Welcome everybody out to podcast number 1332. In this podcast, I'm going to continue the reading of the book, Elevating Preconstruction Planning. And I'm going to talk about the supply chain component inside the production system and specifically talk about procurement.

If you're into that, please stay with us. This is the Elevate Construction Podcast, delivering remarkable content for workers, leaders, and companies in construction, wanting to take their next step. Get ready to step out of your comfort zone with Jason Schroeder as he encourages you to do better, live a remarkable life, and expect more.

Let's go. Welcome everybody. I hope you're doing well and staying safe out there.

I'm excited to keep reading this book to you and doing some summaries here. It's a really neat book. I hope you check it out.

We've really put a lot of effort into it, mostly pictures, large font, I think you'll like it. So what we're doing here is we're finishing up the plan section and we have covered the production plan, lean in contracts, and then risk management. So at this point, you have a plan collaboratively made with the last planners that each foreman can follow.

Everything in this system is engineered to support the foreman installing work with workers in a work package in his own. They must have a plan they can see and understand to do this. Now your foreman have a plan they can follow.

So let's go ahead and cover the supply chain component procurement. Armed with the right people and a good production plan, you are now prepared to align the production demands and the supply chain to provide the crews with the tools, equipment, materials, and information they need to be successful. Trades will execute the work if they have the resources and first planners engineer the system to allow this to happen.

Current trends show that using chat GPT is more accurate than Google informing an unbiased aggregated and comprehensive definition of most topics. We've added the terms here to ensure that you are on the same page as we move forward so that we can align on these key behaviors. So this is from chat GPT.

Supply chain management supply chain management or SCM in construction refers to the management of the flow of materials, equipment, services, and information from suppliers to construction sites and ultimately to the end users or clients. It involves coordinating various stakeholders involved in the construction process, including suppliers, contractors, subcontractors, logistics providers, and clients to ensure that materials and resources are delivered to the right place at the right time and the right quantity and at the right quality. In construction, SCM plays a crucial role in ensuring the smooth and efficient execution of projects as construction projects typically involve complex supply chains with multiple tiers of suppliers and trade partners.

Effective supply chain management and construction aims to optimize processes, minimize costs, reduce waste, mitigate risks, and improve overall project performance. Key aspects of supply chain management and construction include sourcing and procurement, meaning identifying and selecting suppliers and subcontractors who can provide the required materials, equipment, and services for construction projects. This involves negotiating contracts, managing relationships with suppliers, and ensuring compliance with project specifications and quality standards. 

Logistics and transportation, managing the transportation, delivery, and storage of materials and equipment to construction sites. This includes coordinating with logistics providers, scheduling deliveries, optimizing transportation routes, and managing inventory levels to minimize delays and disruptions. Inventory management, managing inventory levels of materials and equipment to ensure that there are adequate supplies available when needed, while also minimizing excess inventory and storage costs. 

This involves tracking inventory levels, monitoring usage rates, and implementing inventory control measures. Just-in-time deliveries. Just-in-time JIT delivery and construction refers to a supply chain management strategy where materials, equipment, and components are delivered to the construction site exactly when they are needed for installation or use, minimizing the need for onsite storage and reducing inventory holding costs. 

The goal of JIT delivery is to streamline the construction process, minimize waste, and improve efficiency by ensuring that materials are delivered in the right quantity at the right time and to the right location. So that's all chat GPT. And the reason it's plugged in there is because it was the best summary. 

So let's talk about procurement. Procurement is sometimes misunderstood as only buying what you need without tracking it. That is why supply chain management is a more useful term. 

It indicates the need to select, purchase, track, and properly receive the resources procured. So I would advise don't just procure what you need, manage the supply chain. The supply chain refers to all of the resources of the project. 

So you have to design it, buy it out, detail it, approve it, make it, transport it, and then take it to the place of work. Let's talk about these one by one. Design. 

Supply chain management starts with design. The point here is that we do not design and then try to install onsite. We first design the project, break it into its work packages, and then design, meaning the designer is designed to that work package. 

The process is as follows. Number one, we create our production plan early on in design. Number two, we understand the flow of the project and how it is phased. 

Three, the work packages and zones are clearly defined for the design team. Four, any needs for that work package are known by design. Examples are testing and inspection requirements, placement breaks for concrete, structural bracing and fit-up requirements, valves for MEP systems, design adjustments needed for kitting or prefab, adjustments to the commissioning, balancing zones, design adjustments to accommodate changes in means and methods. 

The key takeaway is that you design to the work package. Don't package the work based on design only. So when I, in the image in the book, I have design effort, breakout design packages, general project strategy, identify phases, pull plan, simulate norm level tack plan, package, tack wagon, and the design of the work package, there's an arrow running in the reverse that says the design of the work package should dictate what's done in the design. 

Okay, buyout. Assuming you have designed your project in a way that supports the work packages, you now need to purchase the scope. The key items for this are sign up the right trade partners, get them to an executed contract on time, release them to begin submittal and procurement efforts, initiate your quality process, complete the pre-mobilization meeting and schedule the pre-con meeting with them, track their compliance for insurance bonds and job site requirements as work approaches. 

I have not shared any secrets here. The key is to follow your company's process, but do it in a way that enables the procurement of long lead materials in a timely manner. I recommend reviewing this weekly in your team weekly tactical and using a log of your choice or the one on the Lean Tacked website. 

And so the log that you're going to use, there's the procurement, sorry, the buyout and the procurement log. The buyout log will have spec section, tack zone, scope of work, selected trade partner, but then it will have the RFP bids due, bid review contracting and then drop dead date that you need the subcontractor on site. Now let me fast forward a little bit and then the procurement log will have submittal prep, submittal review, submit to design team, design review, design approval, issue the PO for the materials, the fabrication lead time, delivery time and then you'll have a procurement buffer and then a material inventory buffer. 

Both of those are quite important to the overall system. Okay so I fast-forwarded there a little bit. Let me go back to the buyout log. 

The line item in your buyout log will only trigger the trade for their first work package. Keep in mind that supply needs to feed the successor work packages on a flow and that you need enough time for the entire process to get materials to the place of work when the team needs them. So in the book we have an image that says design buyout trade release submittal, fabricate, delivery work package, but it shows that in a cascade throughout the multiple zones and the point is is to enable the first work package and then everything else will happen on a flow. 

Procurement. Once you have your buyout under control on the project the next step is your procurement effort. The procurement log or software will confirm that materials equipment and information are on track to be delivered on time to the work package. 

A procurement log or software has two major sections for the submittal process and the fabrication and delivery timeline. Any process or software needs to manage both, not just the submittal portion. So once a trade is released they can begin the procurement process. 

The submittal portion of the process is only a small part. We need to manage the entire process throughout to ensure materials arrive on time packaged the right way. There's also a buffer in that. 

This buffer and I'm talking about the procurement buffer and then also the material inventory buffer. These durations correspond to how much material you will want in your lay down areas ahead of being taken to the place of work and the buffer that's needed to anticipate delays in the supply chain. And then the required on job date that's taken from your TAC plan. 

Your logger software tool needs to work dates back from the required on job date. Include a material inventory buffer duration in each line. Enable you to see the progress of steps real-time. 

Mark late items read with conditional formatting. Mark items within two weeks of being late yellow with conditional formatting. Enable you and your team to break out items by zone and work package.

The key here is to manage the process throughout and to recover delays real time. It's not common for people to utilize this process completely which is interesting and unfortunate as it's a project management 101 tool. Managing delays. 

When you see and by the way everybody this is like really key to pay attention to this is great. When you see that there's a delay or a problem there are several options to work through. Start sooner, help trades break up submittals, assist the trades with team help, swarm the internal review of the submittal, open a blue beam session to do concurrent reviews, ask the design team for help expediting, select alternative material types, tune in person page flip with the designers, negotiate with the vendors, visit the fab shop, move the items to a second production site, supplement the contractor, take over shipment, delay into a buffer designated or designed into the supply chain. 

There are many more but even with all the strategies to manage the supply chain you may need to use specific buffers to absorb delays that you can't recover. The material inventory buffer is the amount of materials you want to keep on site to keep workers fed with materials. It cannot be too much but it cannot be zero it needs to be right-sized to create flow for the project. 

The supply chain buffer is a tool to match the pace and pace the project buffers meaning if you have buffers in your phase you need to have them in the supply chain as well. That way if you do not need the buffers in the phase you will still have your materials on time. There's a really neat image of this inside the book I don't know that I can properly explain it in detail but let me say this if you have buffers in your production plan you better have those same buffers in your supply chain or a procurement buffer because if your schedule moves forward and you don't have those same buffers in the supply chain your materials will be late.

Oh that's not bad I think I did a good job there. Okay so if someone has advised you to not use buffers in the supply chain please disregard that advice. You must have buffers to align resources with the install dates. 

If you want more information on this please consider reading critical chain by LEA who M Goldratt. This is one of the many tools we use to enable success in the following months. And these buffers should be for every delivery materials equipment and information should be packaged in this order project phase zone. 

This means we don't bring out materials all at once we right-size the deliveries to keep the flow of construction and bring them just in time by zone. If we delivered by building our phase it would create too much inventory on site and would slow down production. So your target when do you need your material to arrive so you have just enough materials but not too much. 

Okay so in the book here I've got an image that I want to really highlight that when you are filling out your procurement log or actually ordering materials it has to be done by zone. So I have an image of zones on top and then the procurement log on the bottom and simply showing that they correspond. Don't bring everything out all at once. 

Okay let's talk about just in time deliveries. Just in time is widely misunderstood and disliked in construction and hopefully I can provide some clarity here. The term JIT at its root really means to flow and do pull and feed things just in time according to the production rhythm. 

We use the term just in time in construction to talk about how we should feed the project with resources which is different from how it's understood for manufacturing. We are trying to overcome the misperceptions and scale the proper understanding to better utilize the concept. You bring out materials and other resources to the place of work meaning the zone for that work package just in time for that work for that day. 

Just in time is not bringing everything straight from the vendor to the job site just in time. It's not avoiding lay down or staging areas. You will use lay down or staging yards in a strategic way. 

If not you'll have unevenness from waiting on materials. If you bring materials too soon you have excess inventory which causes the eight waste in construction. If you bring them too late you will cause delays. 

These errors are caused by value stream mapping or deliveries. Value stream mapping removes all non-value add activities in the value stream which means that we no longer have a true understanding of the passage of time for certain activities. In supply chain management the process of using a staging yard would be categorized as such and so let me make a point. 

If you so the ideal is design it by a detail and prove it make it transport it to the place of work and when you value stream map it would be make it transport it offload it stage it load it transport it take it to the place of work and three of those are waste so value stream mapping would say get rid of it. But when you actually run the numbers using a lay down area is is beneficial because it's better to have the wasted motion and cost of having a lay down yard than it is to have workers waiting on worker materials. The problem with this thinking meaning that value stream mapping can just get rid of our lay down yards is that it does not look at the whole story. 

The waste from using a lay down or staging yard may be a lot less than the effect of not having the materials when you need them. So for long lead items with high amounts of risk you may want to order them to arrive a period of time before your install. It's all about analyzing risks and dollars, possible situations. 

Costs from lay down are greater than the cost from unavailability and the risk of causing delays or the cost from doing a lay down yard are less than the cost from the availability risk causing delays. So you've got to analyze the dollars. Basically the bottom line is the vendor will make it transport it offload it if they use a lay down area which would include staging loading transporting and then take it to the place at work just in time. 

That would mean that you have to have a material inventory buffer. So the buffer in the log represents the amount of materials you want on site and for how long before the install. So here are some warnings. 

You may have realized this means procurement efforts and order dates need to be moved forward, meaning forward in the schedule. That is correct as long as you could take into consideration the following points. One, don't blindly accept long lead items. 

Find out what the actual cycle time is to produce your product pieces and the actual lead time and take appropriate action to reduce the length of different steps in the process. Don't underestimate the power of a phone call and increasing the human connection to understand how the process can be expedited. Two, don't overburden the supply chain. 

Most of the effects realized from the COVID-19 pandemic were not from the pandemic itself. It was from the panic that ensued that caused over ordering ordering incorrect materials ordering too much and ordering way too soon as a reaction. As Peter Senga explains in his book The Fifth Discipline, the entire construction market is a complex system and the variation from pushing, rushing and panicking will increase lead times. 

You will have the vendor deliver some materials such as drywall, screws, lumber and other readily available materials directly to the zone and deliver long lead high risk items like curtain wall elevators and electrical gear to a staging yard, all in the appropriate amounts. The point with just in time is to bring only the materials you need for that day's work to the zone from the vendor or staging yard. Anything more will mean wasting time with moving at multiple times and possibly damaging it. 

Ignoring just in time delivery principles means a loss in production. So let's talk about procurement meetings here real quick before we get done. These discussions will take place in the strategic planning and procurement meeting. 

You may recognize this from the TAC book. Here is the overview. In the book I explained that the strategic planning and procurement meeting is either a part of your team weekly tactical but preferably on Monday. 

It's a first planner meeting where long-term planning takes place and the master schedule is updated and work is made ready for the look-ahead schedule and procurement is intentionally managed. And so one of the main things we want to do here is make sure that we're managing the procurement log or the long lead items in your actual production plan. So in this meeting the team will discuss procurement at least once a week and artfully manage and engineer the supply chain. 

This is beyond a review and discussion. This is a deep dive to control the system. You will complete the following steps. 

Review the log, review the schedule, do a page flip, call vendors, map out the supply chain steps, analyze the value stream, pull up the model, use VDC to audit the project materials, dig into large problems, solve problems to recover the supply chain. And then lastly, information. Managing procurement extends beyond materials. 

You need to be procuring the training, tools, equipment and information that goes with your material. Track and provide the following to ensure that you have designed and understood the entire work package. Complete shop drawings, complete submittal packages, lift drawings if necessary, a visual quality board from the pre-con meeting, installation instructions and training, distributed and posted RFIs, real-time pricing information and approvals.

Okay, so that is the procurement section. Let's do the reflection. The purpose of this component is to supply your production plan with materials, tools, equipment and information. 

If you don't have a supply chain production system in place you will struggle on site. With a good procurement system you'll always have what you need. Without it you can expect to wait on materials and therefore experience stops, restarts, delays and an overburdened project. 

Never leave this component of construction to your trades. It is your job to manage procurement on the project with them. Component scoring 1 to 100%.

One, do you have a procurement system on your project? Two, do you have a way to track procurement on a log software or visual? Three, are you recovering delays in the supply chain proactively as you notice problems real-time? Four, have you designed the use of lay down and staging yards with any associated material inventory buffers? Five, are you effectively meeting with your team to manage procurement? Six, are you using buffers in your procurement efforts? Seven, are you bringing materials out just in time? Eight, are you focused on information and materials in your efforts? Nine, have you leveraged virtual design and construction in your efforts? What is your final score taking the average of all answers? If your score is below 80% what specific actions do you need to take to elevate your team and leadership? Okay everybody we're done with this section. Next one is all about prefabrication and I'll see you there. On we go. 

Please join us next time in elevating the entire construction experience for workers, leaders and companies coast to coast. If you're enjoying the show, please feel free to share with your construction colleagues and help us spread the word by rating, subscribing and leaving a review on your preferred podcast listening platform. We really appreciate it. 

We'll catch you next time on the Elevate Construction Podcast.