CASE STUDY:UNICON CONCRETE PRODUCTS

(H.K.) Ltd

UNICON CONCRETE PRODUCTS (H.K.)

Part of ITC (International Tak Cheung) Holdings Ltd.

Manufactured Precast Concrete Products:FacadesSlabsStairsPartitioning Walls

Used in large, high-rise Residential, Office & Industrial complexes.

Largest chunk of Unicon’s sales (app. 80%) - HKHA

HONG KONGImportant centre of economic activity in SE-

AsiaEconomic gateway to People’s Republic of

China (PRC)Has world’s Largest container port

PROBLEM:6 Million people on only 1076 sq kms – Space

CrunchLack of Affordable Housing - Housing among

the Most expensive in the world800-1500 sq foot apartment in HK:

HK$15-35 per sq foot per month (Rent)HK$5500-8000 (Purchase)

CONCRETE CONSTRUCTION MARKET

Precast Concrete Products sold to General Contractors in HK

2 Options:Traditional MethodAssembling precast concrete facades & slabs

PRECAST CONCRETE FACADE

PRECAST CONCRETE BALCONY

PRECAST CONCRETE STAIRCASE

SEMI-PRECAST CONCRETE SLAB

DRY WALL

Prefabrication Yard : On-Site

Transfer of Precast Facade : On-Site

ADVANTAGES of Precast Concrete

Less reliance on Skilled LabourStandardized Product

Reduction of on-site work and less congestion

Stable Design & Consistent/Superior Quality

Production unaffected by traditional problems (environment etc)

Less Supervision reqd.

DISADVANTAGES of Precast Concrete

Design process to be specified at the outset of the process

Dependence on Expensive equipments (eg. Tower crane)

Hampers creativity & originality of architect

HONG KONG HOUSING AUTHORITY (HKHA)

Govt. Agency for providing Affordable Housing for local residentsRental BlocksHOS (Home Ownership Scheme) Blocks

Regulations – manufacture of facades/slabs restricted only to production facilities in HK

HKHA’s Ambitious 4-year program for construction of new residential blocksContracts for 179 blocks in the next year alone50% of these (app. 90) would require Precast

materials1 Block: 1120 facades, 3400 slabs

PROBLEM:Unicon’s Current Capacity: 7 blocks per yearCurrent Industry Capacity: 20 blocks per year

HONG KONG HOUSING AUTHORITY (HKHA)

APPROVAL PROCESS

Registered Architect and Registered Structural Engineer (RSE) – prepare and submit detailed design/calculations to Govt. Building Dept.

Submission Review – Approved or RejectedThe Submission & Review process takes

app. 2 months

As Mr. Li, would you pursue the blanket approval for slabs and

facades? Why?

BLANKET APPROVAL

A Strategy whereby the already approved technical submissions for HKHA projects would NOT require Review or Approval by

RSE or Govt.could simply be RE-SUBMITTED for future

projects

ADVANTAGES:

Reduction in timeReduction in cost From made-to-order to make-to-stockProduct standardization Advantage of expected boom in market Help in expansion

DISADVANTAGES:

Other company’s 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 loosing in leadership in the market.

What changes do you foresee to Unicon’s operations if the

blanket approval is accepted by the HKHA?

•Reduction in lead time•Changes in Production process•Increase in volume of production•Standardization•Shift in focus•Need for Inventory management•Expansion•Cost Saving

Changes

Product Process Matrix

The process selection depends on two major factors

•Degree of standardization•Volume of goods produced

Product structure Product life cycle stage

Low volume

Unique (one of a kind)

Low volume Multiple Products

Higher volume

Standardized product

Very high volume Commodity

product

Process structure

Process life cycle stage

Jumbled flow (job shop)

Job shop

Disconnected line flow (batch)

Batch Batch

(Increased Capacity)

Connected line flow (assembly

line)

Assembly line

Continuous flow (continuous)

Continuous

Present Scenario

• Multiple products are being produced•Not at a very high volume •Batch Processing•Production of facades and slabs takes place simultaneously in batches

Approval of Sanction

With the approval of sanction following changes will take place

•Increased Standardization•Increased Volume

Available options

With the approval of sanction following changes will take place

•Assembly Line – Not Viable•Batch Processing with increased capacity- Preferred Option

Strategy

•Batch Processing•Increase the number of moulds of facades and slabs •Stairs account for 6% of sales with low profit margins - their production may be shut down• Space may be used for facades and slabs. •Will enable an increase in their production to satisfy the increasing demand  

What steps would you take to increase the production of slabs and facades? How would you implement your plan?

54% market share of slabs and facades

High margins- More Profit

SOME FACTS

Single Shift from 8:00 A:M to 6 P:M. Implement double shifts.

Unicon can also use the existing moulds for slabs and facades in the second shift.

Unicon will have to bear additional labor cost for 32 employees. This means an additional cost of 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.

WHAT CAN UNICON DOAdditional Shift

WHAT CAN UNICON DORelocate 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 in 1997.

Efficient utilisation of space. Counter demand supply gap

Looking at the flipside Unicon would be abandoning an existing product where they have some experience.

Blanket Approval- Reduction in Lead time

Complexity reduction via standarization

Unicon should consider adding another 5000 square meters to the existing 7500 Square meters plant. Disparate assembly lines for slabs and facadesInnovative employee schemes

WHAT CAN UNICON DOLong Term Perspective