Application of Lean Production Approach in Integrated Project Scheduling Management

Construction project management focuses on the completion on time, ensuring committed quality, and within budget plan. Delay is one of the major problems in construction projects which is defined as the excess time in completing the project as specified in the contract, or project delivery commitments of the parties. Consequences of delay are different for different parties. As for the owner side, delay means loss of revenue due to late operation of the properties and unavailability of the facilities. To the contractor, delay causes increasing overhead and preliminaries costs, higher material costs by inflation, and due to labor cost increases. Delays can also lead serious effects such as lawsuits between the owners and contractors or contract termination. The effects of delay is illustrated below. 

There are lots of researches which have been conducted in different countries with the result that delay problem is a common phenomenon in the construction project; it is more severe in developing countries and Vietnam is not an exception. According to many studies, there are many causes of delay, in which, ineffective planning and scheduling of project by contractor is a major factor because they used so many inadequate assumptions and estimations. Thus, application a right process in project scheduling is essential requirement to improve the delay problem.

Mr. Le Viet Hoa made a research aimed to introduce Lean Production theory and its application in construction projects in Vietnam. It is believed to bring an innovation in the scheduling process. The objectives of his were to: (i) study the theory of Lean Production; (ii) study the application of Lean Production in integrated project scheduling management; and (iii) discuss the benefits and obstacles in applying Lean Production theory in construction project scheduling.

Conclusion

The study introduced current practice in project scheduling management and how to apply the Last Planner System. As the result, the application this theory has so many benefits and obstacles to the construction project.

   

To remove those obstacles, training will be a key factor. All related workers and staff should undergo formal training on how to use this tool in a convenient and efficient way. Although training can lead to increase workload in the early stages of implementation, however, in the long term, it will serve to improve the efficiency of the construction companies and constitute an investment cost from the original training.

Furthermore, there are some issues that would be considered to follow for increasing the success rate of implementation:

-          If the LPS are not carried out in a systematic manner, it will fail. However, the project documents must be fully completed and discussed weekly;

-          The Project Manager must control the LPS, the organizations still needed approval against unsatisfactory performance.

-          The LPS will highlight which of teams don’t perform well. If the data will not be used for  managing performance, the LPS will be discredited and lost benefits; and

-          The LPS will bring out the poor Project Managers. This can trigger training and reassignment.

The thesis abstract is copied and pasted below.

Abstract 

Construction industry in the world in general and in Vietnam in particular is one of the sectors with the greatest contribution to the development of the national economy over the past decades and it also played an important role in creating jobs for employers in the country. However, the industry was faced with poor performance, low productivity, bad quality, delays and cost overruns. With the desire to reduce waste, overproduction and create value added for customers. Lean construction has developed in recent times for the construction sector by increasing the efficiency of the construction process by improving the production process and control the workflow in the construction activities.

Lean construction has been studied and applied successfully in several companies of the western countries and it is a topic that many scholars have been investing effort to further research and applied more effectively. This study tends to introduce the application of Lean construction contractors and construction managers in Vietnam to be able to use and combine other tools to improve project performance.

Manufacturing and Construction have significant characteristics different. In manufacturing, regularly finished products after ex-factory will be transported to the consumers through the distribution channels are wholesalers to the retailers by logistics network systems. In contrast, construction products, great value and cannot be transported. In addition, the construction industry is composed of three important features that is completely different to other industries which are: Onsite production, one-of-a-kind projects, and complexity. Therefore, although the Lean Production was implemented very successfully after the Second World War but the Lean Construction theory is still being developed.

EFFECTIVE PROJECT CULTURE FOR INTERNATIONAL LARGE CONSTRUCTION PROJECTS

SEMINAR

EFFECTIVE PROJECT CULTURE FOR INTERNATIONAL LARGE CONSTRUCTION PROJECTS

By

Dr. Hadikusumo, CEIM/MPM Coordinator

On 20 Jan 2013, MPM program organized monthly technical seminar with topic for this month is: Effective Project Culture for International Large Construction Projects with the participation of more than 30 participants with many nationalities.

During seminar, Dr. Hadikusumo shared about Large Construction Projects have been perceived as high risks and complex processes. The risks involved technical, commercial and political risks.  And, the processes included Conceptuael, Design, and Construction to Commissioning processes. The situation will get more complicated whn people with different cultures work together in a project. Thus, the understanding and management of cultural dimensions are of paramount important to put people to work together in harmony the complex construction processes. 

Visit An Giang provinces and Da Nang city of MPM delegation

Visit An Giang provinces and Da Nang city of AITVN/ MPM delegation

Last 17/01/2013, AIT delegation has organized a visit to Center for Promotion of Human Resources Development, The People's Committee of Da Nang city, Da Nang city to explore the potential corporation between AIT and Da Nang city for high level human resources development.

From Left to right: Dr. Hadikusumo, Ms. Tuong, Ms. Hoa, Dr. Amrit Bart (AITVN) and CPHUD representative

Next event, on 18/01/2013, AITVN also had a meeting with An Giang university to finalize the Memo of Understanding so that AIT and An Giang University can start for our cooperation. Professional Master Program in Project Management in Construction will be a first program launched at An Giang very soon this year.

Dr. Amrit Bart, AITVN Director and Dr. Hoang Xuan Quang, Viec-Rector of An Giang University

Project Management Approaches of a Japanese Construction Company In Vietnam: Procurement Management, Organizational Structure, Subcontractors Management, Customers Management and Safety Control

Japanese contractors have been setting up their companies in Vietnam since 1990 and operating successfully with many buildings finished on schedule with good performances. Although Japanese contractors have created a good reputation with Japanese standard quality and on time delivery, there have been some problems remained in their system that the report was analyze in terms of Procurement Management, Organizational Structure, Sub-contractors Management, Customer Management, and Safety Control. Mr. Le Hoang Nguyen focused on the following problems:

1. Procurement or project delivery type of the Japanese contractors is Design & Build.

2. The organization structure of the Japanese contractors is usually too simple to meet all the requirements such as safety and QA/QC properly.
3. The owner – the main contractor – subcontractors – suppliers can form a supply chain.
4. The most important thing, how to control safety matters following the safety plan in the actual Vietnamese conditions with local subcontractors.

In conclusion, by analyzing the current project management approaches in Japanese construction companies in terms of procurement management, organization management, sub-contractors management, customer management and safety control, the report will find out strengths & weaknesses of the existing system and recommend for improvements.

The objectives of this case study were to : (i) study the current practices in Japanese contractors in Vietnam in term of Procurement Management, Organizational Structure Management, Sub-contractors Management, Customer Management, and Safety Control; (ii) investigate for an efficiency of organization set up; (iii) find out strength and weakness of the current system; and (iv) recommend approaches for improvements.

Conclusion

Basically, through the analysis of the current project management approaches the strengths and weaknesses of the current system were found at some points. Although the report shows the efficiency of the existing organization and the management system, in conclusion, the mentioned above project managements was reviewed and some approaches are recommended for improvements.

1. Procurement Management and organizational structure

Design & Build with lump sum contract and fast-track management is still the strong point of this type of procurement. This is based on the relationship and trust. Though, the high cost and risk are the remained issues need to be improved to increase the contractor’s competitiveness. There are some proposed approaches such as breaking down the scopes of work into smaller scopes with specialty suppliers, direct purchasing for main materials, equipments and machines. As a result, the direct cost could be reduced considerably.

As the demands of the procurement system, the organizational structure has some related issues. The organization is too simple to cover all the required works in terms of technical issues, construction works, QA/QC, safety matters and purchasing orders. In the proposal, the organizational structure should include necessary departments: Technical Department included QA/QC and Safety departments, Construction Department, Commercial Department with Procurement Department, Administration Department and Accounting Department etc.

The concerned issue is that how to localize the management in the Japanese construction companies in Vietnam. The return of the localization the management could be the cost reduction, better communication, management and/ or coordination between local staffs & different departments and local suppliers, subcontractors, consultants. This is essential to form a supply chain network.

2. Sub-contractors management and customer management

As a matter of fact, in a general view, subcontractors – main contractor – customers form a supply chain network through project by project. So, the importance of relationships, between the client and the contractor, the contractor and the subcontractors should be understood properly. Moreover, the relationship should be focused on improving performance and adding value to the process.

In order to achieve the above targets, the following approaches could be applied.

First, at least three companies of each supplier, subcontractor and consultant should be considered, evaluated and then maintained for every project to have the best competitive price and performance delivery. Second, co-operations with supplier, subcontractor and consultant should be in more than one project in order to incorporate the knowledge into the new project and achieve continual improvement. Third, long-term relationship with the subcontractors should be considered and maintained in the concept of supply chain network by keeping payments on schedule and variations approval and any necessary supports at the right time of need. In other word, the Japanese contractor has to play the main role as the chairman in every meeting and co-ordinations in terms of time, cost, quality, and safety control in all the phases of the project.

Customers are almost the Japanese companies, the unique specific characteristic in Japanese contractor. Because of the increasing critical competition, the demand is that how to get jobs from non-Japanese customers. Achieved this target, the Japanese contractors not only could increase their competitiveness with local contractors but also expand the supply chain network.

3. Safety control

Finally and the most importance is safety first, the much different thing compared with local contractors. Safety control at jobsite is follow the company safety policy, safety targets and safety plan with specific measures and safety construction cycle in daily, weekly and monthly. However, the following recommendations should be considered.

First, the safety policy should include all of business activities, and the organization should be set up to make sure the safety plan is implemented seriously sufficiently and efficiently.

Second, planning and implementing safety targets should get agreements with managers and supervisors to make sure the targets are achievable. In addition, purchasing and supply policy should be taken into account too.

Finally, for continual improvement, not only safety construction cycle is implemented regularly but also PDCA (Plan-Do-Check-Action) circle should be applied continuously. Moreover, health and environment matters should be taken care of and applied at jobsite for a better working and living environment.

His thesis abstract is copied and pasted below.

Abstract

Vietnam construction industry has been developing significantly since 1990 with more and more high-rise buildings and factories built in Ho Chi Minh City, Hanoi, Da Nang, Can Tho and other cities due to continuously increasing demands in economical, cultural and social aspects. Foreign contractors found this big chance and set up their company in Vietnam at the right time. Among them are Japanese contractors such as Kazima Corporation, Shimizu Corporation, Obayashi Corporation, Fujita Corporation, and Taisei Corporation, which have been operating over fifteen years in mainly the industrial buildings section. As the result, the competition between the contractors, local and foreign companies, has been increasing dramatically. So the most challenge for the Japanese

contractors in Vietnam is how to increase efficiency, competitiveness and sustainable development.

For these purposes, this report will analyze the current project management approaches in Japanese contractors in Vietnam in terms of:

1. Procurement Management.

2. Organizational structure.
3. Sub-contractors Management.
4. Customers Management.
5. Safety Control.

Finally, in comparison with the theory and practices, the report will point out the strengths and weaknesses of the existing management system in comparison with the local companies, then recommend for improvement approaches that could be applied in Vietnam.

Factors Affecting Financial Performance of a Project in Times of Economic Crisis: A Case Study of Commercial and Office Center Projects in Ho Chi Minh City

Since Vietnam joined the WTO (1/2007), it fully entered international integration. According to the foreign investment inflow to Vietnam, a lot of multinational enterprises were established and opened the prospects of office and retail area for lease. Many businesses invested in real estate in the past. Thus, a supply of leasable sector has increased sharply for two years and became saturated. Actually, it is too difficult when Vietnam is influenced by crisis of the world economy which leads to a lower growth of domestic economy, high inflation, and tight monetary policy. Business reduces the operation scale, the investors limit expansion, and demand for office and retail area reduces.

Besides, according to the investment researches of consulting firms, the potential retail in Vietnam is attracted by crowded and young population, who is dynamic, open, and potential for consumption market.

Although Vietnam population is approximately 90 million, but there are only 638 supermarkets, 120 commercial centres and more than 2,000 convenient stores. This number does not meet the needs of people. Forecast, from now to 2014, the retail sales in Vietnam will be increased 23% per year. Therefore, the potential of modern commercial business development is huge.

Consequently, in order to take the potential advantages of the Vietnam real estate as well as to help the market to overcome gradually difficulties during the economic downturn, it is necessary to consider the factors affecting the investment efficiently, especially the project’s financial performance, by which to set up the preventive plan. Develop projects, which strengthen the real estate market more stable and developing.

Ms. Hoang Quynh Anh made a case study which 2 main objectives were to: (i) research the factors that affect to the financial efficiency of the commercial real estate project commercial in the recession economy period; and (ii) give measures to minimize the effect of factors on financial efficiency of the project.

Conclusion

Each factor has a negative impact on the efficiency of investment project. According to the detailed solutions, the investors need to implement the project and in mid-2013 by using the following reasons:

- The positive signal from the government’s measures to restrain inflation, contributed to the project’s financial picture brighter, inflation falls down under 10%, the interest rate remains at 9%, economy grows slowly but it has progressed through each quarter;

-   Vietnam is a market with the great potential advantages of young population and high flexibility, rapid urbanization. Mostly investors and investment advisory companies have said that if the difficulties of the real estate market are temporary, it can be completely recovered when the economy has positive changes.

- Real estate is a high profitable sector.

Besides, the Vietnam real estate market is facing to the below challenges:

- The impact of the world economic crisis and Vietnam economic crisis are still prolong;

- The government’s solution has not brought the clear results yet;

- The competition between investors about reducing rental due to the rise of supply source of leasing area.

When the economic difficulties led to the crisis, real estate investment projects have been influenced heavily and may fail completely. In terms of the financial performance of the project, for instance, the project is not profitable for investors. The factors affect to the financial performance of the project during the period of economic crisis including exchange rate; inflation; interest rate; construction period; total capital; capital structure; occupancy rate; and rental.  When the economy is difficult, these factors are not guaranteed to initial expected value and change in bad direction, affect to the entire cash flow, financial indexes change negatively. To solve this problem, proposed solution is based on the relationship between factors and project cash flow, throughout the theories of basic financial calculation, determining the degree of change of financial performance when it has been influenced by these factors which have the solutions for each factor.

However, there are some limitations in this study. Firstly, the study does not consider the influence of some other type of real estate such as: apartments, townhouses, hotels, etc. Secondly, calculation depending on the accuracy of input data does not anticipate all risks.

Recommendations

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For the purpose of preventing harm to the financial performance of the project when the economy is difficult, recommendations are as follows:

- Surveying market and assessing demands to have the investment orientation proper in the feasibility study phase of the project.

- Completing marketing at the beginning of project, saving marketing cost by selecting the form of effective advertising such as: internet, attend exhibitions, contacting customer, attractive commission order.

- Increasing number of customer by establishing the principle contract, using memorandum of commitment after the project completes;

- Having preferential policies on rents, having convenient administrative procedures, lasting the rental period to pre-order customers, committing about quality after selling. 

- Researching the product and service properties of the same type on the market, researching demands, purchasing power and taste of customers to offer the reasonable price, adjusting price according to the volatility of the market.

- Having  financial plan, mobilization channel finance flexibility, reducing the dependence on bank;

- Taking advantage of supporting to the State policies on interest rate, tax… when the economy is difficult;

- Completing the project on the schedule for project operate quickly, early generating revenue;   

- Ensuring quality construction, do not increase cost and time due to repair of the damage, reducing maintenance cost when the project puts into operation;

- In the operation phase, it is necessary to establish management organization compact, transparency in administration, training institutions for the necessary technical personnel, saving cost.

According to the above solutions, developers should take all measures, since these solutions have been affecting to each stage of the project, and the final result is the success of the project. However, developers need to pay special attention to two factors below:

- Surveying market and assessing needs of market in the feasibility study phase of the project in order to direct the appropriate investment. This is crucial element lead to the success of the project. Therefore, the survey data must be accurate and updated, information supply must be reliable.

- Developers need to make effective financial plan to backup all risks and to reduce dependence on bank. This will help the project escapes from the difficult circumstances, because finance is an important factor for investment decisions.

 

Paying attention to two above factors, along with research methods, professional calculation will give the project approach to success.

 

For further studies the following should be analyzed:

- Making the financial plans to ensure the safety of the project, increasing the diverse capital such as issue of shares, taking advantage of customer deposits, bank debt agreement…

- Extending the study in some types of real estate such as apartment, hotel, downtown house, land…

Continue studying the influence of the factors of inflation and exchange rates which these indicators affect to the entire cash flow of the project.

Her thesis abstract is copied and posted below:

Abstract

Controlling the financial performance of a project as the economy fell to recession is very difficult, how a project can achieve profitability as planned? This is really challenging and time-consuming for the financial management of the project, since it involves to a wide range of issues within the project and the objective problems of social. To answer this question, it is necessary to determine what factors affect to the project finance in the circumstance of the economic stagnation. This final report focuses on review how the financial performance of a project changes when the input data changes, thereby determining the factors affect the financial performance. Through a case study is a construction project of commercial and office centre in HoChiMinh City, according to the basic financial calculation theories, the report points out the factors that affect financial performance of the project when the economy is difficult. Since then, giving some measures to improve the situation, maintain and develop the project.