The current capacity challenges of the building industry are well known. Strong demand for new homes, large infrastructure projects, Brexit uncertainty encouraging many EU workers to return home and fewer apprenticeships have all conspired to create a shortage of capacity in the world of construction.
This capacity challenge is also an issue for property insurers and property claims managers. How does our industry ensure that there is sufficient construction capacity to deal with the property reinstatement work that needs to be done?
As a property claims manager, MA Assist has always had to monitor the capacity of its Building Repair Network (BRN). But the challenge has become greater over the last couple of years as the construction industry boom has continued.
Many suppliers on our network have expanded into other areas of construction where margins are higher and work is plentiful. This means that they often have less capacity available for insurance works.
Measuring suppliers’ capacity, in particular the volume and value of insurance works that they can take on from MA Assist, is made harder by the fact that many builders love a full order book and will accept new work even when they don’t have the capacity. This can result in longer claim durations and frustrated customers when works do not start within a reasonable time period.
MA Assist has been monitoring and managing its BRN capacity for 25+ years, and the challenges have changed significantly over that time.
But one thing has never changed – most builders are never completely open about their available capacity.
Our capacity has to be managed by postcode and by supplier. We constantly monitor workloads and events to identify any postcode hotspots that need addressing.
Every supplier on our network is assigned a clear set of postcodes for which they will receive works from MA Assist. In times of surge these postcodes can be extended and flexed to provide flexibility where needed. But for Business As Usual (BAU) suppliers are allocated work in accordance with agreed postcodes.
There is always more than one supplier operating in any particular postcode. In the past we have allocated more work to the best performing supplier in each postcode (measured through our performance metrics and supplier league tables). But such a system has its limits as a good performer soon becomes a poor performer if he is overloaded with too much work.
Our operating system, Pulse, has algorithms built into it to help the allocation of work to suppliers. This has worked well for us, but it is dependent on the parameters that are set in the background. If we don’t fully understand the supplier’s capacity and set the parameters incorrectly, then the algorithm produces the wrong answers.
None of these tools encourage the supplier to prioritise our work over others – a simple way to increase capacity. So we have come up with a new measure.
Know your limits
Instead of asking suppliers what their capacity is, we have taken a new approach – tell them what their capacity is!
We know how much work our suppliers do for MA Assist but we can never know how much they do for other BRNs and sectors of construction. So we now assign capacity to suppliers based on how much work they have finished and invoiced to MA Assist over a given period.
Every month we send each supplier a report which shows:
We then ask for feedback from each supplier and an action plan where they are over-capacity. We recognise that capacity management is a two-way process and so we ensure the suppliers read and understand the report and continually confirm their agreement and understanding of the capacity parameters set out.
While this has been an intellectually challenging project for us to complete, its operation is simple and the results easy to understand.
The results have been interesting.
Extra capacity and understanding
“As we advance in life we learn the limits of our abilities” – Henry Ford.
Our suppliers are starting to understand that the more work they close and invoice, the greater their capacity, and the more work we will assign to them.
This has been a shock for some suppliers. Those with extended claim durations are not getting as much work as they used to. Their order books are being reduced and will only be increased when the value of work that they complete for MA Assist increases.
Other suppliers have had a more pleasant surprise – as their throughput is so good we are giving them more work.
Not only is this approach increasing the capacity of our BRN, it is helping our suppliers understand their businesses more. One supplier on our network who has been with us since December 2013 had this this say:
“As a small business owner support is really important, especially client support. I feel like I get this from Marc and all the team at MA Assist. I always feel that guidance is given when required, advice is always impartial and fair. Comments are constructive and feedback is honest. Cashflow is a major part of any business, I have never had a problem with any of my payments from MA Assist which is invaluable. Remittance advices are sent quickly so that accurate forecasts can be raised”.