MALAYSIA IBS INTERNATIONAL EXHIBITION 2011

INDUSTRIALISED BUILDING SYSTEM

ORGANISATION & MANAGEMENT ISSUES;

IS IBS GOOD FOR YOUR BUSINESS?

PRESENTER
Prof. Dr. Christopher Preece
Department of Civil Engineering, RAZAK School of Engineering & Advanced Technology

Universiti Teknologi Malaysia

Research Assistant Suzana C. Alih, BQS Universiti Teknologi Malaysia

STRUCTURE OF PRESENTATION
BRIEF BACKGROUND TO IBS IN MALAYSIA
ARE THERE BUSINESS OPPORTUNITIES IN IBS IN MALAYSIA? HOW DO WE ASSESS WHETHER IBS IS GOOD FOR OUR BUSINESS OR NOT?

WHAT ARE THE POSTIVE BUSINESS BENEFITS?

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS?

SO WHAT ARE THE PROBLEMS?

WHAT ARE THE THINGS THAT COULD MAKE IBS MORE ATTRACTIVE AS A BUSINESS OPPORTUNITY?

CONCLUSIONS

Key Points
There are business opportunities in IBS in Malaysia from both the Government and private sectors. Focus is now on the private sector developers/owners/clients IBS is a good product Do we have the business strategies, resources and management skills to be able to compete? There are perceived and real problems in the construction value chain to be overcome if there is to be a general move from conventional construction to IBS. IBS can help to improve the general image of construction which will benefit all stakeholders.

BRIEF BACKGROUND TO IBS IN MALAYSIA

A construction technique in which components are manufactured in a controlled environment (on or off site), transported, positioned and assembled into a structure with minimal additional site works (CIDB, 2003).

BRIEF BACKGROUND TO IBS IN MALAYSIA

IBS development is seen to be addressing the Construction Industry Master Plan (CIMP), Strategic Thrust Number 5; innovate through research and development and adopt new construction methods

IS IBS A GOOD PRODUCT?

Is IBS a good product?

Benefits of IBS high quality end products, speeds up delivery process, reduction in site workers and dependency for foreign labour, on-site materials and wastages. perceived to be innovative. a safer construction environment. more sustainable and green. increases competitiveness of construction

ARE THERE BUSINESS OPPORTUNITIES IN IBS IN MALAYSIA?

ARE THERE BUSINESS OPPORTUNITIES IN IBS IN MALAYSIA?

In the IBS Roadmap 2003-2010, the Government had set the aim of reaching 70% usage of the IBS in the total building projects in the country by the year 2008. The focus of the IBS Roadmap 2011-2015 is to convince private owners, the main engine of growth in the industry to increase usage of IBS. The new goal is to achieve a useage of 50% IBS content by 2015.

Convincing the private sector..

The private sector in Malaysia accounts for 57% of the total project value. Residential projects such as flats, condos and terrace houses have high IBS potential due to the repetitive nature of production. Private sector built RM 13.6b worth of residential projects compared to only RM 1.8bn by the public sector.

Mini Business Case Kimlun Corporation Bhd

Kimlun Corporation Bhd (Kimlun)

Article by Justin Yap in the Borneo Post 11 March 2011 Kimlun positions itself to gain advantage
Kimlun group is divided into two segments, namely the engineering and construction services as well as the concrete products division. Since the group began its IBS building construction method in 2009, it secured total building construction contracts amounting to RM250 million within 12 months.

Kimlun Corporation Bhd (Kimlun)

Domestic projects - RM142.8 million Iskandar Housing project secured in October 2009, two IBS building contracts from Tebrau Teguh to build 11storey low cost flats together with its commercial properties in Johor Bahru city with a combined value of RM118.8 million in 2010. International projects - The group has also secured some major contracts in Singapore.

Kimlun Corporation Bhd (Kimlun)

AmResearch Sdn Bhds (AmResearch) with Kimluns expertise in IBS, it enabled the company to
maintain decent gross construction margins of eight per cent to 12 per cent, even during the time of high building material costs years in FY07-08, as IBS locks in a shorter construction period and at a quarter of labour costs. We are impressed with the groups ability to project manage with impressive manufacturing margins of between 21 to 29 per cent, by having a shorter project turnaround period. We believe the growth prospects of Kimluns construction division are better than the industry,

There is therefore a market and opportunities for construction businesses across Government, Government Linked & private sectors ie. developers, manufacturers, designers, contractors etc.?

HOW DO WE ASSESS WHETHER IBS IS GOOD FOR OUR BUSINESS?

HOW DO WE ASSESS WHETHER IBS IS GOOD FOR OUR BUSINESS?

Conduct a SWOT analysis (Strengths, Weakness, Opportunities, Threats) What is the value proposition we have identified that IBS is a good product! Who is the target market? Is there a demand yes! What are the barriers to entry do we have the resources (our strengths and weaknesses?) Who are the competitors? Is is fair competition? What is the size of the market? Is the market growing?

HOW DO WE ASSESS WHETHER IBS IS GOOD FOR OUR BUSINESS?

Will it be profitable? Do we have the resources (competencies, skills, capital, track record etc.)? Will it enhance our corporate reputation and brand image? Can we form strategic business alliances and partnerships? Will IBS enhance and develop the skills and competencies of our people? Does IBS lead to higher quality of product and services? Will it lead to repeat business? Will it open up new domestic and international markets?

SO WHATS THE PROBLEM?

SO WHATS THE PROBLEM?

The percentage of completed projects using more than 70% of IBS components in 2007 were only in the range of 10% (IBS Roadmap Review, 2006). Moreover, in 2007, the number of projects that were using at least one IBS components was less than onethird of the total construction projects in the country (IBS Roadmap Review, 2007).

SO WHATS THE PROBLEM?

To increase the usage of IBS, a Treasury Circular was issued in October 2008 which emphasised the application of IBS where a minimum of 70% usage of the system is required in all Government building projects (Ministry of Finance Malaysia, 2008). Nevertheless, the problem of limited IBS take up in Malaysia remains unsolved with the percentage of IBS usage in Government building projects still far lower than the target set in the IBS Roadmap.

SO WHATS THE PROBLEM?

1. Readiness issue;
Due to the industry lacking in various aspects such as low R&D, low IT adoption and limited technology availability, the usage of IBS has not been encouraging.

2. Lack of knowledge and awareness

Limited knowledge of IBS has hindered the adpotion of the system.

SO WHATS THE PROBLEM?

4. Low labour cost in Malaysia
Foreign labour can be easily employed.

5. Negative perceptions of IBS

Problems associated with leakages, weak joints, issues of abandoned projects, unpleasant architectural appearances and monotonous end products. Not a popular choice among design consultants.

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS THROUGHOUT THE VALUE CHAIN?

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS THROUGHOUT THE VALUE CHAIN?
1. High initial investment
It was seen as the most significant barrier to IBS. The use of the system increases overall construction costs and this limits contractors interests as they will normally prefer using a method that is more economical since their main objective is to maximise profit. This results in them choosing to use the conventional method instead of IBS.

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS THROUGHOUT THE VALUE CHAIN?
2. Monopoly of manufacturers and large contracting firms
In Malaysia, there are limited numbers of IBS manufacturers and this leads to market control, resulting in higher price of IBS components. Besides, since IBS requires high investment, the involvement of small contracting firms is limited since they lack the capacity to undertake IBS projects.

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS THROUGHOUT THE VALUE CHAIN?
3. Limited knowledge of IBS among industry stakeholders
Developers/clients who lack understanding of the system and its benefits may not be interested in applying it; Designers with limited knowledge on IBS might find it difficult to produce drawings according to the concept of IBS; Contractors lack of awareness on the system may result in errors during construction such as problems in jointing and leakages.

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS THROUGHOUT THE VALUE CHAIN?
4. Lack of integrity between designers, contractors and manufacturers
Cause - poor implementation of the system and often lead to mismatch between design and manufactured products

5. Availability of cheap labour in the Malaysian market

since the supply of labour in Malaysia is cheap and easily obtainable, contractors find it less attractive to shift from conventional method.

What the business challenges in moving from conventional approaches to IBS in the construction value chain?

What the business challenges in moving from conventional approaches to IBS in the construction value chain?

Property owners/developers/clients Designers Manufacturing base Construction project site

What are the business challenges in moving from conventional approaches to IBS in the construction value chain?

Property developers/contractors/building owners Insufficient push factor from the end buyer for IBS No tax breaks for IBS unlike Green Buildings

What are some of the business challenges in moving from conventional approaches to IBS in the construction value chain?

Designers Perceived as limiting creativity Lack of design knowledge Proprietary systems make is harder to adopt by designers

What are some of the business challenges in moving from conventional approaches to IBS in the construction value chain?

Manufacturing base Lack of volume and economies of scale due to non-standardisation of designs Lack of quality control in the smaller IBS manufacturers Lack of R&D, support services, technologies and testing labs Lack of innovative products

What are some of the business challenges in moving from conventional approaches to IBS in the construction value chain?

Construction site Lack of skilled people in IBS project management ie. Logistics planning and coordination, on-time deliver etc. Additional costs of hiring special equipment and machinery.

What may be some of the positive business benefits of IBS?

What may be the positive business benefits of IBS?

Improved business image and reputation? Increase their opportunities in obtaining contracts for future IBS projects? Developing new skills in management and workforce? Being associated with more sustainable and green construction?

What things that would make IBS more attractive as a business opportunity
Can Government offer more tax incentives to increase contractors interests in IBS? Can it provide subsidies for machineries and moulds used to manufacture IBS components to lessen the contractors financial burden in undertaking IBS projects?

What things that would make IBS more attractive as a business opportunity
Is IBS in Malaysia perceived to be innovative and advanced in terms of R & D, use of IT and development of new technologies? Does involvement in IBS open up oppportunties for design and contracting firms to compete both domestically and internationally?

The key to IBS implementation (from the new Roadmap 2011-2015)

Political leadership and commitment is well established Focus has been on training and education with some success. Big challenges still remain.

The key to IBS implementation

Sustainable policy and political will to move from conventional to the IBS approach Integration of IBS in the construction value chain (from design, manufacture and build) Standardisation which should be holistic and comprehensive.

SOME CONCLUDING COMMENTS

As an alternative to the conventional method, IBS is a good product with emphasis on quality, higher productivity, being less labour intensive, a safer site environment and more green. However, having been introduced for over 40 years, the use of IBS in Malaysia is still very much lower than anticipated, mainly due to the many barriers facing the system's implementation throughout the value chain. The Economic Transformation Programme (ETP) is well under way now with projects in all the 12 National Key Result Areas (NKRAs). This offers opportunities for local specialist players to get more projects in the economic transformation that the nation is heading towards

SOME CONCLUDING COMMENTS

NOW IMPLEMENTING IBS ROADMAP 2011-2015! Increase awareness and R&D on IBS, Do we have the project management skills for IBS? Provide subsidies for manufacturers and contractors, Stress financial sustainability and competitive advantages Focus on the benefits to the end-users and clients Stress the sustainability benefits Conduct business case studies on IBS that can be used to help persuade stakeholders particularly developers

SOME CONCLUDING COMMENTS

IMPROVING THE IMAGE OF CONSTRUCTION IBS as solution for the 3D image problem (dirty, dangerous, difficult) in construction IBS is innovative, sustainable, safer, and profitable..

WHAT WE HAVE COVERED.

BRIEF BACKGROUND TO IBS IN MALAYSIA
ARE THERE BUSINESS OPPORTUNITIES IN IBS IN MALAYSIA? HOW DO WE ASSESS WHETHER IBS IS GOOD FOR OUR BUSINESS OR NOT?

WHAT ARE THE POSTIVE BUSINESS BENEFITS?

WHAT ARE THE NEGATIVE PERCEPTIONS ABOUT IBS?

SO WHAT ARE THE PROBLEMS?

WHAT ARE THE THINGS THAT COULD MAKE IBS MORE ATTRACTIVE AS A BUSINESS OPPORTUNITY?

CONCLUSIONS

THANK YOU.