Agility, Leanness or Leagility?
A Thought Leadership piece by Martyn Jones.
Did the authors of the Rethinking Construction report, published in 1998, take sufficient account of the specificities of construction when advocating a Lean form of Supply Chain Management (LSCM)? Were the recommendations of the Egan Task Force based too much on the success of SCM in a resurgent, process-based UK automotive industry?
The members of the Egan Task force were greatly influenced by the radical changes and improvements seen in other industries, particularly the success of Lean Supply Chain Management (LSCM) in the automotive industry. This meant that the Lean form of Supply Chain Management came to dominate thinking in the procurement and management of construction supply chains.
The Egan report was both forthright in its criticism of the industry and radical in its proposals for change. At that time, it was the most explicit presentation of the key features of the emerging techno-economic paradigm to construction. Many in construction found it excitingly seductive too as it seemed to address our longstanding weaknesses and open up opportunities to improve our performance in relation to a range of outcomes including quality, productivity, and health and safety.
The focus was on greater customer focus and more collaborative inter-organisational relationships across our supply chains to achieve more profitable outcomes and competitive advantage for all parties in the chain. It prescribed the building of highly transparent, trusting and long-term relationships between buyers and suppliers to create a physically and socially efficient value chain through the reduction of waste in processes and/or an increase in responsiveness and greater collaboration in product delivery.
But here’s the question? Given the dominance of LSCM thinking, its success in other industries such as the automotive industry, and given the opinion of many in construction that it was a way to tackle many of construction’s weaknesses, why has it proven – with a few notable exceptions such as the supermarket building programmes of the 1990s and 2000s – to be so troublesome to implement and sustain in much of construction?
One of the reasons is that Egan’s report (and indeed the whole approach) is not without criticisms. It was seen by some as being too dominated by big organisations – particularly regular and experienced clients with large and frequent pipelines of demand for construction products and services. It was based on a LSCM approach that was more suited to process-based industries and without any discussion of the alternative – the Agile approach to Supply Chain Management – which could be seen as more appropriate for project-based construction.
So back in 1998, did Egan invite us to back the wrong horse in the SCM Stakes? Was there another more appropriate runner and rider in the paddock: The Agile approach to SCM (ASCM)? The proponents of this approach argue that LSCM only makes sense under certain circumstances: where demand is predictable, the requirement for variety is low, and volume is high. They argue that an alternative is needed in unpredictable, volatile, highly customised and low market volumes – as in the case in most of the construction market
As professor Martin Christopher argued back in 2000, “There are certain conditions where a Lean approach makes sense … the problems arise when we attempt to implant the philosophy into situations where demand is less predictable [and] requirements for variety is high …[As a result many] firms have been misguided in their attempts to adopt a lean model in conditions where it is not suited”.
Where demand is volatile and variable, as in much of construction, the elimination of waste is a lower priority than responding to the needs of dynamic markets. Such markets require innovative and market-responsive (or Agile) Supply Chain Management (ASCM) approaches supported by higher margins as shown in the following table.
An examination of the table suggests that at best, it is only those parts of the construction market where the nature of construction spend is regular and ongoing and the relationships between buyers and suppliers are continuous and long-term that are able to fully adopt and sustain LSCM. Where irregular customers require high quality, complex and highly customised products with high-information and value-adding content that require the mobilisation of scarce competencies and the synthesis of diverse technologies then agility is more appropriate.
Agile is also now being seen as more responsive to social and environmental issues, more accommodating of change and uncertainty, and intra- and inter-enterprise integration. Given the necessary tools and support, agile teams, sustained through regular intervals or pauses for fine-tuning of behaviours, can be trusted and empowered to creatively accomplish project goals.
So, what’s best for your supply chains? Lean or Agile? Lean techniques are designed to improve predictable or repeatable actions while Agile works better for innovation projects and original creativity, which are not so easy to manage in a repeatable way. This means that the choice of approach very much depends on the nature of your supply chains and more specifically the volume and frequency of your workflow.
For example, if you are making greater use of the offsite manufacture of standardised components and processes then a Lean approach may suit you best. If you are seeking creativity to tackle say carbon reduction, then an Agile approach may be more appropriate.
And it might not be a case of either/or. You might think about mobilising both Lean and Agile approaches in different parts of your development process and supply chains, with say Agile being dominant upstream to customers and Lean being applied downstream with key and frequently used specialist suppliers. This synergistic blend of Leaness and Agility has given rise to a new form of Supply Chain Management – Leagility.
What can we draw from this? The form of SCM used is very much dependent on context and that collaboration based on trust is essential to the success of Lean, Agile and Leagility approaches. Construction’s customers often procure more on the basis of cost rather than the capability of resources, whilst expecting their suppliers to operate with agility but on lean margins.