Application of the Design Structure Matrix (DSM) to the Real Estate Development Process Using Modular Construction Methods
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Application of the Design Structure Matrix (DSM) to the Real Estate Development Process using Modular Construction Methods By Steven V. Bonelli AND Adrian M. Gonzale z Gue rra B.S., Business Administration, 2000 B.S., Industrial Engineering, 2006 University of Vermont Northwe stern University Maste r of Business Administration, 2011 University of Michigan Submitted to the Program in Real Estate Development in Conjunction with the Center for Real Estate in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development at the Massachusetts Institute of Technology September, 2012 ©2012 Steven V. Bonelli, Adrian M. Gonzalez Guerra All rights reserved The authors hereby grant to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature of Author_________________________________________________________ (Steven V. Bonelli) Center for Real Estate July 30, 2012 Signature of Author_________________________________________________________ (Adrian M. Gonzale z Gue rra) Ce nter for Real Estate July 30, 2012 Certified by_______________________________________________________________ Steven D. Eppinger Professor of Management Science and Innovation Sloan School of Management Thesis Supervisor Accepted by______________________________________________________________ David Ge ltne r Chair, MSRED Committee Interdepartmental Degree Program in Real Estate Development This page intentionally left blank. 2 Application of the Design Structure Matrix (DSM) to the Real Estate Development Process using Modular Construction Methods By Steven V. Bonelli AND Adrian M. Gonzale z Gue rra Submit ted to the Program in Real Estate Development in Conjunction with the Center for Real Estate on July 30, 2012 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development ABSTRACT Real estate development (RED) has traditionally been a very dynamic business, where real estate developers strive to turn an idea into a real asset, by delivering a quality project on time and on budget. In recent years, Modular Construction Methods (MCM) has arisen as an innovative solution to commercial RED projects that require higher levels of the three aforementioned factors, with a special emphasis placed on time. The purpose of our thesis is to explain MCM and its impact on RED by analyzing the interdependent relationships between the different tasks performed during the course of a development. We have accomplished this by using the Design Structure Matrix (DSM), a systems engineering tool, to map out the dependencies between development tasks in a graphical manner. To develop our DSM model for an RED process that uses MCM we conducted interviews with the senior management at RJ Finlay, a New Hampshire based full service real estate firm and Keiser Industries, a modular manufacturing company that operates in Maine and is owned by RJ Finlay. To fully understand the real application of the MCM process to RED, we met with the general contractor, lead architect and project management team for 30 Haven, a commercial RED that uses MCM. 30 Haven is located in Reading, Massachusetts and has been co-developed through an integrated project delivery (IPD) process by RJ Finlay and Oaktree development, using an in-house general contractor and Keiser Industries as its modular manufacturer. Our interviews occurred weeks before the project was completed in the summer of 2012. This allowed us to interview the involved parties about the whole process from inception to construction completion. This helped us further understand the actual problems a RED process using MCM can face throughout the preconstruction and construction processes. We then developed a DSM that showcases the different stages that a RED process using MCM have to go through and the planned and unplanned iterative processes for each stage. Planned iterations are feedback loops between tasks that are meant to rework tasks that forcibly need it, while unplanned iterations reflect feedback loops that occur because of unexpected events. Our thesis has focused on proposing proactive solutions to the unexpected events (referred to as “failure modes”) a RED process using MCM can face, by either eliminating them or minimizing their likelihood and impact. The DSM helped facilitate the development of both a normative model and an optimal one, where our solutions for the unplanned iterations were applied. We complemented our findings with a hypothetical financial model that uses the normative and optimal DSM models to show the difference between both in terms of the returns, time and cost for a generic multifamily RED that uses MCM. Thesis Supervisor: Steven D. Eppinger Title: Professor of Management Science and Innovation 3 This page intentionally left blank. 4 Table of Contents Abstract 3 Acknowledgements .......................................................................................................................... 9 Chapter 1: Thesis Purpose, Goals and Methodology ...................................................................... 10 Chapter Introduction: .................................................................................................................... 10 Thesis Purpose:............................................................................................................................. 10 Thesis Goals: ................................................................................................................................ 11 Methodology ................................................................................................................................ 11 Secondary Data Collection ............................................................................................................ 11 Primary Data Collection ................................................................................................................ 12 Thesis Premise.............................................................................................................................. 12 Chapter 2: Introduction to Modular Construction ........................................................................ 14 Chapter Introduction: .................................................................................................................... 14 General Modular Manufacturing Process ........................................................................................ 14 Advantages and Disadvantages of Modular Construction................................................................. 15 Chapter 3: Site Built and Modular Construction Methods Comparison ........................................ 17 Chapter Introduction: .................................................................................................................... 17 Researching Site Built vs. MCM: ................................................................................................... 18 A Case for MCM: ......................................................................................................................... 19 Chapter 4: Field Work Research ................................................................................................... 25 Chapter Introduction: .................................................................................................................... 25 Company Profile : RJ Finlay........................................................................................................... 25 Project Profile: 30 Haven .............................................................................................................. 25 Interview with General Contractor (GC) ......................................................................................... 26 Interview with the Lead Architect (LA) .......................................................................................... 36 Module Manufacturer Profile: Keiser Industries .............................................................................. 39 Interview with Operations Manager ............................................................................................... 39 Chapter 5: Introduction to the DSM and its Application to the Real Estate Development Process 43 Chapter Introduction: .................................................................................................................... 43 The Design Structure Matrix (DSM) .............................................................................................. 43 The Site Built Real Estate Development Process DSM .................................................................... 44 Findings and Conclusions .............................................................................................................. 48 5 DSM Application (Bulloch and Sullivan DSM): ............................................................................. 48 DSM Interpretation: ...................................................................................................................... 49 Chapter 6: Real Estate Development Process DSM using Modular Construction Methods (MCM): ....................................................................................................................................................... 50 Chapter Introduction ....................................................................................................................