Procurement process are robust

Mr. S.N. Subrahmanyan,
CEO & MD,
L&T

Ankur Gupta,
Director,
K K Gupta Constructions Pvt Ltd

Vikas Kothari,
President and Director,
Om Metals Infraprojects

K K Sinha,
Wholetime Director,
Essar Ports

Important aspect to consider while buying equipment and how to optimise the equipment to the fullest

Procurement of machinery is a specialised task and the advent of new, frontier digital technologies is helping to further sharpen the process. A few key factors that need to be considered during the procurement process are robust and sustainable technologies, IoT enablement for digital tracking of performance and health, dash boards and analytics friendly data flow, ease of operations and maintenance, longevity, minimum cost of OEM services and immediate availability of 'genuine - original' spares throughout the project lifecycle, informs S N Subrahmanyan, CEO and Managing Director, L&T.

“It is important to understand objectives in construction field. We as an AA class government road contractor always looking to increase productivity first, then off course our goal to achieve better performance, states Ankur Gupta, Director, K K Gupta Constructions Pvt Ltd.

He adds, “Depending on the scale of investment on project awarded, the most common practice is to do working on cost-benefit analysis till the completion of project, which helps to justify purchase and determine the right requirement as per the bid desired. KKG group have large fleet of plant and machinery and it always prefer to adopt the productive, effective utilisation, and running model of popular brand machinery only.”

Initially, KKG always looked at important factors such as the capacity of equipment, their usage along with vehicles fleet and the best available current resources. “Generally before execution of any road project we use an asset utilisation ratio for finding out rates as per bill of quantities (BOQ) in bidding of any road or civil project, which measures your ability to get optimal results from equipment and other assets. Because if the desired fleet will be efficient then you will get you better results. KKG believe that innovation in every sector is really about responding to change in a creative way; and by adopting technology, you improve your efficiency soon. We always study the entire possible factors while release any requisitions from market,” says Gupta.

Om Metals Infraprojects, continues to take efforts towards the development of the society and environment. "It is very important for us to look at everything with an attitude of being a responsible contributor to the country's infrastructure growth. Thus, while procuring equipment, we do our own analysis from every aspect. We look at the specifications of the equipment while procuring according to our requirement. Secondly, it is very important to look at its efficiency parameters like power and fuel consumption, its durability or strength and its easiness in terms of repair and maintenance," informs Vikas Kothari, President and Director, Om Metals Infraprojects Ltd.
K K Sinha, Wholetime Director, Essar Ports Ltd shares few key factors while buying equipment.

• Project and operational requirements
• Selection of technology
• Requirement of environmental norms
• Delivery timelines
• Capital cost
• Operating cost
• Ease of operations and maintenance
• Performance parameters, its guaranteed levels, rejection limits
• Vendor assessment, references, customer feedback
• Strategic buying covering Long term agreements, world as a single market
• Quality aspects from the aspects of cargo, performance, prevalent norms and standards
• Application of equipment namely the project location.

Making optimum use of equipment
On assuring how to make optimum use of equipment Gupta believes, execution planning is like a roadmap, it helps one to know where one is going and how long it will take to get there. Whatever we invest on site first of all large machinery should be inspected timely as soon as it is purchased. Any heavy machinery on site needs to be operated by a perfect skill operator so it's more responsible to handover equipment to right person. We know workers come and go, skills become rusty and poor operation leads to breakdowns. In any project depend how you are using your skill to complete the project on time. We as a road contractor believe to serve right direction, right method can be increased by only show your trust and confidence to your project team. Because if he is the only person who knows very well how to execute your entire site in well manner.

Gupta shares few tips to be followed for best optimum use of equipment;
• Keep machinery clean, and maintain a clean environment
• Have a maintenance and repair schedule, and keep good records
• Add and test lubricants frequently
• Daily track DPR on site
• Average in km/hours need to be maintained
• Positive environment.

Meticulous planning and clear construction methods is key to ensure the best usage of any machine. At L&T, methods and planning are part of the organisation's culture, which have been nurtured over decades, believes Subrahmanyan.
Om Metals Infraprojects Ltd has several projects under implementation and the strength of the company lies in identification, execution and successful implementation of the projects in infrastructure space. Thus Kothari adds “We believe that, to make optimum use of equipment, the most critical factor is routine maintenance so that work progresses do not get hampered. Moreover, we believe that any company's strength and success lies on the hands behind its staff. Thus, we make sure the on-site attendants for the equipment should have thorough knowledge, comprehensive expertise and all the skills required for these equipment.”

Sinha shares following points to make optimum use of equipment;
• Maintenance planning not limited to predictive and preventive Adherence to best practices of operations and maintenance equipment is important.
• Efficient planning of cargo and ensuring sufficient shut down for maintenance activities
• Maintaining of operating logs so that over/under-utilised data can be captured and accordingly a preventive action can be taken
• Recording the real-time data, inputs, consumption pattern and taking corrective action for any deviation as compared to the designed/rated ones.

Challenges while buying equipment and ways to overcome it
To develop any infrastructure it is very important to have excellent equipment but while buying equipment it can be challenging to pick up the right one.

Explaining on challenges faced while buying a machine Subrahmanyan informs, “The primary challenge that one faces during the equipment procurement process is to strike the right balance between technology, cost and lead time for supply.”

To overcome the challenge Subrahmanyan suggests, “Firstly, it is imperative to have a dynamic outlook to plan ahead with a horizon of 3-4 years. A couple of years ago for example, notwithstanding a sluggish industry, L&T had ordered business strategic machineries like high-end cranes, etc, confident of significant infrastructure development in the country. Long-term business associations with OEMs are crucial for which L&T leverages its strength in strategic planning and engagement at the right time. As leaders in the field, L&T carries the responsibility to set the right trends and benchmarks for the industry as a whole.”

Any machinery, equipment maybe standard to one contractor but may not be to another. It depends on the scope of the operations of a contractor. Today's construction projects are highly mechanised so it is important to know how the achieving productivity and efficiency by using existing resources or buy new one. “During the construction work, selection of right equipment has always been a key factor in the success of any construction project,” comments Gupta.

All construction projects require different types of equipment and machineries as per their own level of application. Sometimes it is very difficult to install new equipment on site if project cost is very low but if one get timely completion and flow of other works in hand then one must prefer the right guidance.

Gupta notes the following points need to face while buying equipment:
• Profitability v/s productivity
• Availability
• Non-availability of land within city limits -if one have placed order of heavy mobile plant and not able to deploy on site for production.
(Like crushing plant, RMC plant etc)
• Delaying in loan executions
• High operation costs
• Technology adoption
• Project performance
• Skill workers
• Sustainability concern

"Every project has its challenges, so you must be aware of that. We are all human and make mistakes, but it's how those are handled that sets a contractor apart," Points out Gupta.
He states, “KKG knows that trust and communication are two components that must be present for a project to overcome challenges and end on a good working relationship. Nothing in life is perfect but it's all in how you handle it. It's no different when dealing with a construction project, whether be it a government project or back to back project.”

The actual position is the engineers in the office used to calculate budgets and such, they simply weren't found on the site at all. Every road or highway should be constructed in a way that guarantees and ensures comfortable, convenient and safe. One has pay­ments due to subcontractors, vendors, materials suppliers, but don't get paid until the project is complete and unless you have enough available cash flow. “Many sectors in the road engineering industry those aren't yet fully developed. The first hurdle for many independent contractors is often finding the funds to start and grow their business,” points out Gupta.

To overcome challenges Gupta suggests, “Therefore it also is recommended to find trusted partners, engineers, contractors, suppliers, to work with on your project. This is important to the completion of a successful project.”
He adds, “You should feel comfortable talking to your project team about anything dealing with your project then be it a design question, quality of construction, schedule or budget. As an owner, you should be informed about the progress of your project and involved in the decision making process. Setting expectations and goals at the beginning of the project are important to minimise the obstacles you will face on a project. The project team can't predict everything but they can help you work through those challenges and apply their previous experience to the current situation.”

On the challenges Kothari states, “Our company continues to look for opportunities in new profitable ventures like hydro and irrigation and construction of smart cities. Thus, to meet our requirement, we need to get in touch with different equipment makers of different segments with their different quotations. Sometimes, the specifications and quality of the equipment which are being showed in the brochures does not prove to be as good as in actual. This is the main challenge we generally face while buying equipment and we have been very careful about this.”

Om Metals Infraprojects Ltd does its own analysis from every aspect. To overcome challenges like difference in quality, the company does its own ground work like cross checking from other existing users about the equipments. “We have an excellent team of professionals who bought their comprehensive expertise to benefit our company. They go and see the working of equipments at the site of existing users and do Q & A with the on-site attendants,” avers Kothari.

Sinha points out challenges while buying equipment such as technical competence of the vendor and expertise of team, financial health of vendor, backlog of supply of vendor/OEM that is order base v/s capacity and capability of vendor, price realisation and cost effective procurement, delivery timelines and time taken from floating enquiry to ordering to equipment, value engineering in order to ensure optimal design, design modification suiting to different OEMs and securing approval from relevant authority as per project requirements, receipt of data in the required format for evaluation purposes, risk mitigation/compliance issues, ensuring uninterrupted supp­lies and maintaining sustainable inventory levels.

To overcome the hurdles Sinha believes it is very important to enter in to long term agreements to ensure cost-effective uninterrupted supply. Similarly, entering into MOU with strategic partners. It is also very important to create systems and platform for standardising procurement process. Also partnering with OEM's and engineering for shortening of timeframe from offer to technical acceptance.

Renting equipment
Stating on whether renting equipment has become trend Subrahmanyan says, “An uncertain business portfolio and skewed domestic growth have prompted several organisations to seek alternates solutions such as hiring in an effort to mitigate known risks. Despite owning one of the largest fleets in the world, L&T does adopt selective hiring too, depending upon project demands and intricacies.”

As per Sinha, decisions regarding renting equipment are strategic in nature considering the project and operational requirements. Renting equipment makes the company asset light in nature, with lower debt requirements and provides the opportunity to work on core competencies while outsourcing the O&M of machine. It also renders flexibility to upgrade as and when technology upgrades.”

Sinha believes, renting/leasing becomes a further attractive proposition if the OEM's are able to provide flexible solutions with an option to buy out the equipment at the end of leasing tenure of leasing.
There are many opportunities to hire some of their construction equipment for job work instead of purchasing. As per tender bidding it is financially advantageous to purchase whereas under the conditions it is more economical and satisfactory to rent it. They can be bid tender either showing by own machinery or taking on lease. “It is not easy job for a contractor to spend all for plant and machinery in a particular investment. A contractor can never afford to own all types and sizes of equipment, points out Gupta.

He adds, “Generally there are many options to consider when it comes to deciding whether heavy equipment such as excavators, backhoes and wheel loaders should be purchased or rented. Ultimately it comes down to cost and convenience of project.”

Gupta suggests, “Purchasing will probably save your money over time. On the other hand, you are using the gear somewhat less frequently or don’t want to maintain equipment storage locations and hire both service technicians and delivery drivers, then renting can be a great option under any project.”

In this competitive world, Kothari say, “It is always better to have options which can help in cost savings and the management of Om Metals Infraprojects has always been taking measures in terms of cost savings without impacting the quality of work. Taking construction equipment on rent is a better option if those are available at reasonable rates. Moreover, as all the hassles of running these peacefully on-site would belong to the owner of the equipment so renting seems a good option and has become a trend nowadays.”

Support from OEMs
In an era of specialisation, it is expected of OEMs to offer 'customised' solutions to meet certain specific project needs like geological/terrain-related applications etc, through collaborative product developments/enhancements, rather than selling regular off-the-shelf solutions, believes Subrahmanyan.
He adds, “With the advent of new technologies, it has become vital for OEMs to understand the emerging trends and proactively offer solutions that are digitally compatible, analogical, user beneficial and meets the needs of clients, customers and end-users. It is important for the industry at large for OEMs to be constantly involved in this process of evolution to upgrade and set new benchmarks.”

L&T is committed to meet the high expectations of the market and to partner organisations in this endeavour, it is imperative for OEMs to be aware of fresh developments, be abreast with the times, remain up to date in training both in terms of applications and MRO, and thereby be better equipped to provide the support that organisations require.

“The road construction equipment manufacturers need to work on elaborate business plans to expand and retain their presence in the sector,” suggest Gupta.

He adds, “Based on the nature of wide evolving range of equipment demand, many makers producing and deliver to road contractors as per their need. Currently in India road construction equipment's market is very growing. That is why they need to be focus on customised product and they have to launch on big platform in upcoming business trade fairs, Excon trade exhibition.”

Indian road construction sector is based on its engines. Vehicle's diesel engines are at the heart of the company’s range of products. Based on well-proven, robust technology, meet the needs of Indian customers by providing increased machine performance along with reduced emissions.

“Local manufacturing set up will allow offering price competitive products and enabling in maintaining better connectivity with customers. Recently much company introduced and successfully launched graders, Hem, excavator, Ajaxfiori machine for the Indian market which is an international standards. It brings greater value compared to its international peers by providing as standard, advanced features like a fully automatic power shift transmission,” informs Gupta.

Kothari expects support from OEMs in terms of better availability of equipment and its spare parts, equipment maintenance and authenticity in efficiency parameters like power and fuel consumption so that projects do not get delayed.

“After sales support during operations is critical for the project and hence, service contracts are required. In case service contracts are not entered, then OEMs must support with operating guidelines and carrying an inventory of emergency spares which may be required during running of a plant. OEM's should partner with industry in providing value engineering and customised solutions. OEM's should also partner with the industry and take initiative of providing update on latest technology with respect to machine and working out on possibilities of upgrading the same thus enabling a win-win proposition for Industry and its stakeholders. OEM's should also work on innovative financing solutions like supplier credit, leasing and buy back , etc, to enable industry upgrade and thus generating more business,” concludes Sinha.

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