Construction Vs. Manufacturing. Who Wins?

poole_3

Please comment on the following article taken from the constructonomics blog. Thanks.


I found myself very interested in the cost of construction work today, so I made a very ambitious choice of looking at the cost of construction vs. the cost of another industry. And what industry should that be? Automobiles? Good choice, we'll compare the cost of construction from 1967 to 2o09 between construction and automobiles in the United States.

For construction, I used the Turner Construction Cost Index, put out by none other than Turner Construction. The index has been tracking construction costs every quarter since 1967. In 1967 the benchmark of 100 was set and now the index sits at about 900. Our industry has brought us an increase of 900% since 1967. So that's a lot...I mean, not that much...I mean, what is that?

I whipped out the spreadsheet and buckled down for an intense 60 seconds of figuring out the yearly increase in construction costs that this index is suggesting, and as a result, I came to the conclusion that according to Turner Construction, costs have increased 5.5% since 1967. Ok, I guess that's not terrible since inflation typically sits around 3%.

Now on to our friends and colleagues, the automakers. I took a rather crude approach to estimating this appreciation by looking at the average price of a new car in 1967 compared to 2009. In 1967 the average price of a new car was $2,750 (must have been nice) and the price of a new car now is $27,958. And this works out to........a 5.8% yearly appreciation. Hmm, I was expecting construction costs to far exceed autos in that time period.

There are some very obvious flaws to this methodology, for example, while construction costs and auto costs have increased at about the same rate, the auto industry has made tremendous strides in costs cutting and productivity improvements since 1967 while construction has lagged miserably. Perhaps an eventual look at earnings or profit margins between construction and automobiles could present a better picture as to what is actually happening.

These numbers could also be thrown off by a supply and demand difference between 1967 and now. For example, people now surely buy more cars per person and probably spend more as a percentage of income than they did in 1967, while this phenomenon may or may not be true for construction. I can see why it is nearly impossible to come to any clear conclusions when comparing things that are very different. Try controlling for all the variables in construction that differ from manufacturing - in fact, be my guest.

Anyway, I think a look at profits and productivity could be a good indication of what may be going on between auto makers and builders (maybe next time), and what I think we'll find is that manufacturing is kicking our severely fragmented, uncontrollable, disorganized, finger pointing, and litigating rear end. Perhaps we can pull ourselves off the canvas at the count of nine and fight back in a battle that would improve costs, quality, safety, and even profits to the construction industry.

SLSTech

Its your blog - thats my comment

Oh & you still need to fix your trade

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nlgutters

Your blog looks an a lot like publishers blog.

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rbsremodeling

I like it. Can you steal from a blog? how does that work? blogs steal from other sites? so your stealing from a crook?

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poole_3

You're correct. I'm promoting my construction industry blog called constructonomics. I'm stealing ideas from my mind and putting them on paper, but that is the only stealing going on. Does anyone have any comments on the actual content of the post because that is really what I'm interested in. Thanks.

poole_3

What do you mean fix my trade? I'm not sure what you mean.

willworkforbeer

You dont have to get snippy

silvertree

He might mean you have not convinced him your really a GC. Just a guess.
That SLS guy is rumored to be detail oriented.

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rbsremodeling

You have GC as your trade. We all know GC's can't read much less write a blog. When I click on a thread my screen has pop up pictures that explain whats going on

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SLSTech

From your blog - your trade = "recently laid off" & as I recall when I read it a few days ago when you posted your intro you worked in steel fabrication. (Quick side note - I hope you find work or your blog makes you enough money)

Right now you are doing a construction blog - you are not a GC, nor did you work as one. If you want honest answers - put down that you are steel fabrication & construction blogger or something similar or just plain construction blogger.

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orson

I don't see how there is a comparison between assembly line type manufacturing and construction.

Anyway, construction is way too broad a field to compare to anything, even iteself.

So basically you would like to see about the same variety in buildings as in automobiles, produce them all in an assembly line fashion and they can all be made by 6 or 7 huge companies with everyone doing the real work making 8 to 15 bucks an hour and executives making 150mil a year.

Whatever works for you, I actually like the fact that there is a huge variety of different styles and types of buildings and that we don't throw them in the trash and buy a new McHouse when the boiler breaks or the roof leaks.

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silvertree

You make an excellent point Orson. And the building industry would like us all to work cheap while the execs make 150 million a year. Its the American way. But in the guys defense his article is interesting to me and does make a point. I'm cutting the guy slack for his blog.

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OGStilts

Interesting yes....it caught my attention and got me to read it but makes no point that I can see.

He needs to finish his research and then finish his point. To me he seems to be saying that the auto industry is in better shape than the construction industry. Why is he suggesting this? As far as I know, the auto industry is about to become extinct in this country and last I heard the construction industry is and always has been one of the largest industries in the country.

He seems to be leaving it up the reader to complete the research for him. Why would I want to follow a blog like that?

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silvertree

Oh then, I thought his point was the construction industry as a whole follows fluid dynamics of a nature that makes it susceptible to to follow the errors of the auto industry.
Maybe I read too much into it.
But with Home Depot and Loews getting a large chunk of installed sales even when they deliver less and cost more than many competent small contractors I see a resemblance to the birth and growth of Ford, GM ect who delivered a lessor product and gained market share mostly by squashing competition. American cars have never been fine tuned machines, we got those from Italy and Germany, now from the Asian countries.

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OGStilts

See Paul...You always read much deeper into these things than I do

I've never been one to worry about what Lowes or Home Depot is doing or not doing. Now if you are talking about the Kimball Hill's of the world...I think they got what was coming to them with the type of product they turn out.

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silvertree

I'm trying to get better, its that damn Briggs Myers test, ever since I found out I was an ENFP I've been having disturbing thoughts.

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rbsremodeling

Makes it all come clear

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