Identifying Levers of Profitability in Construction Management for a Finnish Giant, a Global Leader in Complete Lifecycle Power Solutions for the Marine and Energy Markets

Automotive Consulting Firms

Client Challenge

The client was a global leader in complete lifecycle power solutions for the marine and energy markets. The client in India is a significant supplier of decentralized power plants for Industries, Utilities and Independent Power Producers (IPPs) in India. It had installed over 250 decentralized power plants in India generating around 3100 MWs.

The top management was targeting a 3x and then a 6x growth moving forward. Given these growth targets, the top management wanted to conduct a review of the current construction management model and assess the levers of profitability to determine potential cost improvements and operating model moving forward. UC Strategy was hired to identify profitability levers in the business

 

Our Approach

In order to identify requested elements, UC Strategy used the following approach:

  • Segmented the projects and conducted detailed data analytics, this included:
    • Segment type of projects undertaken by client in India
      • Size of the project/ Location/ Type of project involvement (Turnkey/Packages), etc.
    • Gain insights into the following aspects:
      • Current operating model in different projects
      • Number of contractors involved (Platforms/ Chimney/ Ducting) for different locations and size of projects
      • Delivery/ Erection timelines
      • Volume of procurement & responsibility of procurement
      • Sourcing strategy of raw material
      • Prefabricated/On site fabrication mix
      • Types of contracts with contractors (For fabricated structures/ For erection)
      • Material included/ Conversion only
      • Quality inspection (Frequency/ At Fabricator site/ Number of personnel involved, etc.)
    • Analysed overall cost break-up of the project:
      • Engineering/ Fabrication/ Erection
      • % cost accounted by key fabrication equipment
    • Analysed contract terms with contractors:
      • Material included/ conversion only
      • Standard deductions considered
      • Penalties for delays
      • Pricing
    • Assessed last 3-year trend in conversion cost per ton
    • Assessed differences in contract terms with various contractors
    • Analysed contract terms of client with end customers (Only for commercial elements)
    • Profile projects to derive key learning’s
      • Contract terms
      • Delays which occurred/ Cost overrun/ Reasons for the same, etc.
    • Identified levers of profitability
  • Segmented the fabrication market and profiled the current contactors of the client, this included:
    • Segmented the overall fabrication market space and gauge the position of the current contractors
      • Type of fabricators/ Exposure to industry segments/ Nature of fabrication work carried out, etc.
    • Gain insights into the current profile of contractors associated with client
      • Total current capacity
      • Share of business with the client
      • Locations of presence
      • Number of years in business, years of association with client & certifications
      • Quality perception
      • Pricing arrangement with the client, etc.
    • Based on the fabrication market landscape evaluate usage/ limitations of bigger contractors for the client
    • Gain insights into the RFQ, overall selection process, contractor management process of the client
      • Frequency of contractor performance review and MIS generated as a part of contractor management
      • Internal structure to address contractor management
      • Framework for contractor evaluation
    • Procure quotes from contractors to benchmark rates (e.g. At 3% tolerance)

 

Our Impact

Came up with final levers of profitability. Defined operating model based on tweaking the levers of profitability for increased future volumes/ size of projects/ location, etc.

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