The dredging industry has big swings in the number of projects. Whenever the number of projects decreases the competition increases. So it becomes extremely important to be able to beat the competition. Today we discuss how.
To be clear, this article is aimed at bidding for projects, meaning that the price will be the final determining factor whether you get the project or not. Political connections, friendships, private awarding or outright bribing are not discussed, as awarding of the bigger projects are usually not the result of these factors and it is the bigger projects that we are interested in, isn’t it?
So let’s dive into it.
From the moment the dredger has been purchased a lot of the expenses are set, such as depreciation, interest and roughly the weekly fuel costs and maintenance. This means that in order to get a lower unit rate the focus should be more on production than on saving costs. See my article here for a more detailed discussion about that.
Getting some production is relatively easy, but it gets harder as you want to become more competitive.
Consider the following figure.
1. With Basic Operator Skills I mean safe operation of the dredger, preventing damage to the dredger, maintaining dredge depth, following dredge plan and others. With these skills an operator is already able to get roughly 50% of the achievable production.
2. The next layer Basic Management Skills, consists of developing a dredge plan, plan and execute maintenance, acquire spare parts and fuel in timely manner, checking daily reports for production and such. This will provide another 25% of the achievable production. So now we are at 75%.
3. Then we get Advanced Operator Skills that include understanding the dredging process, do production checks to find best working method, pro-actively inform management of improvement proposals and so forth. That will gain you another 15%. This gets us to 90% of max.
4. And lastly we have the Advanced Management Skills. These are things as analyzing production trends on the project, strategic spares stock, on-site production optimization, automation and others. All these will gain another 10% of the achievable production. This completes the 100% of achievable production.
As you probably noticed each subsequent step increases the production by a smaller and smaller amount. In addition, each step requires a higher investment than the previous step. So a lot of companies focus on the costs and decide to only implement the basics and sometimes not even that fully. And this ties in exactly with my earlier article “Do you focus on the right thing?” Which I also mentioned above.
You can quite easily get the basics in place. So if you haven’t, then start that immediately.
But here’s the kicker.
If you can implement the basics easily, then so can your competitors.
So the competition is not on those first 75% of the production. Those are a necessity if you simply want to survive, especially on the international market.
The competition is in the last 25%.
Let me share you a story to illustrate the point.
In my early days when I was working for a big international dredging contractor I often went to projects to optimize the production of the vessels there. And sometimes I got back frustrated. I would say: “I was only able to increase the production by 3%” or something like that. I was working at the top of those 10% of advanced management.
Then a senior guy explained to me, he said: “Those last 3% can be the difference between losing money or making a profit.” And any company owner or manager can tell you that losing money or making a profit, even if it is a little bit, makes a difference of night and day.
You see, those 3% go straight to the bottom line. The costs remain the same, so this 3% extra revenue is all profits.
So this brings us to the conclusion.
If you want to beat the competition you have to focus on the advanced stuff.
Upgrading yourself, the operators, the management, all of it. And this is where we can come in. Sure, we will gladly help you getting the basics in place. But where we really shine is going from basic to advance. Making you very competitive and increasing your profits. So if you need any help, feel free to contact us to learn what we can do for you.
I would love to hear your thoughts and firsthand experiences about beating the competition. Please leave a comment below.
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