What matters most to you? That all depends on your personal situation and state of mind. The responses we hear regularly include family, school, faith, the environment, money, work, health, or even public service. The list can go on and on with never-ending variables. So why ask this question on a life safety blog?
Over the course of 2016, I’ll be blogging about things that matter most to the people I interact with in my personal and professional life. My main goal for this year (and every year God gives me) is to make moments matter as much as I possibly can. Moments with family and friends, moments with colleagues and acquaintances, moments with God and nature, and especially moments that make a difference in our industry.
The story I’d like to share in this blog captures a handful of powerful moments that occurred over the course of a few days. As I prepared a series of presentations for key account visits, I concentrated on how to craft my message around a growing trend in the construction industry: pre-fabricated life safety solutions. This specific idea is not new, it’s not difficult to do, and it makes sense from a practical and financial standpoint; but how to break through an antiquated way of thinking to what’s actually important in the big picture was the real challenge I was faced with.
You see, I too was stuck in the old mindset and had to educate myself on how to provide a superior integration solution, rather than stick with the inefficient processes that have been prevalent for a long, long time. That quick and dirty approach will never completely go away, but when resources and time constraints make the current ingrained course of action impractical for accelerated construction schedules, you will need to seek new solutions and become open to ideas that were previously discarded because of simple misconceptions around cost.
What makes this solution so relevant today is the frenzied pace of construction over the past 18 months. This boom is predicted to continue well into 2017, not tapering off until we begin to near the end of this decade. With increased bidding activity and pricing levels as competitive as they were in the mid-aughts, how can companies take on more projects at profitable margins utilizing the resources they already have in place?
If a simple process change could reduce your work load by 30-40%, improve quality, reduce installation defects along with associated risks, and do it for less cost then currently being realized, wouldn’t it seem like a no-brainer? This was the question I was looking to pose to our customers and my friends in the industry. Getting the conversation narrative into terms that fit their daily routine was the real challenge, and I finally began to form a fuzzy answer to at 5AM one morning as I woke for my routine run. I’m still massaging this explanation into coherent terms, but I hope it will resonate with those who truly want to find a better way to install life safety systems.
Before I outline the physical solution that will yield the savings I’ve alluded too, let me define the two pricing models used in estimations. The first is Cost-led Pricing, which is the most commonly practiced method used today. Cost-led Pricing is simple to understand, but doesn’t account for all the real costs incurred when executing the solution.
A Cost-led Pricing estimate starts with the costs of materials, adds line items for labor, and lastly a desired profit margin is added on top. The sum of all these items results in a price for the solution. This is Cost-led Pricing at its simplest.
In Price-led Costing, the price the customer is willing to pay for a solution or service determines allowable costs, beginning with design costs and ending with service costs. Marketing and research through case studies provides information on the price the customer is willing to pay for the value the product or service provides.
Under Price-led Costing, the entire economic framework focuses upon creating value for all customers and meeting cost-targets while earning the necessary rate of return on investment. This is how Space Age Electronics solves your economic application problem and bridges speed, price, and quality into a solution that guarantees profits because more of the variables are removed and accounted for.
Now that we have these two pricing models defined, let’s shift our attention to a case study around pre-fabricated Damper Control Cabinets which illustrates how Price-led Costing saves labor and improves profits over Cost-led Pricing. The real-world context provided by this study led to the moment when the proverbial lightbulb switched on for my audience and they could all see the advantage clear-as-day!
The case study described focused on a typical hotel project. The building stood 8 stories tall, incorporated full smoke control, smoke detection, voice evacuation, sprinklers, and in-room Smoke/CO detection. The project began running behind schedule, and to avoid liquidated damages and get back on schedule the contractors were looking for ways to speed up installation and meet the original due dates. Like most projects, there were no extra dollars available to bring in resources so the solution had to be delivered within an already tight budget.
I asked my audiences about factors that drive project managers, designers, and job foremen to seek alternate solutions that save time and reduce costs. The groups had to relive an all too familiar pain they’ve dealt with repeatedly, before finally reaching a tipping point where alternative methods become viable. Only then were they open enough to evaluate the actual costs to install a damper control location. The short list of issues noted by the groups were experienced on virtually every smoke control project they conducted. This is only a partial list truncated to the most common issues that affect profitability:
Defects (product and installation)
Project scope changes
Communications (designed twice, installed once)
Material handling – shipping and receiving
So here is the proof in the pudding: the two pricing examples discussed earlier show the actual costs for the Electrical Contractor (EC) and Low Voltage Contractor (LV). The first is what was estimated if the installation was done as planned (which would have delayed the project several weeks). The second is what the actual costs were when done using a pre-assembled and pre-wired Damper Control Cabinet solution from Space Age. Based on Cost-led Pricing, the savings of time and labor are evidence that this easy process change is significantly less expensive than traditional installation methods.
The bottom line was this:
– Over $18,000 saved in costs (34% under budget)
– Reduction of 300 man hours
– Accelerated completion by 7.5 weeks (single man hour calculation)
The moment of realization was powerful, but there will always be resistance to something new that requires some initial work to get organized and implemented so that it can be repeated time and again. So while the groups were open to the concepts presented, they were still reluctant to be a champion of change and make a significant positive impact on their business. Not everyone will break from the status quo; only when the pain becomes so great will change be the solution.
So in closing, Space Age Electronics is here to help industry professionals do their jobs in a code compliant manner, save time doing it, and improve reliability. Come join us and let’s create your solution that will stand out as the moment your business changed for the better!