When Your Construction Projects Go Lean, Make Sure Your Payments Do Too
More and more construction projects are going Lean. Based on principles first introduced into manufacturing and product management in post-World War II Japan, the Lean methodology was not widely embraced outside of the automotive industry, where it began, until the 1990s. In practice, Lean aims to boost efficiency and improve project outcomes with a focus on emphasizing value, promoting collaboration and reducing waste. This approach has grown in popularity within engineering and construction as project stakeholders at every level increasingly aim to achieve more with less.
Recently, industry publication Construction Dive spoke with Mike Stark, the executive director of knowledge programs and building markets with the Associated General Contractors of America, about the benefits of Lean Construction and how builders can incorporate these principles for the best results as projects grow more complex. Among other points, Stark points to the importance of collaboration, coordination and technology in a successful implementation of Lean principles. “At the core, Lean tries to maximize value and minimize waste, and efficiency is certainly part of that, but it's the coordination and collaborative aspect that's very important,” he told Construction Dive.
While normally discussed in the context of the planning and physical building process, the traditional construction payment process is filled with areas where embracing the kind of Lean principles Stark describes can significantly improve business practices and project delivery.
One way to understand the Lean approach is to break it down into the “Five S’s”: Sort, Simplify, Sweep, Standardize and Sustain.
Let’s look at those most relevant to payment management:
- Separate the essential from the no longer necessary and eliminate whatever’s not needed. Sorting isn’t limited to physical property and could be extended across business processes that are ripe for optimization. Consider traditional payment practices, for example. Many steps such as the verification of invoice information and calculations, management of compliance documents, exchange of lien waivers and even delivery of subcontractor payments can be automated through the use of a robust payment management solution.
- Identify a place for everything to maximize efficiency. The goal here is to cut down on the time it takes to find what’s needed to complete a task. Returning to the payment process context, how many versions/formats of pay applications does your company receive? What happens if there’s a change? How is the most current document identified? A smart payment management tool eliminates these questions by providing a shared virtual environment where stakeholders collaborate on processes. Cloud-based document storage ensures all associated documents are stored in one place and are up-to-date and easily accessible. Such an approach supports an important pillar of Lean building: transparency. Effective payment management requires having a level of visibility into activities to ensure that hidden problems – such as invalid compliance materials or missing lien waivers – don’t become much bigger problems. Furthermore, in a collaborative, coordinated and transparent approach to payment management, stakeholders know what they need to know when they need to know it, making communications much more efficient and effective. Again, the fundamental objective of eliminating unnecessary or redundant activities is achieved in accordance with Lean principles.
- Develop a system for continuing to practice the newly acquired Lean processes. Does every member of your team follow the same steps in processing a payment? If a key staff member were unavailable, would someone else be able to seamlessly fill in? Does everyone know how to find what they need, every time? Payment technology helps both general contractors and subcontractors normalize processes through the creation of standardized workflows and document processes, as well as user roles able to suit individual business needs.
- The final, and sometimes most difficult, step is embedding the changes made into an organization in a way that maintains and builds on the improvements achieved. Here is where the right technology partner can be a true partner in this effort. From standardizing streamlined/automated processes to providing ongoing customer service, the use of an industry-leading payment management solution can provide a sustainable – and highly scalable – way to manage processes that support Lean principles throughout an organization and across its portfolio.
Textura-Construction Payment Management™ is a collaboration software solution designed to drive efficiency, transparency and control into payment processes.
CPM® is a web-based, SaaS solution that integrates all construction payment management processes into a seamless online workflow, resulting in greater efficiency, reduced risk, and better visibility into financials and payment activities. In addition to facilitating invoicing and payments via direct electronic transfer, CPM improves other aspects of the payment process, most notably lien waiver collection, even at the sub-tier level. General contractors and subcontractors pursuing Lean initiatives benefit from CPM’s elimination of manual, paper-laden payment process steps. Limiting redundancy, increasing automation and creating the potential for value-added activities are just a few of the ways CPM can assist general contractors in embracing a Lean approach.