Organisations Engaged In The Construction

Published Date: 02 Nov 2017

Discuss the reasons why modern organisations engaged in the construction and property industries should use ‘work study’ in their business.

‘Work Study’ measures work and defines performance standards. It is the systematic evaluation of the methods of carrying out a number of activities in order to improve the effective use of resources and to come up with standards of performance for the activities carried out.

Work Study can be seen as a linear process which is divided in a number of stages as explained hereunder. These stages are as follows:

Select - Work selected for method study may be an identified problem area or an identified opportunity.

Define - Before any work study investigation is begun, it is necessary to establish clear terms of reference. This should also include an identification of who owns the problem or situation, and ways in which such ownership is shared.

Record – this stage of the work study involves gathering sufficient data to act as the basis of evaluation and examination.

Examine - The recorded data are subjected to examination and analysis. The aim is to identify, often through a structured, questioning process, those points of the overall system of work that require improvements or offer opportunity for beneficial change.

Develop - The scope at this stage is to identify possible actions for improvement and to subject these to evaluation in order to develop a preferred solution.

Install - Making theoretical change is sometimes very easy; however, making real change requires careful planning. Install, sometimes, will require a parallel running of old and new systems. The important thing that matters is that the introduction of new working methods is successful.

Maintain - After the introduction of new working methods, it is necessary to check that the new methods are working, and that they are being properly followed, and that what have been implemented has brought about the desired results.

The advantages of ‘work study’ in business are that it helps the business organisation analyze its work practices so that it continuously develops these practices to make sure these are efficient enough for it to remain in competition.

By studying the work processes, an organisation can identify specific areas for improvement in both workflow and quality of work, thus ensuring sustained efficiency and high level standards of work that help it differentiate itself from other business organisations within the market.

In a highly competitive market such as the construction industry, there is a continuous pressure for work costs to remain low in order to be more competitive in pricing whilst holding a good profit margin on revenue generated. For this to happen, the organisation needs to keep abrest with new technology and materials that can help it actually reduce costs of manufacturing and production, whilst keeping labour hours as low as possible.

Competition is not only about costs but also about completion of work and delivery dates. Clients who require their projects to be ready by well-planned tight deadlines will obviously look around for companies who can do the work in the least time possible. For a company to be attractive it needs to show that it can work to strict deadlines and that the work carried out is as requested with the agreed standards. This certainly requires construction companies to use their expertise from past experience as well as to invest in new technology that can help it to work faster and reach milestones in shorter times. This certainly requires large efforts on work study and research and development for the company to develop its planning and implementation forces to very advanced work processes. Small changes to traditional work processes can at times save the organization a lot of resources in time and money especially when considering large scale projects. When competition is harsh, every achieved edge of efficiency reached upon competitor companies can result in whether a business organisation manages to survive in difficult working conditions. Market pressures are not so easy in these days of financial turmoil and tough business times. Every little counts!

There are always inefficiencies in workflows and work processes. Work study will help the management analyze these inefficiencies and address them so that the organization becomes leaner. At times, improvement to work processes do not necessarily relate to costs but maybe also to health and safety procedures. In the construction industry, it is crucial that the organization invests in the necessary training and equipment to ensure improved safety conditions of work. In such a high risk working environment it makes sense that an organization takes the necessary precautionary measures to avoid accidents at work which might end up in large losses of money paid in compensation to victims of accidents, damage to equipment or loss of contracts due to lack of safety standards enforced at work.

QUESTION 2

The board of directors at Neville Construction Ltd has been worried for some time about its cost control management system. Neville Construction, along with other companies in the Strathgammon Estate Group Ltd (SEG), has lagged behind in introducing new methods of control and now the Chief Executive Officer (CEO) feels that it is time to act on this matter. Unfortunately, few of the members have the necessary skills and some feel that this initiative is not necessary and they need to be persuaded.

Assume that you are an assistant to Gareth Lomas, Company Secretary, who has been asked to write a report for the board of directors on the managerial advantages of introducing a cost management system in Neville Construction.

The task has been further delegated to you! In your report you should also summarise the main management issues arising from your suggestions (e.g. the need for appropriate systems and training).

STRATHGAMMON ESTATES GROUP LTD

COST MANAGEMENT SYSTEMS

A report on the Managerial Advantages of Introducing a Cost Management Systems within Strathgammon Group of Companies

for:

The CEO and Board of Members of Neville Construction Ltd

by:

Brady Grech

Assistant to Gareth Lomas, Company Secretary

EXECUTIVE SUMMARY

According to the last quarterly sales statistics, and from feedback collected

internally, it seems that we are, and will be facing tough times ahead, due

to the recession and global financial slowdown. The external financial

factor is affecting badly our sales, were we have registered lower sales

despite seeing a slight improvement over the previous period.

Internal operational and sales analysis are also showing that complaints on

deliveries are still high at 12%. The main reasons for the complaints coming

in being mainly three, late deliveries, poor workmanship and inaccuracy in

work manufactured.

Despite the fact that we are facing big competition from both local and

foreign competitors, it still seems that our company is lacking operational

efficiencies in several work processes. Though we have an experienced

workforce, it looks like their intransigence and complacency to change is

hindering the company from improving its efficiency in order to increase

competitiveness and reduce costs in such a hard financial situation.

INTRODUCTION

The aim of this Report is to explain how The introduction of an effective cost management system within Neville Construction Ltd is not a floating option but a necessary need for the company to ensure sustained competitiveness and good retainment of our market share. The cost of not having such a cost management system in place is directly related to the inefficiencies resulting from not having such a system in place.

Fifty years of experience in the sector do not guarantee automatic success

in the light that sales are expected to suffer further, due to the long lasting

recession. Therefore it is being suggested that the company takes a

number of internal actions to mitigate the situation aimed at reforming

internal operations, work practices and motivating better our employees.

DISCUSSION

Though the company continued to register an increase in revenue during the last three years, one can notice a decrease in profitability due to an increased expenditure in operating and direct costs. Despite that some of this increase is attributable to a registered increase in price of raw material, one cannot not note that there was little improvement in the reduction of operating costs. This mainly results from lack of reform and action taken to identify unnecessary costs and areas of improvement in work processes throughout the past years.

Cost control is crucial in the current market work environment where we are continuously pressured to keep production costs down whilst delivering a superior product. This business environment leads us to the imperative need mentioned above. Moreover, we are continuously striving to find the necessary capital to invest in new machinery that can help us become more competitive and be able to attract more quality work.

An effective cost management system can eventually save the company significant operational and material costs by identifying areas for costs reduction which can be improved on both a short and long term plan of process re-engineering and organizational restructuring.

Such initiatives usually result in cost reductions of between 5% to 15% which in figure terms would be the equivalent to a sum between £250,000 to £750,000, per year in savings. These savings could easily be diverted to our investment efforts in purchasing of new equipment, workforce training and improved marketing of our services. Apart from direct benefit in operating costs, these savings will give the company added flexibility and manoeuvrability in price dealership for tendered business due to the achieve reduction in costs. This is crucial for the company to remain competitive in our market.

It is envisaged that a well managed cost management system can identify cost reductions in the following areas:

labour hours required for the manufacturing and preparation of materials

efficiency of the current work processes

maximisation of resource utility

overtime control

cost savings on fines incurred due to missed deadlines of project completion

improved flexibility of workforce

reduction of consultancy fees and subcontracted services to third parties

identification of alternative work material which is less costly and equally good

reduction in utility consumption

The above are some of the main areas which can be analyzed for reduction of costs and improved operational efficiency. The direct benefit from introducing such a cost management system is much greater than the direct cost to introduce and maintain such a system. Moreover, the company should opt for introducing such a system automatically without being forced to due to negative financial situations.

It is better to take action now that we are in time to effectively control our costs rather than having to take austerity measures in a financial loss scenario or in the event that the company faces tough financial situations. The benefits that can be achieved on both the short and the long run from introducing such a cost management system does not only improve our operability and profitability but also the long term success of our business.

There's a cost in not taking action. We can start by saving this cost by taking the decision to introduce an effective cost management system within Neville Construction Ltd.

CONCLUSION

This Report has provided an overview of Neville Construction Ltd current financial situation. Unfortunately, past experience in this sector, do not guarantee financial stability, as it does not only depend on the firm itself but

also on external factors. Continuous collaborative work and the

implementation of new systems is the guarantee to overcome such turmoil

period.

The employees must operate as normal and should suggest improvements including suggestions regarding the division of labour itself, to improve efficiency.

Rather than focusing employees on expansion, or firing them, the company should direct its employees towards improving efficiency. This could be achieved by increasing motivations, incentives and training programs.

The company will plan ahead and anticipate problems. If redundancies do have to be made, they should have as little impact on the company and its employees as possible.

Costs will be reviewed. The company will review any extra costs which the company can survive without to mitigate expenses. The cooperation of employees is necessary, so extra costs such as electrical consumption willbe reduced. Employees are to note that energy-saving schemes and turning off lights after use can make a big difference.

It can be concluded that the points mentioned throughout this report addressed to the chief executive officer and the board of members are tobe implemented as soon as possible to start improving the company’s position and gives the company a cutting edge towards a prosperous future.