Optimize Construction Lending Costs using the principles of 'the Goal'

How to use ‘The Goal’ Philosophy to optimize resources for construction lending

The given note is based on the philosophy of ‘The Goal’ by Eliyahu Goldratt. ‘The Goal’ concentrates on the constraints faced by the firms in terms of resources.

Effect of delay between milestone achievements: The variance between the actual and the target dates in achievement of the milestones results in additional costs which result in increased cash outflows for the end client.

Hence it becomes important to predict the impact of variances between the actual and the target delivery dates and give the management multiple options in case of delays happening in achievement of milestones.

Predicting the costs of delays:

The following is the step by step guide for resolving the above issues:

·         Track the target versus actual milestones for the construction projects. In such a scenario the target dates need to be fixed. Accordingly the variances shall be calculated based on the achievements of the actual versus the target dates. If a software is not available for data capture then the software could be developed for the same.

·         The costs associated with the delays shall need to be tracked using dashboards. For the same data connectors are available with the ETL team for data consolidation, data transformation, data cleansing and data auditing.

·         Based on the cost of delays, hypothesis shall need to be developed for optimization purposes.

·         Best case and worst case scenario: based on the variances for the project implementation, the best case and the worst case scenario for each project stage shall be developed. The most probable cost shall be arrived based on the same.

·         Allocation of resources based on maximizing the NPV of the project: based on the expected variance in the cost of the project, the expected NPV is to be calculated. The projects having the maximum NPV shall be addressed first.

·         Crashing of the activities to meet the project deadlines: in case of delay and a set delivery date for the project, route optimization techniques to be used to meet the required deadlines at minimal costs.

·         Optimization of purchase costs based on delivery dates, delivery requirements of the end client.

    Other activities: purchase optimization through Turbodata
     Ledger optimization

Presented by:

Apoorv Chaturvedi

Email: apoorv@mnnbi.com
Blog: http://mndatasolutionsindia.blogspot.in/
Website: www.mnnbi.com

Other website links: http://www.mnnbi.com/mnnbi_constructionanalytics.html

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