Adopting An Entrepreneurial Mindset In The Face Of Crisis
Homegrown SME Shin Khai Construction is taking the pandemic head on as it positions itself for long-term success.
Like many businesses in the construction and property sectors, Shin Khai Construction was negatively impacted by the COVID-19 pandemic on multiple fronts.
Whether it was a severe manpower crunch or rising materials cost, the 15-year- old company faced the worst crisis in its relatively short history. Shin Kai is engaged as both a main contractor as well as a sub-contractor, and has worked on projects in both the private and public sectors.
Bryan Koh, Managing Director of Shin Khai Construction, shares his company’s journey navigating the crisis and its path to overcoming adversity.
What challenges have you faced during this pandemic?
Productivity declined and costs increased. In the past, when getting workers was not a problem, we could always assign more workers to a project when it is delayed, but that is not possible during the pandemic. If we assume headcount was 100% before COVID-19, I estimate it is now down by 20% to 30%. We no longer have the luxury of engaging more workers.
Costs of materials have also increased. For instance, the shipping costs of materials we get from China has increased by up to 300%. There were also increased dormitory costs because of new regulations. We also faced disrupted supply chains and operational restrictions, all of which resulted in higher business costs.
Furthermore, we had to comply with new safety and environment regulatory measures . For example, fabrication work is no longer allowed near residential or office areas. As such, we have to do fabrication offsite and transport the finished pieces to the project site. But transportation costs have also increased.
As a result of these challenges, many construction firms are having problems completing jobs within the quoted budget. Quotations submitted six months ago may no longer be feasible given the increased costs in materials and labour. For projects that take 1.5 to 2 years to complete, the increase could be very substantial. A $1 million project could end up costing $1.4 million. Thankfully, clients are usually understanding, as we are all in the same boat.
What solutions have you adopted to cope with the downturn, and how have these benefitted the company?
We have regrouped. Firstly, we broadened our services by offering aluminium and landscaping-related services. We also took steps to develop an entrepreneurial mindset among our managers, and encouraged them to generate new business. It has worked well for us.
We also focused on increasing productivity by encouraging specialisation. Previously, our strategy involved getting our employees to multi-task. Workers were assigned wherever there was work. So, a plasterer at a project might have a different co-worker every day.
However, we found that by using the same workers, productivity increased as the team worked better and faster, as a new worker needed time to become proficient. Implementing specialisation also simplified the provision of tools. Different tasks require different tools and machines, so specialisation solved this problem.
We also took steps to improve the living conditions of our workers, including the quality of meals at project sites. Previously, meals are prepacked and usually prepared at 4am or 5am. By the time the workers eat, it is usually 12pm or 1pm and the meals are not at their best. We have succeeded in shortening this time lag . It wasn’t easy as there were complex logistical issues. For example, transporting meals from Jurong to Tuas can take up to an hour, and we have sites scattered throughout the island.
However, we found that these improvements have made our workers happier, as they appreciate that management looks after their welfare. They rest, sleep and eat better, which helps them work better and, as a result, productivity is higher.
What is your outlook for the business and industry in the coming year?
Fortunately, the construction sector is resilient and did not suffer the same crippling effects compared to the F&B and tourism-related sectors. The recently announced property cooling-down measures will have some impact, but in my opinion, not to a great degree. Things still need to be built; buildings and structures still need to be repaired, so there will be work. But productivity and costs have to be carefully managed.
There is no doubt that construction costs will increase with more regulations and further improvements made to workers’ dormitories. An increase in the COE for vehicles will also lead to a general increase in prices everywhere. Challenges will still be there.
We also expect increased digitisation as the sector is now relying more heavily on digital tools such as building-information modelling. Engineers and contractors are using 4D and 5D simulations to re-plan projects and re-optimise schedules. Contractors are also looking to online channels for monitoring their employees’ well-being through apps, ordering construction materials, managing scarce resources more accurately, and maintaining cash flow.
What advice do you have for other SME owners struggling at this time?
Stay positive and find joy in your work. Improve the quality of your services and products and look around to recruit better talent. There are a lot of local jobseekers at the moment, and it’s a good time to improve the quality of your work force to be ready for the upturn. Continue to increase your productivity and reduce costs; be daring in reallocating resources to prepare for the future.
Across all types of businesses, it is evident that the world will look different as we move beyond the COVID-19 crisis. As SMEs navigate this crisis to survive and thrive in the years ahead, we have to maintain our resolve and resilience as we reimagine and reform. In particular, reimagination can help SMEs look beyond the immediate crisis and start to plan for the next normal.