Kuwahara : Because of China Plus One Measures.From the perspective of our company in China, there were three major reasons:
1. Tariff barriers
2. Inexpensive infrastructure
3. Stability is ensured
For companies that own factories in China like us, there was a problem that we could not avoid or reduce the risk of China. In addition, we have to use AFTA mainly in Thailand, for export to automobile manufacturers in Southeast Asia to reduce tariff barriers. In Malaysia, there are inexpensive oil and gas that are required for our production line with its good location in the center of ASEAN, moreover, there are other merits such as low distribution cost by using its highway which is equivalent to developed countries and its stability of having less risk of political and physical disaster compared to China.
Kuwahara: Because of Total Cost Balance.
In Malaysia, Ipoh has a high ratio of Chinese population and our education system in China factory could be applicable as it is. As most of our manufacturing machines are imported from China, the communication for design change in production line and maintenance is also expected to be communicated in Chinese. Also, there is a geographical merit that transportation to Thailand by land route in less than a day from Ipoh. For all these reasons, I think Ipoh is our best choice when considering personnel, transportation and running costs in total.
Kuwahara : Through introduction from our joint venture partner, Toyota Tsusho Malaysia.
In this project, reduction in construction cost is essential. From the experience of establishing our China factory, we decided to adopt local contractor from the beginning but at that time we have no foothold in Malaysia and had to proceed the project remotely from China. Our joint venture partner, Toyota Tsusho Malaysia has project experience with Japanese contractor but also has no experience with local contractor, under such circumstances, they have introduced Plus PM, where project management service was then appointed for.
Kuwahara : There was more cost effect than expected.
I was introduced to the local contractor from Invest Perak (Malaysian State Government investment window), but the amount presented was beyond the amount expected. Under this situation, tender for contractor supposed to be conducted, but it was difficult to change the contractor in the middle as the project was proceeded by the local contractor from the initial stage. Also, our company has no construction experts, so we could not take any measures and caught in trouble.
This is the stage where we appointed Plus PM.
Plus PM has given me two cost down measures without changing the contractor. NSC (Nominated subcontractor) contract (see Explanation 1) and progress payment management by QS (see Explanation 2). By adopting NSC contract, other than building work, it is possible to lower the costs of mechanical & electrical services, water supply and drainage, gas and piles while maintaining the quality. I think the implementation of competition principle by bidding has brought a great effect. Also, the QS was able to verify the cost during construction, assess the variation orders to avoid over payment and enable a smooth price negotiation for the project.
It is common that local contractors will request for additional amount during construction with various reasons, they will also try to give many reasons for delay in construction. To avoid this, the role of QS (Quantity Surveyor) is important to check progress status with volume of work done for payment.
QS are building qualified persons under the British Standard. Besides carry out quality survey, they also grasp the contractual matter, volume of work done, payment items etc. They have the authority not to certify any false volume of claim by the contractor against actual progress. Normally, due to cash flow situation, the construction companies tend to bill or report progress more than actual work done. We use our internal qualified QS to prevent overpayment by the Client as well as quality control to ensure required specifications are reflected at site. The QS will also assess the variation orders due to design changes to realize cost reduction for the project.
Kuwahara : For instance, the contractor requested for additional amount because of steel material price has risen during construction. Plus PM has settled this issue by referring contract conditions and summary basis to withdraw the additional amount for us. Also, soft ground was discovered at the end of construction and the contractor claimed for variation order on pressure resistant work. Plus PM has negotiated and offset it with the amount for construction delay against standard construction period. These are just a few examples from the many reasons the local contractors will look for during the construction to make additional claim. In addition, as there were many design changes, additional amounts were also plentiful, but with Plus PM, all our price negotiations have completed successfully. So I think it would be difficult for us to deal with many of such local negotiations alone.
Kuwahara : This is the first time we adopted a project management consultant. Compare to managing the project directly, it is found that by appointing a construction management consultant, we could concentrate on business while obtaining good result in cost reduction. I plan to have a second stage factory on the same premises and I am planning to ask Plus PM to manage for this project as well.