Engineering & Construction
At any point of time, the ability of an Engineering & Construction company to grow and sustain sales and profits is limited by constraints in the following areas:
Project organisations dealing with turnkey projects involving engineering, procurement, and site construction operate in a highly uncertain and risky environment. Executing these projects not only requires co-ordination and co-operation between the many stakeholders like state-owned companies, individual landowners and contractors, it also needs the weather to play fair.
In addition to external uncertainties, internal aspects such as delayed arrival of designs and large number items needed for each project also creates de-synchronization. So very often, site work force-started without complete drawings or materials. Frequent interruptions, and inadequate resourcing by contractors also create more delays. But when the pressure to begin operations peaks, projects are prematurely commissioned. This leaves behind a “tail” of incomplete tasks and billing. Consequently, not only are resources and money of the company locked up in many such “tail” projects, the customers (of the project) too have to deal with long periods of lower performance (as compared to initial specs).
Most projects in the country suffer chronic delays despite investment in “planning heavy” solutions and expensive software to better manage external and internal uncertainties. This is because none of these solutions addresses the key challenge: “How to manage resources and projects DESPITE an environment of high uncertainties.”
Find out how projects can seamlessly align flow of material, design, contract labor and issue resolution to deliver projects with shorter lead-times, within budget and scope:Know More
- Delivery within 25-35% shorter lead-times with full scope and budget as per original commitments
- Reduction in working capital by 25-50%
- Capacity release of around 30% in departments where resources are shared across projects
- Improved profits by 50-100%
- Improved return on capital employed by 50-100%
- Increased sales (~ 50%) from delivery sensitive customer segments
When projects are completed faster, the sales team has to source more orders (or bid and win more orders) to leverage the released execution capacity of the company. This is a time-consuming exercise, and often involves engaging with prospective customers at an early stage (even before specs are defined or bids are floated). The sales team’s ability to expand its efforts in the market is restricted when its band-width is taken up by execution, coordination, and documentation documentation-related activities such as design submission, collection coordination, procurement coordination, etc. of existing projects.
Learn how you can increase bandwidth and effectiveness of the sales team.Know More
- Increase in overall sales by 30-50% without adding to sales force
- Efficiency to maintain adequate order backlog without dropping prices
- Improved quality of customer servicing
- Ability to intervene in early stages of the customer ordering process
- Stable or improved market share
The health of Engineering and Construction companies is best assessed not by studying their turnover growth but by analyzing the flow rate of projects into the company.
A comparison of the cumulative curve of new orders in the system and completed projects would reveal that there are three stages in the evolution of an engineering and construction company (see graph). In the green stage, a company is able to maintain the rate of project completion in line with the rate of starting new projects. On the other extreme is the red zone in which the company continues to open new projects even as previously opened projects stay incomplete. A company approaching the red stage can show turnover growth, but severe execution margin losses and ballooning receivables can block entry of new projects (by high margin pricing) and shackle the company’s focus on closing older projects. A standalone small or mid-size company can get wiped out in the red phase!
Conduct a detailed diagnostic on your company with this testKnow More
Organizations like Bajaj Electricals Ltd, and many others are using “pull” systems of Theory of Constraints to transform their operations for a competitive advantage in their markets
We have partnered major names in the EPC industry to create and implement radical solutions which have redefined industry benchmarks. These include:
Anant BajajJoint Managing Director, Bajaj Electricals
Bajaj Electricals started implementation of flow processes of Theory of Constraints (TOC) in 2012 in their Transmission Tower Projects Business.Know More