 3/4/02 3/12/02 3/20/02 3/28/02
Average 60.4%
StdDev 5.2%
DW% Near real-time measurement of direct work (productive
labor utilization) enables adjustments to improve the
work process.
DW%isDirec
tWorkPercent
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Key Performance Measures
The following key performance indices (KPIs), related to
the utilization of the craft workforce, are critical to project
success:
Labor utilization:This is shown in the previous slide.
It is the percent value-added, non-value-added, or
wasted time.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Key Performance Measures
The following key performance indices (KPIs), related to
the utilization of the craft workforce, are critical to project
success:
Labor utilization:This is shown in the previous slide.
It is the percent value-added, non-value-added, or
wasted time.
Field supervision effectiveness. This is the percentof the time that superintendents and foremen are
available to their crews in work areas.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Key Performance Measures
The following key performance indices (KPIs), related to
the utilization of the craft workforce, are critical to project
success:
Labor utilization:This is shown in the previous slide.
It is the percent value-added, non-value-added, or
wasted time.
Field supervision effectiveness. This is the percentof the time that superintendents and foremen are
available to their crews in work areas.
Craft accountability.This is categorized by trade. It
is the percent of time craft labor are observed/not
observed in their assigned work areas.
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Where Are Labor Dollars Spent?
Productive labor utilization is a major variable in construction labor productivity. Other important variables that effect laborproductivity are efficiency and quality of work, both of which are linked to craft skills and field supervisions expertise.
Labor Productivity = Productive Labor Utilization x Efficiency x Quality of Work
The metric Productive Labor Utilization brings to light an
important variable of the labor productivity formula. With
a given workforce, the greater the productive labor
utilization, the less labor-hours are used to complete the
project. Work is accomplished in less time and at lowercost, getting more done for less. PicardConsult LLC
experience confirms that work process measurement
and analysis improves results at relatively low cost.
The figure shows an example result of productive labor
utilization measurement. It shows the proportions of
various labor activities observed and recorded at random
intervals over an extended period of project execution.Many labor dollars are spent in non-productive activity
due to various delays, interferences or roadblocks.
There is, in fact, a hidden cost of labor: the unproductive
labor dollars spent.
Work expands to fill the time and spend the
budgeted labor dollars available for its completion.
Dr. Picards version of Parkinsons Law
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Roll over this frame to find the
total productive,
indirect, and lost work...
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Continuous Improvement
Eliminating the hidden cost of labor is a continuous
process of gradual improvement. Awareness is raised
through continuous assessment of the work process.
Depending on the incentive offered, prompt action is
taken to improve it.
Labor productivity improves gradually as more labor-
hours are spent in value-adding activities. Progressive
labor-hour reduction is a natural result of an increasingly
more efficient construction work process. This in turn
results from the growing maturity of field management
practices, as shown in the table.
8
MaturityLevel
4
3
2
1
70% -80%
60% - 70%
50% - 60%
40% - 50%
ProductiveUtilization
Progressive ConstructionWork Process Management
Complete, planned work scopes; competitive estimates; just-in-timeleanmanpower scheduling; self-sufficientwork areas; trained, proactive fieldsupervision; craft briefings; project stakeholders fully aligned to targets;continuous improvement
Customer-contractor joint planning and collaboration; labor productivity
benchmarking, metrics and incentives; gain-sharing; buy-in by projectstakeholders; quick corrective action
Labor productivity improvement is considered in pre-planning; most toolsand materials pre-staged; some improvements made during projectexecution
Project is managed by the contract, just-in- case manpower; if problems,hire more; work process performance/productivity data not consideredrelevant
Labor Productivity Linked with Management Practice
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Sample Results
The figure shows how the productive labor utilizationincreased at a major midwestern power plant Clean
Air project. The project installed selective catalytic
reduction (SCR) for nitrogen oxides emission control,
then flue gas desulfurization (FGD) scrubbers for
sulfur oxides emission control. The project involved a
workforce of over 200 crafts.
A streamlined work process has minimal non-value-
added activity, such as walking, or waste, such as
waiting, and enables labor to complete tasks in less
time. Comparing labor utilization over the course of
the multi-year Clean Air construction project shows the
share of direct labor cost that was productive. A relative
labor dollar savings of 22 percent is made available
through continuous improvement of the work process.
Contractor Labor Use
(proportions of monthly $1,093,625 labor spend)
$1,000,000
$800,000
$600,000
$400,000
$200,000
$02002 20072005 - 2006
Productive $638,728 $828,321 $874,900Indirect $285,630 $144,866 $131,325
Wasted $169,267 $120,438 $87,490
Productive
Indirect
Wasted
Productive work increased from 58% to 80% via adoption of
this continuous improvement approach on a power Clean Air
construction project.
9
58%
76%
80%
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How was this result achieved?
Click to reveal the answer
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Sample Results
The figure shows how the productive labor utilizationincreased at a major midwestern power plant Clean
Air project. The project installed selective catalytic
reduction (SCR) for nitrogen oxides emission control,
then flue gas desulfurization (FGD) scrubbers for
sulfur oxides emission control. The project involved a
workforce of over 200 crafts.
A streamlined work process has minimal non-value-
added activity, such as walking, or waste, such as
waiting, and enables labor to complete tasks in less
time. Comparing labor utilization over the course of
the multi-year Clean Air construction project shows the
share of direct labor cost that was productive. A relative
labor dollar savings of 22 percent is made available
through continuous improvement of the work process.
Contractor Labor Use
(proportions of monthly $1,093,625 labor spend)
$1,000,000
$800,000
$600,000
$400,000
$200,000
$02002 20072005 - 2006
Productive $638,728 $828,321 $874,900Indirect $285,630 $144,866 $131,325
Wasted $169,267 $120,438 $87,490
Productive
Indirect
Wasted
Productive work increased from 58% to 80% via adoption of
this continuous improvement approach on a power Clean Air
construction project.
9
58%
76%
80%
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The following best practices promote a productive
change in the construction work process.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part I)
PicardConsult LLC suggests that project managers apply proven best practices to
systematically improve project performance, project control, and labor productivity.
Project management and contractors have some or substantial control over areas
in which these practices can be used. Working together to implement these best
practices can significantly reduce project cost and duration.
Measure Labor Utilization.Collect data daily by random observation; analyze
and report the data the same day.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part I)
PicardConsult LLC suggests that project managers apply proven best practices to
systematically improve project performance, project control, and labor productivity.
Project management and contractors have some or substantial control over areas
in which these practices can be used. Working together to implement these best
practices can significantly reduce project cost and duration.
Measure Labor Utilization.Collect data daily by random observation; analyze
and report the data the same day.
Create Lean, Self-Sufficient Work Areas and Point-of-Use Logistics. Maximize
craft productive activity by eliminating the need to travel away from the
workface or wait for foreman support, supplies, tools, or information.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part I)
PicardConsult LLC suggests that project managers apply proven best practices to
systematically improve project performance, project control, and labor productivity.
Project management and contractors have some or substantial control over areas
in which these practices can be used. Working together to implement these best
practices can significantly reduce project cost and duration.
Measure Labor Utilization.Collect data daily by random observation; analyze
and report the data the same day.
Create Lean, Self-Sufficient Work Areas and Point-of-Use Logistics. Maximize
craft productive activity by eliminating the need to travel away from the
workface or wait for foreman support, supplies, tools, or information.
Constantly Balance Crew Size with Actual Workload. Use just-in-time staffing
to provide just the right numbers of crafts on the job to achieve a target
productive level of labor utilization.
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part I)
PicardConsult LLC suggests that project managers apply proven best practices to
systematically improve project performance, project control, and labor productivity.
Project management and contractors have some or substantial control over areas
in which these practices can be used. Working together to implement these best
practices can significantly reduce project cost and duration.
Measure Labor Utilization.Collect data daily by random observation; analyze
and report the data the same day.
Create Lean, Self-Sufficient Work Areas and Point-of-Use Logistics. Maximize
craft productive activity by eliminating the need to travel away from the
workface or wait for foreman support, supplies, tools, or information.
Constantly Balance Crew Size with Actual Workload. Use just-in-time staffing
to provide just the right numbers of crafts on the job to achieve a target
productive level of labor utilization.
Provide Foremen with 1-3 day Look-ahead Schedules.This enables foremento anticipate roadblocks that could cause delays. This should also include plan
B tasks when scheduled tasks cannot be performed.
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PicardConsult LLC A leader in labor productivity measurement and analysis
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Best Practices (Part II)
Maximize Foremen Availability to Crews
in Work Areas.The figure shows that higher
foreman availability translates into higher
productivity. Locate foremans desks in the work
area and equip crafts with two-way radios to
obtain tools and materials, thus maximizing
foreman workface time.
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
65.0% 70.0% 75.0% 80.0% 85.0% 90.0%
FMAv
DW
R
2
= 0.4324
Direct Work vs Foreman AvailablityFGD Projects 2006 - 2007
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part II)
Maximize Foremen Availability to Crews
in Work Areas.The figure shows that higher
foreman availability translates into higher
productivity. Locate foremans desks in the work
area and equip crafts with two-way radios to
obtain tools and materials, thus maximizing
foreman workface time.
Institute Continuous Improvement. Set
realistic yet demanding targets; raise the bar on
each succeeding project to drive continuous
improvement.
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
65.0% 70.0% 75.0% 80.0% 85.0% 90.0%
FMAv
DW
R
2
= 0.4324
Direct Work vs Foreman AvailablityFGD Projects 2006 - 2007
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Best Practices (Part II)
Maximize Foremen Availability to Crews
in Work Areas.The figure shows that higher
foreman availability translates into higher
productivity. Locate foremans desks in the work
area and equip crafts with two-way radios to
obtain tools and materials, thus maximizing
foreman workface time.
Institute Continuous Improvement. Set
realistic yet demanding targets; raise the bar on
each succeeding project to drive continuous
improvement.
Management Support Essential. Contractually
establish a cooperative relationship in which the
results of improvement benefit the contractor,
crafts, and owner.
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
65.0% 70.0% 75.0% 80.0% 85.0% 90.0%
FMAv
DW
R
2
= 0.4324
Direct Work vs Foreman AvailablityFGD Projects 2006 - 2007
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Summary
To promote labor productivity on heavy construction projectsand save time and money, improve the work process. Use best
practices based on these approaches:
Approach construction project execution as a production
work process
Distinguish what craft activities add value to the work
process, and what activity is unproductive or wasteful
Define needed improvement areas to increase efficiency of
the work process
Institute continuous improvement of the work process
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Summary
To promote labor productivity on heavy construction projectsand save time and money, improve the work process. Use best
practices based on these approaches:
Approach construction project execution as a production
work process
Distinguish what craft activities add value to the work
process, and what activity is unproductive or wasteful
Define needed improvement areas to increase efficiency of
the work process
Institute continuous improvement of the work process
Collect real-time labor utilization data at the points where
the work is done
Use statistical methods to analyze the level and variation of labor performance
Identify and quantify labor productivity constraints and areas of opportunity
Determine the lean workforce size, in balance with actual workloads
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PicardConsult LLC A leader in labor productivity measurement and analysis
PicardConsult LLC
Summary
To promote labor productivity on heavy construction projectsand save time and money, improve the work process. Use best
practices based on these approaches:
Approach construction project execution as a production
work process
Distinguish what craft activities add value to the work
process, and what activity is unproductive or wasteful
Define needed improvement areas to increase efficiency of
the work process
Institute continuous improvement of the work process
Collect real-time labor utilization data at the points where
the work is done
Use statistical methods to analyze the level and variation of labor performance
Identify and quantify labor productivity constraints and areas of opportunity
Determine the lean workforce size, in balance with actual workloads
Introduce new visibility and accountability in project performance management and field supervision
Provide daily contractor/craft reports and trend labor utilization data
Monitor productive labor utilization against estimate-independent benchmarks
Present real-time data that enables project managers and field supervision to proactively address problems
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PicardConsult LLC A leader in labor productivity measurement and analysis
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Conclusions
13
With relatively little, but consistent effort, construction projects can be
completed using less labor than conventionally estimated by minimizing
wasted resources and maximizing benefits in the process.
Dr. Hans Picard
PicardConsult LLC
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PicardConsult LLC A leader in labor productivity measurement and analysis
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About PicardConsult LLC
PicardConsult LLC is a leader in labor productivity measurement and analysis. With its
robust Work Process Analytics Deming/Six Sigma-based technology, PicardConsult
LLC provides clients real-time craft and foreman utilization metrics to support timely,
fact-based decision making. Productivity improves as the utilization of the craft
workforce and the effectiveness of trades foremen improves.
Quantifying and reducing non-productive craft activity, such as excessive waiting
or walking, which is often associated with heavy engineering construction and
maintenance, boosts productivity and can generate labor cost savings of 20 to 30
percent, or more, through continuous process improvement.
PicardConsult LLC has established a reputation of delivering results for more than 30
years by assisting managers to do more with less. Picard Consult LLC offers on-site
training in data collection, treatment, analysis, and reporting.
Clients include Kansas City Power & Light, Tennessee Valley Authority (T VA), The
Southern Companies, Cinergy/Duke Energy, Dynegy Midwest, Corn Products
International, and Cameco Corporation.
PicardConsult LLC is led by Dr. Hans Picard, Mine Eng., ScD Metallurgy, MBA.
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PicardConsult LLCA leader in labor productivitymeasurement and analysis
For More Information
For more information, contact
PicardConsult LLC
PO Box 1046
Tryon, NC 28782 USA
828-859-3129 office
828-859-3169 fax
PicardConsult.com
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