As part of the revitalization of downtown St Louis, Bell Electrical Contractors, Maryland Heights, Mo, has worked on conversion and renovation of older multistory buildings into condominiums; at the start of one project, workers used the basement of the building as a storage area.
“We’d have 100 light fixtures shipped to the basement, and when we needed some, we’d send someone down to get them,” said Charlie Pavelec, project manager, Bell Electrical Contractors. “The problem was that our guys were constantly waiting for use of the elevator and often had to wait because they were sharing it with other trades. If they got the wrong part or were missing a part, they would have to go down again. It was taking too much time.”
Could Pavelec’s system be changed to be more efficient? He thought so. After working with MCA Inc., a consulting firm, he began to consider alternatives, met with his project management team and did a process evaluation. The resulting plan mandated that Bell Electrical employees assemble all materials needed for particular tasks into a kit at the off-site company warehouse. Employees then transported the kits in a container to the job site. According to Pavelec, the new system saved the company 5 to 10 percent in labor costs. “If you have a 10,000-man-hour project, and you can save 1,000 hours, that’s impressive,” he said.
Every job requires materials management, and all contractors know the travails associated with the task. Who hasn’t witnessed a work slowdown because materials were not on-site when needed? And what company hasn’t paid for multiple transports of materials to and from a job site or multiple handling of the same materials that were not used or incorrectly ordered? The goal for contractors is to have the right amount of material on-site and to handle it efficiently. Too much inventory on the site can cause problems. It can be prone to damage or loss through theft or misplacement. There can be a decrease in profit if too many job hours are spent handling it. Too little inventory can also result in a loss of productivity since scheduled tasks can’t be completed in the planned timeline. Yet what is the proper balance? And what if there is too little room on-site to store materials?
MCA Inc., was commissioned by Electri International—The Foundation for Electrical Construction Inc.—to study and write a report on the impact of the use of job site inventory and on-site warehousing as buffers against the unpredictable nature of the work flow and schedule. As part of the research, the report authors, Dr. Perry Daneshgari and Phil Nimmo, interviewed job foremen to determine ways to improve productivity. Their research found that about 40 percent of an electrical contractor’s labor time is spent on material handling—time that could be used for installation.
“We know for a fact that if you manage the materials based on need on the job site, you’ll have that labor available for installation rather than handling and moving material or doing returns or dealing with damaged materials,” Daneshgari said. “We found that having materials on-site for a three-day period was the most efficient practice. If companies order materials from distributors for same-day or next-day delivery, the accuracy of getting the material when, how and where they want it is 63 percent. For second-day delivery, the results rose to 95 percent. For third day, it rose to 99 percent, which means that a company would have enough of a buffer on the job site so that the labor that would need to be done for that day or the next two could be done.”
Research for the report focused on current practices with an eye to determining ideal practices.
“There is a profound difference in productivity,” Nimmo said, “based on whether contractors are working on their primary plan, the one for that day, or an alternate, a contingency or emergency plan. If a contractor does not have the material for the job they need to do on that day, they have to move onto what task can be done with the available material. Productivity is not as high if they can’t do the primary plan since that affects the flow of the job. However, one size doesn’t fit all. Philosophies of contractors are very different, but it looks as though several of them are comfortable with either maintaining a small buffer of materials at their shop or working with a vendor partner who stages the materials on-site or close by at their location.”
Contractors interviewed for this article both use on-site warehouses and vendor partnerships, depending on the project situation and their general practices.
“We do some on-site warehousing just for larger projects because of the massive amounts of materials that we need,” said Gary Laidman, project manager, ESI Electrical Contractors of Ohio, who is currently at work on a $16 million project, the new heart center at the Cleveland Clinic, Cleveland. “At the clinic, they don’t allow us to overstock because of the limited space that we have and because it would get in the way of the other trades. So we put together a warehouse area and have one of our employees in charge of it who orders materials and works with suppliers and brings materials in as we are using them.
“We work with multiple distributors depending on the products. We buy some materials from one supplier and conduit from another that is all delivered to a central staging warehouse. With conduit, we have a particular system. After it is delivered to the site, we use cranes on-site to put it on the floors we’re working on so we can easily use it. It all works out quite well,” he said.
While in that case, ESI Electrical Contractors has both an on-site warehouse and use of the job site for storage, on projects of other contractors, space is more limited. Frank Miller, project manager, Dynalectric, Los Alamitos, Calif., who oversaw construction of the Four Seasons Westlake Hotel and Spa in Westlake, Calif., shares his experience.
“Basically most projects have some … on-site warehousing, some storage of materials on-site, but today owners are building wall to wall, property line to property line,” Miller said. The only on-site warehousing for the Four Seasons Westlake project was a container used to store conduit and wire and basic electrical materials. The owner, who purchased all the lighting fixtures, provided off-site warehouses to house those materials.
“We can’t and don’t stockpile the whole job. We order material for on-time delivery and installation, so we don’t have huge storage problems anymore. We order and release materials as we need them,” Miller said.
Some of the contractors interviewed had varying results in working with vendor partners.
“To be honest, we haven’t found on-site warehousing provided by a vendor to be too efficient,” said Bob Riel, vice president, Dynalectric, San Diego. “We’ve tried having the supplier put up a mini supply store, and there are some advantages, but we don’t do it anymore. The advantage is that it is a nice place to get materials, and we don’t have to order because they keep standard quantities that we want, but, in our opinion, you are tying yourself to one supplier and may not necessarily get the best price. If the supplier you are working with has a problem, you still have to go outside to get it.”
Another electrical contractor that had vendor partnerships with two distributors ran into a different problem. According to the agreement between the contractor and the vendor, the vendor would receive materials at their site, package it and deliver it when needed to the job site. Unfortunately, the vendor personnel didn’t do the things the contractor felt was necessary in terms of identifying or correctly labeling parts and pieces leading to confusion when the materials arrived on-site. In addition, the distributor didn’t provide adequate ongoing verification of the delivery of materials and in some cases didn’t order all of the correct materials. While the contractor was enthusiastic about the idea of working with a vendor partner, it found fault with the execution.
Collaboration between contractor and vendor can be a challenge. “Traditionally, the relationship between the distributor and the contractor has been antagonistic,” Daneshgari said. “We found that both can increase their profit by decreasing their labor costs, but they have to cooperate in order to do that,” he added.
Collins Electrical Co., Stockton, Calif., is an example of a company that had a positive experience with a vendor partnership. The company solicited several experienced on-site management distributors in order to determine ways to streamline their procedures.
“Our ultimate goal was to get the materials in front of the installers and do anything to become more efficient, including not bringing materials back after a project,” said Brian Gini, vice president and Modesto, Calif., branch manager, Collins Electrical Co.
With that in mind, the company embarked on construction of a new Kaiser Medical Center in Modesto. In the process, it negotiated terms, unit pricing and quantity levels with the distributor, Graybar Electric, who provided on-site warehousing and services with an on-site Graybar employee as manager.
“Looking back, it is one of the best upfront strategies we put together for the material movement and management,” said Gini. “We attribute it to a collaborative partnership of field and office management, preplanning with the foreman on the job and collective participation between Graybar and Collins Electrical in executing the material movement.”
Since Graybar also transported materials from an off-site facility where Collins Electrical’s employees prefabricated some materials, there was an issue of who should be handling the product: the electricians or the distributor? To make it possible for the distributor’s employees to do some of the materials handling, Collins worked with the local union, the general contractor and the owner so that the on-site services were a standard practice on the project.
“There was a cost associated with it, and we were a little apprehensive at first,” Gini said. “But in the end, I think our management and our office realized the benefits of such a program. Besides having one of their people full-time on the job, Graybar had all their hardware, their connectivity and ordering programs on-site, similar to those in their local warehouse. It saved us money in terms of efficiency. We had the materials there when the men needed them. Since we were not charged for materials unless we took them out of the trailer, the closeout saved us because we were not bringing unused materials back to our warehouse.”
Bottom line? On-site warehousing and materials handling—either done by a contractors’ own crew or in partnership with a vendor—calls for careful preplanning, execution and follow through in order to have an impact on the profit margin. EC
CASEY, author of “Kids Inventing! A Handbook for Young Inventors” and “Women Invent! Two Centuries of Discoveries that Have Changed Our World,” can be reached at email@example.com or www.susancaseybooks.com.