Supply Chain Case - Unicon Concrete Products

Case Study: Unicon Concrete Products (H.K.) Ltd.

By

Rhoderick Buendia

December 16, 2015

Instructor: Coach Nikki Raycraft 

Table of Contents

Executive Summary        

Issue Identification        

Alternative and/or Options        

Recommendation and Implementation        

Monitor and Control        

Executive Summary

Mr. Li has an opportunity with Unicon to manage it in a new focused direction. With its competitive advantage it has established with the Hong Kong Housing Authority (HKHA). I recommend pursuing the blanket approval process with HKHA. These efficiencies could prove beneficial for both parties as this will greatly reduce lead time and costs. Façade and slabs is the growing trend in the industry and will allow Unicon to take advantage of the cost savings that come with it:

• No need for engineered documents, saving on time and engineering costs
• Job security
• Operational efficiencies
• Holding inventory
• Reduced lead times
• Product standardization
• Increased quality
  

The tradeoffs that implied with this move is worth the risk of this approval process. This could be savings upwards to HK$150,000 per block. An approximate saving of over 1M HK$ based upon the 179 blocks per year projection from the HKHA. Once this approval is agreed upon and the contracts awarded. I recommend a detail review of Unicon current product lines and completely outsourcing the stair production line. After a 6th month time, I recommend we review our production efficiencies and look into expanding our production facility as our three remaining products are now made-to-stock.

Issue Identification

There are several issues that need to be addressed that will determine how Unicon will be successful moving forward.

1. Should Unicon decide to increase its current plant space to be better prepared for future business, or take full advantage of the current boom in Hong Kong and not miss out on the current opportunities in the industry? With Unicon’s current product lines, Façade, slabs, stairs and portioning walls. Increasing Plant space would be costly and could possibly jeopardize current opportunity for business. However, this decision would solve a long term issue and would allow Unicon to be better prepared to grow as a company.
2. Would it be beneficial for Unicon to pursue a blanket approval process with their current number one customer, the Hong Kong Housing Authority (HKHA). With a recently announced four year construction program that will indict contracts for a total of 179 blocks, a blanket approval could prove very lucrative as it would save dramatically on costs and time. This could also allow Unicon to pursue industry-wide standards for the precast industry. The HKHA does have the authority to approve this type of proposal if it was convinced of its benefits. This move would be putting a lot of focus on one customer, leaving many opportunities for the competition to acquire the other projects/customers. Unicon will not be able to devote full attention to all of its current product lines, and has limited space.
3. Currently Unicon has 4 main product lines. Façade, slabs, stairs and portioning walls. Unicon began its foundation with portioning walls, it is slowly becoming the legacy product as more and more operations are leading to precast structures. Should Unicon proceed with all four product lines or focus on three or less products that are becoming more recognized. This would have short term implications as the resources saved could be better used in another product line.
   
   
   
   Environmental and Root Cause

Mr. Li must take a look at the industry and where it is going to be in (long term) - five, ten or even twenty years. What will Unicon need to do to stay competitive in the industry and be “one step ahead” of the competition?

Let’s first take a look at Unicon’s current products:

Facades and slabs are becoming the growing trend. Together they make up 54% of Unicons sales. This is becoming the industry trend amongst general contractors. The stairs product line is still profitable; it is not a core product for Unicon. This uses up valuable production space and manpower. Partitioning walls are used, but slowly becoming a legacy product and the trend is toward precasting. They require engineering documents that are expensive and time consuming. The production process for the facades and slabs are identical, however the plant capacity are uneven. Unicon uses subcontractors to provide labour for this production. One subcontractor provides 2 teams of 4 for slab production, while another subcontractor provides 3 teams of 4 for slab production. The plant has 25 facade moulds and 64 slab moulds. Some slabs could be used to produce 2 slabs and daily production ranged from 64 to 101 slabs per day. If we take a look at the Hong Kong industry, it is currently in a boom. With our largest customer who makes up 80 percent of our sales. The HKHA have announced forecasts of 179 blocks to be tendered in the next year alone. Unicon’s current capacity is for 7 blocks per year with the current industry capacity of 20 blocks per year. The trend is moving towards pre-casting material. If a blanket approval was negotiated. It would reduce the amount of additional costs drastically for Unicon. This would allow Unicon to standardize their product and take full advantage of stocking concrete facades and slabs. This would allow Unicon to focus on the quality of their product and allocate resources toward those structures as you will know exactly how many you will need for each job. As mentioned, this could be savings upwards to HK$150,000 per block.