Any construction project is bound by a specific budget and from a business perspective a project is deemed as a business activity that is supposedly intended to generate revenue for the company. The entire concept of generating revenue is in turn hinged on minimizing cost and maximizing profit which applies for just about any business activity. Within the realm of the construction industry, there are a wide variety of ways that lean construction companies are able to lower their project costs effectively and this article examines the various strategies that these companies use towards lowering their costs and subsequently enhancing profit margins.
Project Planning
Among the reasons that account for higher than necessary project cost is poor project planning. Every project is different regardless if it involves the same activities. For example not all landscaping projects or demolition or even fencing projects should be managed using the same sequence of activities. This is when ‘hiccups’ occur due to wrong specifications, unusable material or equipment, and more often due to logistics. Projects are left at a standstill when material and equipment do not arrive on time, or equipment are left idling whilst incurring cost each hour. Other logistic and procurement factors include over buying or under buying materials needed for the projects. Although these factors may seem trivial due to savings of just a few hundred dollars, over time they could accumulate to thousands of dollars that could be used to generate even more revenue and in 5 years, these concerns that are generally deemed as trivial siphon thousands of dollars from a company’s revenue potential in only 5 years.
Therefore in order to subscribe to good project planning practices, it would be good to phase the projects in a manner that the project runs smoothly and effectively. First and foremost there is the issue of ‘prepping’ project sites which require project managers to know what is needed and for small and medium projects a small skid steer or a mini excavator on hire for 200AUD a day is all that would be needed. After which the materials required and the people required are brought in at the same time and the project commences. This should be placed as phase one, phase two should involve planning the stages of the project within the phase as in what goes first, how much material should be placed on site and location of materials to ensure that the project runs efficiently. Lastly is the clean-up which would only require perhaps an excavator (or skid steer) supported by a mini dumper and perhaps to workers. The clean-up for small or medium projects should be done within a day or two at most.
Purchasing vs. Renting Equipment
Most construction equipment is available for hire and this includes mini excavators, mini dumpers, skid steers and standard sized equipment. Owning such equipment carries cost due to factors such as storage, transport and maintenance which over time adds up to quite a bit. Therefore, it is advisable to look into renting these types of equipment and using them optimally which reduces the pressure on capital structure and cash flow simply because these machines are expensive. Buying a piece of equipment such as a skid steer or a mini excavator involves forking approximately 10,000AUD and for the same amount of money by renting machines at 200AUD an hour, projects get a variety of the latest machines for 50 Hours minus all the hassle of transporting the equipment and maintaining them. These machines are only probably needed for about 2 hours for small projects at the most and using capital to buy an excavator that would be idling in storage is not advised.