SYNOPSIS UNICON CONCRETE PRODUCTS (H. K. ) is a part of ITC (International Tak Cheung) Holdings Ltd. The company manufactures Precast Concrete Products: Facades, Slabs, Stairs and Partitioning Walls These are used in large, high-rise Residential, Office & Industrial complexes. Largest chunk of Unicon’s sales (app. 80%) –HKHA. Hong Kong is an important center for economic activity in Southeast Asia, an economic gateway to People’s Republic of China (PRC) and has world’s largest container port. The problem faced is of space crunch for a large population.
HK has 1076 sq kms of space for accommodating 6 million people. This causes an impact on the rent and purchase of a house. Lack of Affordable Housing -Housing among the most expensive in the world. 800-1500 sq foot apartment in HK: * HK$15-35 per sq foot per month (Rent) * HK$5500-8000 (Purchase) Concrete and Construction Market: Precast concrete products were sold to General Contractors who were capable of coordinating the construction of large, expensive building projects. Typically two methods were used in the construction line. * Traditional method * Assembling precast concrete facades and slabs
ADVANTAGES of Precast Concrete * Less reliance on Skilled Labor * Standardized Product * Reduction of on-site work and less congestion * Stable Design & Consistent/Superior Quality * Production unaffected by traditional problems (environment etc) * Less Supervision required. DISADVANTAGES of Precast Concrete * Design process to be specified at the outset of the process * Dependence on Expensive equipment (eg. Tower crane) * Hampers creativity & originality of architect HONG KONG HOUSING AUTHORITY (HKHA) * Govt. Agency for providing Affordable Housing for local residents *
Rental Blocks * HOS (Home Ownership Scheme) Blocks * Regulations manufacture of facades/slabs restricted only to production facilities in HK The HKHA had announced construction of new residential ambitious 4 year program for construction of new residential blocks. HKHA indicated that contracts of 179 blocks would be tendered in the next year alone. It was estimated that 50% of the proposed plan will require precast materials for construction. The problem that Unicon faced was that the industry requirement was of a capacity of 20 blocks per year whereas Unicon’s capacity was of 7.
A developer interested in construction will book the services of an architectural firm to coordinate the design and build the project. The architectural firm provided engineering support dealing with both the sub-structure (i. e. the foundation) and the superstructure (i. e. the building complex). Once the design documents are ready and approved by the lead architect a tender is prepared and sent to the government for approval. APPROVAL PROCESS * Registered Architect and Registered Structural Engineer (RSE) prepare and subWmit detailed design/calculations to Govt.
Building Dept. * Submission Review Approved or Rejected * The Submission & Review process takes app. 2 months As this stage took up a lot of time Mr Li thought of a strategy to reduce this phase by introducing a blanket approval. A Strategy whereby the already approved technical submissions for HKHA projects 1. Would NOT require Review or Approval by RSE or Govt. 2. Could simply be RE-SUBMITTED for future projects This would not only save time but cost as well. It will cause a change in market from made –to-order to make-to-stock.
It will help in product standardization and help in expansion for Unicon. The Disadvantages of blanket approval are as follows: * Other companies of precast industry are not interested in developing industry wide standards. * Standardization of products would increase competition in the market in terms of cost. * Threat of Unicon losing in leadership in the market. If everything is in place the issue that Mr. Li needs to attend to is the increased demand and his firms limited capacity to produce. To counter this issue he can use the following strategy.
WHAT CAN UNICON DO? Additional Shift: * Single Shift from 8:00 AM to 6 PM. Implement double shifts. * Unicon can also use the existing molds for slabs and facades in the second shift. * Unicon will have to bear additional labor cost for 32 employees. This means an additional costof 32*1500 = $HK 480,000 * Also more maintenance cost would be more with increased use of moulds of slabs and facades. Additional shift would need more managerial inputs which can turn a headache for the company. Relocate Plant Space: * Partitioning walls account for 40% of the sale.
Hence closing that is not a pragmatic option * Unicon can divest from production of stairs as it accounted for only 6% of their sales in1997. * Efficient utilization of space. * Counter demand supply gap * Looking at the flipside Unicon would be abandoning an existing product where they havesome experience. Long term perspective: * Blanket Approval-Reduction in Lead time * Complexity reduction via standardization * Unicon should consider adding another 5000 square meters to the existing 7500 Square meters plant. * Disparate assembly lines for slabs and facades