Improving competitive edge in construction industry – 7 C’s approach
Today’s business type:
Covid 19 has changed the world economics to a large extent. The biggest job creator industry itself faced the challenge of acute shortage of labor for the first time in history. Immediately after the lockdown was declared, all the site activities have come to a grinding halt. This includes government as well as private projects.
- An analysis made by KPMG has estimated loss due to corona virus to the tune of Rs 30 thousand crore per day.
- This pandemic has led to curtail down the investment in construction industry by 20-25% approximately.
- The loss is not just restricted to the Construction industry, but also to the entire economy as well.
- As per Economic times the construction industry alone employs 12% out of the total working population.
- CREDAI has indicated in May the estimated loss would be around 1Lakh Crore.
- This loss has badly affected the ongoing projects with a backdrop of labor reverse migration.
To estimate the losses in monetary terms for the impact of corona virus pandemic on construction industry still lies a challenge. Apart of economic losses like disinvestment, unemployment, pay cuts, the industry has to also overcome few major challenges like loss of business opportunity, high level of uncertainty, dismal business, sudden change in priorities of the customers (prolonging the purchase of properties or outright cancelling the bookings), diversion of funds (Government funds now getting diverted to health care sector) and so are the major challenges for the next few months or for a year or two. This has resulted in loss of jobs, pay cuts, and increased working man hours to the work force, and other professionals engaged into this industry.
The real pain: The workers who migrated from the cities to their home towns suffered a lot during this pandemic phase. Lakhs of workers left the cities & migrated to their respective villages also suffered during the journey. Many of them got stuck at relief centers. Projects which are under development have been badly hit with a projection of further delay of four to six months for completion. Here it becomes more important to understand that every delayed day is going to add up additional interest cost on working capital loans taken. This anyhow will be borne by the contractor or developer himself. Revised operating norms, safety measures, social distancing, demand for specialized equipment and specialized materials all adding further add as disruptions to the supply chain in this industry. On the back drop of reverse migration skilled workers available at work places or sites may demand a wage rise by 20 to 25 percent, which itself will again be monetary burden on account of developer. The material supplies have either stopped or getting delayed due non availability of transport vehicles or shortfall of drivers. The contractors are continuously facing the challenge of mobilizing the resources. The work force, plant & machinery, and the systems are idle which in turn is adding to the losses. The sales and sales revenue has been a major hit dropping it to more than 40% to 42%. The outstanding payment got defaulted on and such numbers got increased and widespread, resulting many construction companies are facing bankruptcy.
7 C’s Approach
The strategy to quickly recover from the present crises and perform outstandingly and prove ourselves to be more competitive will only help us to survive in the future adapting 7C’s
- Categorical—be completely clear and direct in communication with your suppliers. Be open and frank in your thoughts and explain the present liquidity crises like situation to the supplier and find out a solution which will be acceptable to both of you.
- Capitulate—We as a channel partner need to give back to the society by providing employment, business, opportunities, and money into the economy
- Captivate—we need to now attract and at the same time hold the interest of the stake holders in the entire construction eco system.
- Cautious—Follow all the new regulations laid by the government w.r.t. safety norms
- Cerebrate—Think and define your future actions with new norms, new technology, new work standards, new specifications for raw materials, construction, and processes as well.
- Comprehensive approach—work by including all or nearby all for business growth. Include all the individuals involved in the industry, company, organization for better positive engagement & effective performances of the available resources
- Cynosure—create your own identity, try to have some USP, and be noteworthy for others by setting up new normal or new success model. When all other market players are finding it difficult to withstand and sustain during this locked down period, we need to recover fast and create our unique place and stand firm in the competitive world. For example, you can make the payment to the suppliers during the locked down, or ensure to make payments to the employees in time. These few things will spread a positive signal to all stakeholders and will help you get your own USP
How to bring the industry/organization quickly into Revival stage:
15 simple ways of improving upon competitive edge – navigating in the present crises and surviving to thrive the new normal I propose 10 following simple ways to be on competitive edge
- Engaging Work force:
- The construction companies now quickly need to absorb the work force and provide better, safe, and secured work place.
- Fair payment and dues: ensure the dues are paid quickly after the work resumes.
- Prompt payment to labor contractors
- Provide proper shelter
- Now construction industry needs to provide proper shelter to the labor in their premises, which will ensure uninterrupted work flow even during the pandemic like situation in future.
- On site medical aid, making available potable drinking water, electricity, supply of free/subsidized groceries, making available other few basic necessities, will keep the workers bonded with the organization for a longer time.
- Imparting safety training at work place, practicing yoga and exercise at site, educating healthy habits, will help to develop a feeling of moral bonding and strengthen the company-workforce relationship.
- Increase the work force: Try to increase the manpower shortfall if any to cover up and speed up the project execution work at sites considering site progress.
- Reallocate the employees from those sites which have not yet started or temporarily postponed for execution.
- Payment to the supplier’s: Try to make the old outstanding payment to all the creditors. Make and ensure to pay them may be partially but in time. This will result into boosting confidence & positivity in the market.
- Sign up for new capital & infra projects, enabling picking up some momentum in the economy
- Do not depend much upon relief packages as the industry is still not clear about? Property developers and consultants still feel that this loss could still be minimized by announcing a relief package.
- Increase digitization: Make use of digital tools like Building information Module, 3D, 4D, 5D simulation to re-plan the projects resulting rescheduling of the projects, use of integrated digital twin solutions which helps to monitor the projects right from the conception stage to the final completion stage.
- WFH: Developers, architect’s, consultants, bankers, legal liasoning teams, supply chain professionals are adapting new hardware’s, and new online channels, various apps ensuring real work flow management, real time tracking, as well monitoring the site progress. Procurement teams can now order construction materials online & can manage critical resources more accurately.
- Focus on long lead inventories and alternative suppliers: Companies now need to think about developing alternative supplier’s keeping view of availability of raw materials both from containment & non containment zones respectively.
- Invest in automation: many players are investing in automation of onsite and back office processes
- Accelerate gradually towards thinking or using prefabricated subassemblies in place of fabrication process considering the speedy execution of the projects and shortage of manpower.
- Designers now to plan and developers need to construct healthy lifestyle homes focusing more upon scope for customization at the buyers end.
- Create a return business plan quickly and act upon
- Think of new normal, draft in detail and execute it as quick as possible.
- Attract property buyers and try to convert every lead into actual sales and earn profit.
- Ensure to lease out properties with better commercial terms and prosper the business.
By implementing the above measure the organizations, construction industry and economy of the country as well start rolling in the revival stage and gradually will lead INDIA to become one of the strongest economies of the world in future.