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