Warehouse Efficiency 101: Strategies for Avoiding the Most Common Pitfalls
Are you struggling with warehouse efficiency and feeling like it’s holding back your business growth? Don’t worry, you’ve come to the right place! In this article, we’ll provide you with valuable insights on how to optimize your operations and overcome the stumbling blocks that are hindering your warehouse efficiency. Whether it’s the imbalanced stock, warehouse layout, employee training or even tech and equipment, we’ve covered it all! Get ready to unleash the proven strategies to propel your business forward!
Table of Contents
- Messy Warehouse Layout
- Imbalanced stock
- Not looking after equipment
- Not using tech right
- Deficiency in employee training
In the world of B2B supply chains, time is like gold in your pocket. Surprisingly, only about 22% of businesses have really dialed in their supply chain game. Imagine the potential waiting to be unlocked! It’s like having a treasure trove of opportunities just waiting for the taking.
And every second wasted due to inefficiencies costs you financially and gives your competitors an edge. Let’s see the common pitfalls in the warehouse and how to avoid them.
- Messy Warehouse Layout
A confusing layout can slow things down for a manufacturing industry. Instead, focus on optimizing your warehouse layout. In the realm of manufacturing, an inefficient layout can significantly impede productivity. Therefore, it’s crucial to optimize your warehouse layout for seamless operations.
- Aisles: Much like well-maintained paths in a park, ensure your aisles are narrow enough. When designing warehouse aisles, it’s important to strike a balance between width and efficiency. Narrow aisles can help facilitate efficient movement and access to different sections of the warehouse.
- Product Placement: Prioritize proximity to the exit for high-demand products. Placing frequently requested items near the exit streamlines the retrieval process, enhancing efficiency.
- Signage: Think of signage as the street signs within your warehouse. Clear, visible labels and signs help workers locate items swiftly, reducing search times and increasing productivity.
- Adaptability: Embrace a culture of adaptability. Regularly assess and, if needed, reconfigure your layout based on evolving demands. This flexibility ensures that your warehouse remains optimized for current production needs.
By paying attention to these key factors, you can significantly enhance the efficiency and productivity of your manufacturing warehouse.
- Imbalanced Stock OR Uneven inventory
- Good Systems: Establish a robust tracking system to monitor inventory levels within the warehouse. Utilize advanced software solutions tailored to the manufacturing industry, ensuring accurate and real-time stock visibility.
- Rotate Stock: Prioritize a “first in, first out” (FIFO) approach. Ensure older materials or products are positioned at the front while newer items are placed at the back. This rotation helps to keep inventory fresh and minimizes the risk of obsolete goods.
- Regular Checks: Conduct routine inspections to validate physical inventory against digital records. This practice helps identify discrepancies early, allowing for prompt corrective action and preventing potential production delays.
- Lagging on equipment care
- Update Equipment: Periodically evaluate the condition of your machinery. In some cases, retiring older machines in favor of newer, more efficient models is a strategic move to enhance productivity.
- Fix Problems Fast: Promptly address any malfunctions or breakdowns. Swift repairs prevent disruptions to the production process and curtail potential complications.
- Regular Checks: Implement routine maintenance checks akin to health check-ups for machines. This proactive approach helps identify and address potential issues before they escalate.
- Not Using Tech Right
Tech can help, but only if used properly. Only 63% of businesses have tech solutions in place.
- Pick Wisely: Get tech tools that fit your needs.
- Train Everyone: Make sure everyone knows how to use new tools.
- Have a Plan B: If tech breaks down, know what to do next. For example, if a warehouse relies on automated conveyor systems for transporting goods, a backup plan could involve having manual conveyor systems available in case of a breakdown.
- Deficit in staff training
The people who work in your warehouse are on the front lines. They know the ins and outs of daily operations and can provide invaluable insights:
- Training: Ensure everyone is well-trained and up-to-date with the latest best practices and technology.
- Feedback Loop: Create a system where employees can easily share their observations and suggestions. They might spot potential problems or have ideas for improvements that have yet to cross your mind.
- Reward System: Recognise and reward employees for their ideas and efforts to improve warehouse efficiency. A motivated team can make a significant difference in achieving operational excellence.
- Open Communication: Foster an environment where communication flows freely. When everyone is on the same page, avoiding and addressing common pitfalls becomes a collective effort.
Warehouse inefficiency can cause 34% of delays in shipping, which causes unnecessary business costs. Here is one case in which Moglix has solved the problems of un-optimised inventory, data discrepancies and a fragmented vendor base. You can achieve a streamlined, efficient warehouse operation by avoiding these pitfalls. Regularly review processes, embrace data-driven decision-making and adjust proactively to stay ahead in the competitive B2B supply chain management world.
3 Ways Project Heads of Infrastructure Project Developers Can Optimize Metal Fabrication Design
Amidst a booming global metal fabrication market anticipated to soar to USD 29.46 billion by 2029, Project Heads face a critical task. The industry drives infrastructural advancements significantly.
Optimizing design, particularly in design engineering, becomes vital in this expanding financial landscape. Next, discover three straightforward strategies to optimize your metal fabrication designs, ensuring they are both innovative and cost-effective.
1. Collaboration and Planning
A. Defining Strategic Collaboration
- Importance: Without apt and explicit communication, even stellar designs remain susceptible to translation errors during fabrication.
- Protocols: Engage in discussions, ensuring every query and specification is transparently communicated to the fabricator.
Example: Consider a scenario where the design stipulates a particular material thickness, tolerance, and flatness. Clear, two-way communication ensures the fabricator comprehends and adheres to these specificities, thereby mitigating the probability of costly errors.
Note: Any discrepancy between communicated designs and executed fabrications must often be addressed to adequate collaboration.
B. Systematic Planning for Predictable Outcomes
- Sequentially: Employ a phase-wise approach, ensuring each progression logically follows its predecessor.
- Documentation: Maintain rigorous documentation throughout the planning process.
2. Design & Drawing
A. Uncompromised Design Refinement
- Investigation: Subject every element to intensive scrutiny.
- Omission: Extract any superfluous aspects within the design.
An important consideration here is to ensure every preserved element’s adherence to the final product’s ultimate functionality. The design should mirror the end goal in its most optimized forming.
B. Expert Insight as a Catalyst for Optimization
- Consultation: Engage fabrication experts in regular discussions.
- Integration: Integrate their insights into design modifications and enhancements.
- Utilize specialist knowledge.
- Validate design modifications.
- Ensure optimal material utilization.
3. Material Selection: Bridging Durability with Fiscal Practicality
A. Rigorous Evaluation of Material Suitability
- Testing: Correlate each material against its exposure to different conditions.
- Alignment: Ensure each selected material adheres stringently to project parameters and anticipated environmental exposures.
It is crucial to evaluate not only based on suitability but also from the perspective of fiscal efficiency, ensuring the chosen materials do not inflate costs disproportionately.
B. Strategic Alloy Utilization
- Matching Properties: Choose alloys whose inherent properties resonate with the application’s demands.
- Financial Coherence: Ascertain that the selected alloy is financially viable and doesn’t strain the budget.
Important Note: Every selected material must be substantiated by its functionality, durability and economic viability, establishing a coherent balance.
Seize control of your Operations Managers of Infrastructure Project Developers success by intelligently optimizing your metal fabrication design, ensuring a marriage of innovation and cost-efficacy. Let these strategies guide your path forward in a market increasing in both value and complexity. For a deeper dive into custom solutions tailored to your project’s unique demands, please email us at email@example.com or explore our diverse offerings at Moglix Business Solutions.
What Project Heads of Real Estate Firms Need To Know About Net-Zero Buildings
Net-zero buildings put out as much energy as they consume, or even more, by using renewable sources. The sources include solar energy, wind energy, and green hydrogen. But what are the advantages of these buildings for project heads of real estate firms? Continue reading to find out.
Unlocking Power of Net-Zero Buildings
Real estate accounts for ~40% of the world’s energy consumption. Adopting net-zero buildings helps save energy while giving other benefits such as:
- They reduce greenhouse gas emissions and have a smaller ecological footprint. Especially when compared with conventional buildings. This makes them more sustainable.
- They increase the value and attractiveness of the property, as they show innovation in the real estate industry. Plus, they offer tax incentives and benefits for the owners and investors.
- They are very economical in the long run — since they produce clean energy and save money on bills. Plus, they need less maintenance and use fewer resources than traditional buildings.
- They are reliable and resilient, as they can operate independently from the grid and have backup generators. This makes them less vulnerable to power outages.
- They contribute to better the health and productivity of residents. It’s because the indoor air quality is generally better and natural lighting is available. They also promote a healthier lifestyle and peace of mind.
Disadvantages of Net-Zero Buildings
Some of the disadvantages of net-zero buildings for project heads of real estate firms are:
- They need high construction and investment costs. It’s because of the installation of energy generation plants and the complex planning involved.
- They depend on the availability and reliability of renewable sources. This could vary depending on the weather and location. For example, solar panels do not work on rainy days.
- They may need help in meeting the required criteria and environmental standards. This can impede the implementation of your architectural vision.
Interested in implementing a net-zero buildings strategy while mitigating potential drawbacks? At Moglix, we specialize in assisting manufacturing and real estate firms with strategic decision-making. Reach out to us at firstname.lastname@example.org for further details.
From Data to Delivery: The Cutting-Edge Technologies Reshaping Supply Chains
Over 6 in 10 firms are considering technological investments to optimise their supply chain. The trend is evolving as inflationary pressures and economic stagnation concerns grow.
Transformation usually focuses on improving customer engagement. But this time, the focus is shifting to the supply chain. So, while firms gear up to invest in supply chain management software, do you know the role of technology?
Are you curious about how cutting-edge technologies optimise operations, enhance supply chain visibility, and reduce costs? Read on to discover.
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Technology Takes Charge in Supply Chain Landscape
As much as 60% of supply chain leaders consider technologies a competitive advantage. These technologies include robotics, artificial intelligence (AI), and the Internet of Things (IoT). Let’s explore how these technologies can become a competitive advantage for you.
Harnessing the Power of Robotics for Efficiency
By 2026, 75% of large enterprises will adopt some form of robots in their warehouses. Let’s see how automation using robots can optimise operations for your supply chain:
- Automate: Robots can pack items, reducing human labour and improving order fulfilment speed. Let automation handle repetitive and time-consuming tasks. This streamlines processes and leads to faster and more efficient operations.
- Reduces errors: Plus, it reduces the risk of errors in data entry and inventory management. This ensures orders are fulfilled, reducing returns and improving customer satisfaction.
- Data-driven decision-making: Automation generates a vast amount of real-time data. You can analyse it to identify bottlenecks, inefficiency, and areas of improvement. This can help you make informed choices to optimise operations.
IoT’s Visionary Impact on Visibility
Two-thirds of business leaders emphasised increasing visibility in their supply chains to maintain operational stability. Here’s how IoT can improve visibility:
- Real-time tracking: Devices such as sensors and RFID tags help you track a product’s journey across the chain. It helps you spot and mitigate risks right away, should they arise.
- Predictive maintenance: Predictive maintenance software can track the health of delivery services in real time. This increases the visibility of the delivery processes. Plus, it can help reduce vehicle downtime and repair costs by detecting issues in advance.
- Condition monitoring: IoT can track environmental conditions such as temperature to reduce the wastage risk. This is critical for goods with specific storage requirements, such as pharmaceuticals.
AI Drives Cost Reduction
Reports say AI-driven operations reduce errors by 20–50% and administration costs by 25–40%5. Here’s how you can use AI to reduce costs:
- Supplier performance monitoring: AI tracks supplier performance and detects issues. This reduces supply chain disruptions and associated costs.
- Route optimization: Advanced algorithms can calculate the most efficient delivery routes. They consider factors such as road closures or traffic conditions. This minimises the delivery distance, improving delivery times and saving fuel costs.
- Process efficiency: AI can analyse your datasets and identify inefficiencies in your processes. It can then suggest process improvements, reducing operational costs, and streamlining workflows.
Transforming Supply Chains into Profit Engines
A company’s supply chain represents over 10% of its overall costs6. So, optimising the supply chain can boost your bottom lines dramatically. That’s what Moglix did for India’s leading tire manufacturer.
Moglix helped the firm improve its supply chain efficiency by optimising its inventory management processes. As a result, the firm saved 3% of its total cost of ownership. If you want to learn more about how Moglix can help make your supply chain a competitive advantage for you and achieve your business goals, schedule a call.
Pharma Supply Chains: Leveraging AI to Maximize Efficiency
Did you know Artificial Intelligence (AI) can help pharma reduce manufacturing cost by 15–30% and personnel cost by 50–70%? 1. A manufacturing strategy called lights-out manufacturing minimises human presence in factories. AI is set to alter the pharma supply chain sphere dynamically. They are in an excellent position to capture 70% of the future value2.
In the past, manufacturing companies have initiated digital shifts in the supply chain. And they’ve all had one likeness — untapped data and technological breakthroughs. They all leverage technologies such as advanced analytics, AI, and blockchain. But pharma companies are yet to make any bold moves.
AI is transforming the supply chain through real-time data processing and decision-making. This would make supply chains data-driven by reducing human subjectivity and bias. Read along as we explore how AI improves MRO procurement and optimises the supply chain.
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Transforming Pharma Supply Chains
The pharma supply chain generates massive amounts of data, which must be utilised more. Processing data with AI will support real-time decision-making and improve operational efficiency. Plus, it will create a cost-effective and near-autonomous supply chain.
Here are a few critical supply chain processes where AI will likely have the highest impact.
- Optimising Inventory: To optimise the supply chain, you must accurately adjust inventory levels. Use advanced AI tech, such as predictive analytics, to track the state of drugs. This will enable you to take proactive measures if the supply chain encounters obstacles.
- Boosting Efficiency: Visibility across the supply chain means knowing the status of every transaction and demand trigger. Regardless of the logistics movement, you should know the state of the drug. One can achieve this via supply chain control towers serving centralised hubs. You can use these hubs to audit, track, and generate insights to boost efficiency.
- Achieving Quality Excellence: Pharmacos face challenges due to quality, safety, or compliance issues. AI-enabled predictive maintenance can cut this. It can provide information and insights into operations, equipment performance, and forecasting faults. This can help you improve operational effectiveness, thus improving your bottom line.
It’s a no-brainer for pharma cos to embrace AI and unlock its potential to meet market demands.
A case in point is this leading vaccine manufacturer from India. It faced high inventory holding and volatile monthly MRO procurement spending. After collaborating with Moglix, it reduced inventory costs by 10%. Click here to schedule a demo and see how to team up with Moglix to make your supply chains resilient.
A Quick Guide to Streamlining Logistics in Cement Industry
Did you know that power and fuel costs 50–55%1 of the entire cost of cement producers? Yes, the cement industry is growing. However, it needs to optimize its supply chain processes to sustain growth.
MRO procurement concurs with buying the maintenance, repair, and operations products. These are essential for the production and transportation of cement. Optimizing MRO procurement and supply chain can improve efficiency, quality, and inventory management.
Continue reading as we delve into strategies and technologies that enable efficient transportation. We’ll also discuss the role of supply chain management software in managing logistics.
Table of Contents
Rocky Road of Cement Logistics
In hilly areas, the inward and outward logistics costs contribute over 35% of the cement cost2. This impacts the profitability and competitiveness of the cement manufacturers. This is one challenge the cement industry is facing; some others are:
- The logistics of cement products rely on the road/rail network. But those are often in poor condition in countries like India. Plus, the capacity is also a factor. This results in either production loss or costlier movement.
- The industry must still adopt the latest technologies to optimize and integrate the supply chain. This leads to poor visibility, transparency, and coordination among the supply chain partners.
- The cement industry faces the challenge of fluctuating demand and supply. This causes problems in forecasting and supply chain planning, affecting inventory.
Achieve Supply Chain Excellence
Supply chain management software helps cement companies track and optimise supply chain processes from raw material sourcing to finished product delivery. It can make transportation efficient and improve inventory management. At the same time, it can optimize distribution using technologies and data analytics.
This is possible by optimising the flow of materials and information across the value chain. Here are some benefits of supply chain management software in the cement industry:
- By improving the visibility and transparency of the supply chain operations, it
- Reduces costs
- Improves customer satisfaction and
- Enhances decision-making.
- It makes you more agile and responsive to changing market conditions. This enables you to adjust production plans, optimise inventory, and divide resources.
- It improves collaboration among the supply chain partners, such as suppliers and distributors.
Cement companies can improve coordination, collaboration, and decision-making using supply chain management software. One such software is Moglix. It also allows you to optimize inventory, transportation, and distribution processes.
Check out how Moglix transformed MRO procurement for a cement manufacturer. The company achieved a 20% increase in working hour efficiency. Plus, it saved 5–7% and ensured delivery of 100% genuine products. This reduced the costs of handling counterfeit products.
Moglix made this possible by reducing the PR to PO time. It also standardized the pricing across the plants and reduced supplier dependency. This helped build stronger relationships with the ones it retained. Schedule a demo to understand how Moglix can strengthen your supply chains.
5 Ways CEOs of Infra Project Developers Can Use Digital Technologies to Augment Safety at Road Construction Sites
Road construction sites pose significant risks to the safety of both workers and the general public. Safety should be the utmost priority for CEOs of infrastructure construction project developers in India to protect lives and ensure the smooth progress of projects. Reports suggest that more than 40,000 injuries happen in road construction each year. This makes it crucial for the construction industry to adopt modern and safe approaches in their day-to-day operations.
The above data represents fatality experienced at road construction sites.
In recent years, the construction industry has witnessed a revolutionized and digital shift that is transforming the way the construction industry operated previously, offering innovative solutions to enhance the safety of its workers. In this blog, we will explore five ways CEOs of infrastructure project developers can harness the power of digital technologies to augment safety at road construction sites.
- Sensors and IoT Devices: Environmental sensors can monitor the weather conditions and temperatures to identify any alarming aspects that could pose worker risks. Workers can wear smart helmets or vests with sensors to track vital signs and detect fatigue, ensuring they are fit for their job and reducing the risk of accidents like cardiac arrest or falling unconscious due to weakness.
- Drones for Aerial Surveillance: Another promising digital technology for enhancing safety at construction sites is drones. Drones with high-resolution cameras can offer real-time aerial surveillance of the entire construction site. It also allows CEOs, engineers, project owners, and safety teams to observe operations, identify potential hazards, and assess the overall safety of the construction site. Drones are a new-age addition to the construction site as they can quickly cover large areas and provide valuable data to prevent accidents and improve safety protocols.
- Train Workers with Digital Materials: Recent studies have revealed that about 90% of construction site accidents happen due to unsafe behaviors and environments. These incidents often occur due to a lack of training regarding the safety protocols among on-site personnel, insufficient safety understanding, and a general unawareness of established safety guidelines. Even though safety protocols are in place and safety training is available, they often fall short of ensuring that all site workers are adequately informed.
To overcome this challenge, digital content can assist business leaders in guaranteeing that every on-site worker can easily access this vital information at any given moment.
- Real-time Data Analytics for Predictive Safety: Real-time data analytics is an excellent addition to the infrastructure industry, as CEOs can create predictive safety models that help identify and mitigate risks before they escalate. By collecting data from various sources, such as weather forecasts, equipment telemetry, and worker behavior, intelligent algorithms can analyze trends and issue warnings or recommendations to ensure safe working conditions. Predictive safety measures can significantly reduce accidents and downtime.
- Reduce Onsite Work by Expanding Modular and Offsite Fabrication: Shifting to modular and offsite fabrication methods in construction represents a strategic approach to curbing onsite labor requirements. By embracing these techniques, construction projects can substantially reduce the need for extensive and time-consuming work at the site. As per a recent survey, about 65% of building professionals reduced the project’s construction cost. These prefabricated construction modules can then be swiftly assembled onsite, reducing the duration of construction activities and the associated labor costs. A report suggests that 66% of building professionals experienced faster project completion with smart construction. This approach enhances project timelines, safety, and quality control, making it an increasingly appealing choice for the construction industry.
Ensuring safety at road construction sites is a moral and legal responsibility for CEOs of infrastructure project developers. By embracing digital technologies, CEOs can fulfill this responsibility, enhance project efficiency, and reduce costs associated with accidents and delays. Moglix Business construction safety solutions are trusted and utilized by over 20 of India’s foremost enterprise-level infrastructure project developers. We are the top construction raw materials suppliers in India. Some of our best-quality construction raw materials include TMT bars, structural steel, electricals & cables, ductile iron pipes, and more. As technology advances, the scope to foster preventive safety measures at construction sites will only expand, making it a worthwhile investment for any infrastructure project developer.
To learn more about how we are transforming the infrastructure industry with our innovative solutions, check out our website https://business.moglix.com/our-solutions/epc
For more information, write to us at email@example.com
How Can CTOs of Infrastructure Project Developers in India Reduce Cost Overruns in Road Construction Projects?
India’s 5.89 million km road network is facing a management crisis. According to a report by Economic Times, a stark 871 projects need to catch up: 169 for up to a year, 157 for up to two years, 414 are delayed for up to five years, and a critical 131 projects are overdue by more than five years. This is not merely a delay; it’s an emergency. CTOs, armed with data, are tasked with navigating this challenging terrain.
With technology’s growing role in construction, strict oversight on spending and strong alliances are paramount. This article stresses the urgent need to address road construction delays in India and underscores the crucial role of CTOs in this crisis.
Pain Point of Infra Project Developers
Managing multiple construction sites poses significant challenges for infra project developers. One primary concern is the lack of accessibility, given the constraints of on-site resources. Multiple sites demand substantial manpower, funds, and logistical support, like vehicles. Moreover, handling numerous purchase orders (POs) exacerbates these challenges. POs are crucial for budget adherence, but they add to the overwhelming volume of paperwork, including notices, payment applications, lien waivers, and change orders. This barrage of documentation hinders operational visibility, essential for excellence.
Furthermore, a study highlighted that construction projects in India experienced an average schedule overrun of 55% compared to the planned duration. This alarming statistic underscores the urgent need for addressing these pain points, especially in highway and road projects.
In response to the challenges faced by infra project developers, a unified solution emerges: the ‘One Dashboard’ system. This cloud-hosted platform streamlines procurement through catalogue-based buying. Seamlessly integrating with a developer’s ERP system, it offers an integrated view of all project-related transactions.
Furthermore, the inclusion of APIs consolidates procurement spending data into a singular data lake. Beyond merely centralising data, this reservoir allows for controlled access, granting only CXOs and pertinent stakeholders need-to-know basis entry, guaranteeing both security and strategic insight.
Spend Tracking & Reporting
Through the catalogue-based buying solution, expenditure is clearly displayed, both categorically and site-wise. This ensures transparency in financial transactions, allowing stakeholders to promptly identify spending trends and anomalies. The system, in essence, becomes the single source of truth for all parties involved.
Centralising financial data removes ambiguities, strengthens stakeholder trust, and encourages forward-thinking decisions, all vital for the fiscal stability of expansive infrastructure projects.
Moglix Business’s catalogue-based buying solution provides enhanced visibility and precise control over procurement expenditure. For a comprehensive understanding and further insights, refer to Moglix Business Solutions.
How CFOs of Infrastructure Construction Project Developers in India Scale 8X Working Capital Growth in 1 Year?
Construction project developers must secure ample working capital to avoid liquidity issues that can impede payments to subcontractors, suppliers, and employees. It rings particularly true for CFOs of infrastructure construction project developers in India dealing with leveraged balance sheets and milestone-driven cash flows.
This article discusses a few strategies to scale working capital growth to maintain the crucial triage of cost-quality-time.
3 Effective Strategies to Boost Working Capital Growth
Generally, CFOs can improve their working capital by either reducing project expenses or delaying payments to have cash on hand. We delve into the finer details below.
#1 Problem: Fragmented Supplier Base
The high complexity of infrastructure projects causes severe fragmentation and communication concerns at the contractor-subcontractor-design interface. Different project phases require multiple specialized suppliers for procuring construction raw materials, such as TMT bars, structural steel, fabrication, electricals & cables, ductile iron pipes, etc. The vendor base may split further for developers constructing several projects at diverse locations, necessitating relationships with local suppliers.
Solution: Vendor Consolidation
Reducing the number of vendors to a select few can simplify supplier management and facilitate the associated procurement process and staff costs by almost 2%. It also fosters stronger supplier relationships and increases supply chain visibility.
#2 Problem: Inconsistent payment terms
Another pitfall of a fragmented supplier base is the sheer breadth of the corresponding payment terms and conditions. As different suppliers have their own custom quotes and payment cycles, a lot of time and effort is spent on staying on track of payments while throwing cash flow monitoring for a toss.
Solution: Payment Terms Standardization
A better way to optimize working capital is to extend and homogenize payment terms across all suppliers while keeping them aligned with cash inflows and project milestones. So, rather than sticking to a 30-day cycle, negotiate for a 45-day working capital rotation period and clear invoices at once, eliminating repetitive tasks and streamlining cash flows.
#3 Problem: Bulk Payment for Raw Material Procurement
Given the colossal requirement for natural or semi-processed raw materials, such as concrete, earthworks, cement, and more, making bulk purchases has become the norm in the construction industry. However, this feature entails further scope for cost savings.
Solution: Discount for Early Payments
While unit costs for construction materials, reduce when purchased in huge quantities, project developers can further lower the expenditure by negotiating for early payment discounts, preferably approximating about 10% on the invoice value.
Example: CFOs Scaling Working Capital Growth by 8X
- Assume a construction project developer follows the strategies outlined in the text and avails of a Rs. 1.5 crore credit from the supplier of raw materials by making early payments.
- Further, the company follows a 45-day payment cycle, which results in 8 (=360/45) working capital rotations in a year.
So, the business manages to unlock additional working capital of Rs. 12 crore (=1.5×8), which can be deployed in other projects as well.
Optimize Supply Chains to Enhance Working Capital Availability
Infrastructure construction companies can improve liquidity, navigate market uncertainties, enhance profitability, and unlock business value by optimizing their working capital and procurement processes. Consolidating vendors to a select group of top construction raw materials suppliers in India and negotiating better terms are some such ways that can be carried out effectively using Moglix’s EPC solutions.
Write to us at firstname.lastname@example.org to learn how our solutions can help you streamline your operations.
How CPOs of Infrastructure Construction Project Developers in India Can Reduce Costs by 11%
Given their complexity, unique site conditions, massive scale, and long timelines, infrastructure projects often entail the potential for cost overruns—as seen in over 50% of Asian construction projects1. So, optimizing costs without compromising quality and duration is indispensable for the CPOs of infrastructure construction project developers in India.
This article discusses a five-pronged strategy to reduce infrastructure construction project costs by 11%.
Strategy Spotlight: The 5 Pillars
As outlined below, reducing project costs is a practice of streamlining key construction cost drivers.
Material Costs (↓ 0.02%)
One of the biggest reasons for project cost escalation is the rise in the prices of construction materials, especially crucial components like structural steel and TMT steel bars, which account for almost 40% of these costs. Strategically consolidating the vendor base and forging stronger partnerships with a single supplier is one avenue for saving nearly 5% on material costs, potentially lowering the total project cost by 0.02%.
Civil Work Costs (↓ 0.04%)
Encompassing several activities, including excavation, site preparation, and reinforcement installations, civil works constitute approximately 20% of project expenditure. Here, too, by following the vendor consolidation approach, especially for suppliers of earthworks and foundations, infrastructure developers can save an additional 2%, which translates into a noteworthy 0.04% total cost reduction.
Procurement Process Costs (↓ 0.03%)
Representing over 10% of your bill of quantities (BoQ), delays in quote solicitation, order placements, and material deliveries can significantly inflate project estimates. By adopting catalog-priced pricing, which standardizes order and inventory management while easing payment processing, CPOs can downsize their massive procurement teams to 3, yielding 30% cost savings on labor expenses. This will rein in the project costs by an additional 0.03%.
Project Finance Costs (↓ 5%)
Considering how most infrastructure development projects are financed using debt—at times, to the extent of 80% of the project cost–at high-interest rates, with the ballpark figure averaging 10% compound interest, minimizing these interest payment outflows is another option. Embracing pre-engineered and pre-fabricated buildings is one way out. While initially, these innovative buildings will raise material costs by 10%, they will also help complete the construction schedule at least 10-15 weeks ahead of schedule. By saving 10% on 4 months of project finance costs, you stand to realize a substantial 5% net savings on project costs.
Indirect Procurement (↓ 5%)
Cost savings can also be achieved by bringing down indirect procurement costs involved in the acquisition of safety goods, electrical & cables, ductile iron pipes, and other items that support the core construction process. Consolidating the vendor base by singling out a single provider from the top construction raw material suppliers in India can save an additional 5% in costs after accounting for their 20% share in the project costs.
Charting a Cost-Efficient Course in Infrastructure Construction
Identifying the potential causes of cost overruns is important for CPOs of infrastructure construction projects to implement efficient plans and drive business growth. By executing vendor consolidation strategies, adopting catalog pricing, and using pre-engineered buildings, they can improve their bottom line by a colossal 11%. Moglix can help you achieve this and more through its EPC solutions, which end-to-end automate your source-to-site procurement processes for all types of infrastructure projects.
Write to us at email@example.com to learn more.