CEOs of infrastructure construction project developers in India face many hurdles in running their businesses, including cost escalation, quality issues, project delays, and regulatory hurdles. This can severely impact the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization), a key profitability and efficiency indicator.
This article will discuss five ways CEOs can optimize their procurement processes to improve their EBITDA margins further.
5 Strategies to Boost EBITDA for Construction Project Developers in India
A higher EBITDA signals a better capacity to generate operational profits and cash flows and can be improved through the following methods:
Vendor Consolidation
Reducing and consolidating the supplier base available for procurement of construction raw materials, such as TMT bars, structural steel, fabrication, and ductile iron pipes, can help achieve economies of scale. This translates into lower logistics expenses without compromising the supply’s quality, leading to better profitability margins and a simplified contract management system.
Digital Project Management
Implementing digital project management tools like a RACI (Responsible, Accountable, Consulted, and Informed) matrix can facilitate better construction schedule mapping and reduce task redundancy, stemming cost overruns. Using the matrix; the project developers can distinctly define the roles and responsibilities of their suppliers, establishing clear communication, transparency, and accountability among all the stakeholders.
Supplier Capability Mapping
Thoroughly assessing India’s top construction raw material suppliers and their capacities before awarding the project is another way to improve EBITDA margins. Supplier mapping involves a comprehensive evaluation of the vendor’s competence, delivery timelines, quality standards, and compliance records, which enables improved decision-making and risk management. By further defining the credit terms and payment cycles, developers can minimize supplier disputes and cash flow problems.
Inventory Optimization
Another way to enhance profitability is to optimize the inventory levels of the construction raw materials and semi-finished goods and reduce their holding costs by fully utilizing the limited storage space. Inventory management techniques like just-in-time (JIT) for pipes, electricals, and cables can reduce wastage and product obsolescence by closely matching the inventory levels to the production schedule, supplier capacity, and product demand, eliminating the risk of stock-outs that can delay the project’s completion.
Pre-Engineered Buildings (PEBs)
Unlike conventional buildings, PEBs are factory-made, standardized structures assembled on-site, sometimes shortening the project schedule by almost 10-15 weeks. Using them can result in significant cost savings, better quality control, and higher energy efficiencies, crucial in raising construction EBITDA by a colossal 10-15%.
Achieve Operational Excellence with Moglix
Adopting the outlined strategies, including supplier mapping, inventory optimization, and digital management, can aid infrastructure construction companies in improving their business performance.
However, an easier way to gain a competitive edge is to implement Moglix’s EPC solution, which end-to-end automates and streamlines your supply chains, enables vendor consolidation and catalog-based buying, and centralizes all procure-to-pay processes on a unified platform.
Write to us at info@moglixbusiness.com to learn how we can take your business to new heights.
