Being forewarned means being well prepared
Satish Pendse writes about the importance of early warning systems for the infrastructure industry
Due to the sheer size of projects and the high stakes involved in the infrastructure industry, an unperceived danger can result in considerable losses of wealth as well as reputation. There have been cases when project insurance policies were terminated in the morning of project handover. Sometimes, just few hours before the formal handover, natural calamities have caused considerable damage to the project. Some might consider these as extreme cases (of bad luck?). Others might view these as cases of negligence, where extension of policy could have saved great financial losses for the companies.
In view of the increasing scale and complexities of projects, it is critical for the infrastructure companies to develop in-built intelligent mechanisms which will alert the management of deviations from the standards. Information technology (IT) can play an important role in making these early warning systems human-independent, effective and accurate. In the course of this article we will discuss about some of the industry challenges for which IT based early warning systems can play crucial role.
Not getting complete feel of the project: This is a common challenge faced by various stakeholders of a project. It gets magnified manifold if the project is of high strategic importance. For example, you must have read about the lack of clarity among the key stakeholders working on the multiple projects related to Commonwealth Games. In such cases visual feel of the project (real-time videos/ 3D visual representation of actual progress of project) can act as a powerful tool to provide clear idea on how the project is progressing against commitment to client in terms of completion.
From a company’s point of view it is equally important to have a realistic picture of project profitability and costs to maintain the financial health of the project. An effective MIS report or dashboards can provide early warnings in terms of slippages in profitability and costs which can help in taking timely actions for the necessary controls.
Imagine a scenario where the alert system used by banks to manage individual accounts is replicated for BOT projects where the stakeholders get alerts if the fund flows go beyond the predefined threshold limit. Similarly there can be various kinds of early warning mechanisms to provide a holistic view of the entire project in terms of project progress, costs and resources.
Tracking of high value resources: Infrastructure industry deals in a number of high value items such as reinforced steel, fuel, cement, high value non-moving items, spares, materials, equipments, etc. According to industry estimates, fuel costs can amount to as high as 7-8% of total turnover of the infrastructure organization. This will give an idea of the magnitude of impact these items can have on organization profitability.
Tracking these resources for planned versus actual consumption and throwing alerts in cases of exceptions can go a long way in saving wastage, pilferage and under-utilization of these resources.
Early warning system can also be useful in effective maintenance of equipments. Alerts can be generated for planned maintenance activities of critical equipment and sent to the respective stakeholders for their action thus minimizing the equipment downtime.
Compliance to statutory requirements: There are a number of statutory requirements which need to be fulfilled for smooth running of business. IT can help in developing in-built system alerts for various statutory requirements related to various high risk instruments such as insurance (expiry dates, renewal schedules, premium payment schedules), bank guarantees (renewal schedules, payment schedules, terms and conditions related to revoking of bank guarantees), letter of credit (usage period, payment schedule, expiry date, renewal schedule), power of attorney (expiry date, renewal schedules, revoking of POA in case of the responsible person leaving the organization) and taxation (due date of tax payment, responses to any specific notices by the taxation department before the notice period, due dates of filing tax returns).
Other challenges: Early warning systems can be developed for any challenge, priority of which needs to be decided based on severity of the challenge. Someone in land acquisition business might need warning mechanisms for identifying land related risks. Similarly for real estate industry customer receivables, non-receipt/delay of payments can be a cause of concern and hence a likely candidate for developing early warning system. The key is to understand the business needs and the risks and build mechanisms to mitigate them, in which IT can play a crucial role.
Effective use of early warnings
Imagine a scenario where you are getting too many alerts through emails for non-critical issues or for issues which are not directly concerned with you. This might lead to you ignoring the alerts and in process missing out on something critical. The most important thing for making alerts effective is hence identifying the business areas where early warning is a necessity. The next step is defining the audience who should get these alerts. For example, for real estate, an immediate alert on customer cheque getting bounced should go to the responsible person in accounts department, whereas a monthly summary of all such cases can be an alert for the management.
You will appreciate the fact that the alerts can be of two types – push and pull. Alerts like emails, mobiles messages which are triggered by event occurrence ‘push’ the information to the target audience while in case of MIS, dashboards and reports the target audiences ‘pull’ the information to be aware of the situation. Once the alert mechanism is finalized we can select the suitable IT system to generate alert.
In a nutshell
IT can help in developing human-independent early warning systems to inform us about a future danger so that we can be better prepared to avoid it. Since the stakes involved are high, an unperceived danger can result in heavy losses of wealth as well as reputation. Early warning mechanism can range from effective MIS, dashboards, visual representation of project progress to alerts through emails, phones or any other medium. There are a number of industry challenges such as lack of end-to-end visibility of project, statutory compliances, wastage of high value resources, customer receivables, etc, where early warning mechanisms can play important role. For early warning systems to be effective, one needs to identify the business areas where alerts are required, the target audience for intended alerts, the mechanism of sending the alerts (push-pull) and the IT system necessary to generate the same.