The art of survival

John Prescott’s office has tasked the industry to make cost efficiencies in housing by focusing on labour and plant cost. With more than 70% of projects supplied through the subcontract network, it is increasingly important for housebuilders to focus on reducing costs in their supply chains.

Companies such as Taylor Woodrow and Mansell have made large steps in setting up strategic alliances with key supply-chain members by adopting integration of their supply chain in the delivery of their housing products. A key factor in this is the early involvement of their supply chain in arriving at best value, rather than following the traditional cost-cutting agenda.

These alliances have demonstrated commercial success by taking out cost through value-engineering techniques, optimising design, buildability, matching the product to clients’ needs and simplifying site inventory and installation. Collaborative working has achieved improved delivery programmes, at lower than planned costs, which in turn improves the contractor’s competitiveness in the market.

As for clients, they get lower costs and higher functionality – that is, the things that the client values are achieved in shorter build times with assured delivery of the product.

However, not all alliances are achieving the sorts of gains the ODPM would like to see. Although mergers between housebuilders are achieving savings, they can be nothing more than stealth savings. An example of this is where two large firms using the same plant hire company have different discount agreements. Once merged, the preferential agreement is applied across the business, with no increase in business with the supply chain, only a reduction of revenue.

Not all alliances are achieving the gains the ODPM would like to see

For their part, though, housebuilders have benefited from greater investment in their strategic alliances and as a result, have been able to negotiate better arrangements with their supply chain. The supply-chain members themselves have been able to benefit from improved certainty and workflow, which has allowed them to plan resources and ensure deliveries in a better way.

There is, however, much still to do to reduce waste in both process and product. The industry needs to adopt more effective lean management and construction techniques. And even with large projects and contracting housebuilders, there is still always a catalogue of problems on projects: remedial works, snagging, lack of continuity, poor planning, unnecessary storage costs caused by materials being delivered to site too early, late delivery of materials, inadequate tools and equipment, poor delivery of design drawings and detailing, reliance on paper-driven quality systems, over-engineering by design teams, poor workmanship, inadequate equipment and unnecessary people movement.

The challenge is on. Collaborative working and supply-chain partnering is not essential, but survival is.

Garry Taylor is a partner at Consultant Calfordseaden