The cost of work is generally synthesized from two principal components, quantity and rate. Currently if cost savings are required the quantity is usually cut as this is the component that the asset manager controls. But let us consider the rate component for a moment. The rate is usually determined by the supplier on a project by project basis. Projects vary in size as demand for work delivery tends to be erratic (see graph).
In this situation the supply chain is not only being asked to have resources available to respond to this erratic demand but to regularly incur the costs of tendering as well. If with reliable information and careful planning the demand could be smoothed over, say, five or seven years the supply chain could be asked to tender for a consistent quantity of work over a longer period of time. This will diminish the supply chain risk, give confidence in resource utilisation and significantly reduce tendering costs. All of this delivering a real reduction in the rates and overall cost.
‘Rethinking Construction’ in action.
