Moving up the value chain

PHOTO: Moving up the value chain

SINGAPORE - Few would guess that back in 1975 when Soon Li Heng Civil Engineering started, it operated solely as a transport service provider for building materials. It was not until the 1980s that the company seized the opportunity to move up the value chain and began specialising in works.

Today, the four Soon brothers, as directors of the family-owned enterprise, have helped Soon Li Heng become a reliable transporter of earthworks and heavy machinery leasing business.

The firm has played a significant role as a specialist sub-contractor in multiple public and commercial projects in Singapore.

Its involvement ranges from residences to institutions, office buildings, mixed developments and tunnel excavation projects. South Beach, The Star Vista, JEM and the Kaki Bukit Station (Downtown Line 3) are among its recent contracts.

The construction industry incurs high operational costs, and a civil engineering firm like Soon Li Heng is no exception. In land-scarce Singapore, the administration of proper disposal methods means that companies risk paying a hefty fine if they dump excavated materials negligently.

"A typical residential project excavates 70,000 cubic metres (cu m) of soil, and a dump truck takes eight cu m per load, so it easily amounts to non-trivial costs," explained Ong Jun Quan, one of the second-generation successors to Soon Li Heng's engineering business.

The company emphasises cost efficiency and service differentiation because the homogeneity in technology has relegated competition to cost-saving and customer retention.

This first-time winner of the E50 award says that it is distinguished for its service and product quality. It pays much attention to getting customer feedback and maintaining client relationships, even after 38 years in the business.

Cutting costs

Being a family-run business, Soon Li Heng is able to cut down on the agency costs. Management also adopts a very hands-on approach to operations and projects.

Management aside, the firm boasts a young fleet of high-value assets. Its excavators are limited to operate a maximum number of hours, whereas trucks are renewed every few years. This helps ensure that the equipment stays in good condition.

Soon Li Heng is a strong advocate of productivity measures. For example, it has reduced its reliance on labour by automation through the use of reverse sirens and cameras as well as rotating beacons.

Because of the labour-intensive nature of the construction industry, Soon Li Heng is very reliant on the skills of its workforce. For this reason, it takes the effort to engage staff through daily on-site briefings, so that its employees' values are aligned with those of the company.

The company also aims to be a responsible corporate citizen. To this end, it contributes a portion of its revenue to charitable causes.

Cognisant of the adverse effects that some of its operations have on the environment, the company continually conducts pilot tests and feasibility studies with relevant institutions. In its bid to promote greener practices, it began recycling concrete waste material from construction debris. In this way, concrete materials usually meant for disposal are re-used in the construction of roads and drains.

Mr Ong acknowledged that "government policies, changing demographics and increasing land constraints" have presented challenges to the business.

Chief among Mr Ong's worries is the increasingly restricted pool of foreign labour. To reduce its foreign manpower needs, the company has resorted to sourcing for technologically advanced equipment.

Through the Mechanisation Credit Scheme provided by the Building and Construction Authority (BCA), Soon Li Heng recently purchased two hydraulic clamshells which can reach greater depths, effectively halving the number of required excavators and workers needed.

Singapore's severe land constraints means that there are not enough dumping grounds. As a result, congestion at the few disposal facilities during peak periods is common.

Said Mr Ong: "It can take hours for our trucks to wait in line to dump a mere eight cu m of soil."

Mr Ong is now exploring the possibility of taking the company public through an initial public offering (IPO), so as to raise capital for expansion.

It also has plans to enter the property business, leveraging on its expertise as an excavation specialist.

The writers are students of NUS Business School

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