Masonry Magazine April 1993 Page. 16
Why TQM In Construction?
No longer a back burner issue in the construction industry, TQM must become a major strategic objective for any company that hopes to succeed in the nineties.
BECOMING the low cost provider of construction services is the best strategy for winning profitable projects. That's obvious, but not easy. Today, all contractors face a significant challenge in maintaining profitability in a constantly changing construction environment. Only those who successfully meet this challenge will survive.
Current trends in the construction industry result in increased competition, new obstacles to productivity, and new problems to overcome. Implementing a TQM process allows a company to respond to these challenges by building proactive partnerships, lowering costs, and establishing corporate cultures that attract and retain the best people.
The industry's awareness of the need for quality management has been heightened by the four-year-old Malcolm Baldrige Award for Quality. Most Fortune 500 firms actively pursue this award each year. As a result, these firms want to work with suppliers, including contractors, who are implementing their own TQM processes.
TQM is no longer a back-burner issue in the construction industry. It must become a major strategic objective for any company that hopes to succeed. In 1991, over 1,200 construction industry executives came to FMI for assistance with TQM. Here's a sampling of their results to date: Within the first six months, a $75MM general contractor implemented twenty-one percent of the "opportunities for improvement" (OFÍs) generated by its employees. Cost of improvements, $24,900. Monitored, annualized savings, $209,000. A $30MM mechanical contractor reduced inventory by two-thirds ($400,000) during the first twelve months of its continuous improvement process.
A subcontractor implemented the TQM process on a $10MM project. Work Smart Teams reduced labor costs by $9,500/week or $494,000 annually.
A $5MM division of a utility contractor reduced small tool expense thirty percent within three months of initiating its TQM process.
A work team improved a fabrication process. Cost for all changes, $4,030; savings per month, $3,924, or a payback of a little over one month.
Total Quality Management manages continuous improvement within a construction company. Those companies who apply it effectively will become more competitive, more productive, and more profitable.
A Case Study on Implementing TQM
Study cites return on investment of well over two-hundred percent, and remarkable improvements in internal and external working relationships.
An actual case study on implementing a TQM process within a contracting firm. The contractor described in the study has chosen to remain anonymous; therefore the company's actual name isn't used.
IN EARLY 1991, ABC Construction Company, a $100-million general contractor, had just completed their biggest volume year in the company's history. However, profitability wasn't keeping pace with growth in volume, and local market conditions were beginning to change. Once loyal customers, who had previously negotiated all their work with ABC, were beginning to feel the pressures of the economic downturn.
ABC was now faced with increased competition in a market they had previously dominated. Through the years, they had developed a premier image in the high-end condominium market in southern Florida. ABC has a strong commitment to customer satisfaction that was evidenced by the loyalty of many of the major developers. With this image, ABC was also able to attract and hire the highest