Volume 12 May 2014

SK
Message from

Dear L&T Geo-ites,

I am very happy to participate in this anniversary edition of our monthly
newsletter. It is inappropriate if I do not appreciate the entire Editorial
team, for their effort and contribution to bring out Geo Herald with very
good quality and innovation. Once again, I would like to congratulate
Mr. C. Jayakumar and team for this initiative and wish the new Editorial team
to take Geo Herald to greater heights!!
Every one knows the importance of communication. This can be effective
business communication or literary communication. Why it is so important
during this time is because of the need to clearly articulate, present and
express your hard work and achievements of the past year to your superiors,
peers and subordinates.
While communicating to the top management, it is imperative to sharpen
your thinking and bring out your passion and fire in the belly, for them to
assess your potential and assign right role for your speedy career growth.
Communication must be simple, clear and free of jargon, so that people
working with you can understand without any ambiguity.
The positive mood in the country today will open up new avenues and
opportunities for L&T GeoStructure in the coming months. This has to be
capitalized for our growth, which is of paramount importance. Having said
that, opportunities also will have cost sensitivity, which we have to continuously
work on, to compete with our competitors and emerge successful.
This month is identified as an `innovative cost-conscious month, and all are
requested to participate through the online survey to give your invaluable
suggestions/ideas to achieve competitiveness. I would like to wish you effective
participation in contributing innovative ideas!

Warm regards,
S. Kanappan.

1

Innovative
Cost-Consciousness
The core dictum in developing a cost-conscious culture is A
pound of sales generates a few pence of profit but a pound
saved goes straight to the bottom line. Such is the importance
of cost savings in a business! A cost-conscious culture is basically
`operational fitness and developing it is very similar to personal
fitness campaigns you have to keep working hard at it to stay on
track! At L&T GeoStructure, we have identified `innovative cost-
consciousness as one of the cultural competencies that would help
us achieve our business goals.
What is cost control?
Cost control is a monitoring process which must be continued
throughout the life cycle of a project. In construction industry, cost
control must start from the inception of the project until its completion,
to ensure that the cost of the project is kept within the agreed limits.
Measuring and collecting the cost record of a project and the work
progress are included in the cost control of a project. Besides that, the
comparison of actual progress with the planning is also involved. The
main purpose of cost control is to gain maximum profit within the
designated period, with satisfactory quality of work.
Innovative cost-consciousness
Cost-consciousness is a subject that has been spoken of, time and
again, in every sphere of business. That, coupled with innovation,
will give rise to robust measures and strategies by which we can
control costs. In todays tough business environment, cutting costs
and eliminating unnecessary spending is a solid strategy for increasing
the businesss bottom line. One way to initiate this strategy is to set
specific cost-cutting goals during the planning process. Then we have
to create buy-in with the team, by getting staff members involved in
developing the strategies that will support goal achievement. If we
stay the course, we will reap the reward of a more cost-conscious
culture that is committed to efficiency and profitability.
D
 evelop clear goals. Instead of just stating that we need
to control costs, each conversation should be looked at as an
opportunity to talk about goals and how to improve overall
efficiency instead. For example, in the planning phase, setting
the ultimate goal to cut costs by 3% is specific and measurable.
Now the team will be able to understand exactly what is
expected. Next, we should build accountability for this goal by
assigning it to the individuals or teams that will be charged with
making it happen. Ideally, we should get personnel throughout
all levels of the organization invested in this primary objective.
Involving and empowering as many people as possible will be
the key to changing our cultures mind-set relative to increasing
efficiency.
F ocus on areas of opportunity: While creating efficiency by
improving productivity and cutting costs, we will need to look
at areas in which there is waste and redundancy. However, we
need to stay away from anything that is critical to the happiness
or satisfaction of customers. Many times, in an effort to cut
costs, companies eliminate services or pleasantries that their
customers have come to appreciate, expect and demand and
these companies have paid the price! It is far better to look
at other areas in which you can cut, perhaps negotiating new
rates with outside vendors, eliminating unnecessary supplies,
spending ten percent less on entertainment etc.
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Contents
- Message From SK...............................................1
- Innovative Cost-Consciousness...........................2
- Cost Leadership Through Quality........................3
- L&T GeoStructure migrated to EIP 2010..............3
- Competitive Forces in the Deep
Foundation Industry............................................4
- Accidents Cost Us...............................................6
- Innovative Cost Consciousness @
L&T GeoStructure...............................................8
- New editorial team.............................................8
C
 reate and motivate with
incentives. When tasking
staff members with the added
responsibility of finding ways to
reduce costs and build a more
efficient workplace, it will have to
be made fun and worth their while!
For example, holding contests that
award the employee who comes
up with the best way to save
significant amounts monthly or Ms. Anila Manoharan
annually, would be a good way to
motivate employees to suggest innovative measures. If feasible,
it can be made an ongoing opportunity for employees, so they
can continue to strive for the goal and get excited about their
efforts.
L ead from the front. It is important to gain employee buy-in
to a cost cutting initiative. This support is destroyed when top
management is seen as not committed and not sharing in the
pain along with everyone else. The commitment of the top
management in building a cost-consciousness culture is crucial
to its success in an organization. Once employees realize the
level of commitment displayed by the management, they will
be motivated to contribute in building this culture.
A
 lways look for new cost-saving ideas. The search for cost-
saving ideas should not stop with a contest - but continue, even
when you need them the least. Procurement teams should be
encouraged to balance value for money against the operational
requirement of the items they procure.
G
 et everyone involved. The onus to contribute cost-saving
ideas and build a cost-conscious culture should not lie with a
select few in the organization. It should be the responsibility of
each individual to look for areas within their scope of work, to
enhance productivity and efficiency in the organization.
B
 enchmarking with peers. It is good to benchmark the
processes of an organization with those followed by its peers
and competitors. This will bring in an atmosphere of constant
flux and avoid stagnancy.
Building a culture of `innovative cost-consciousness in L&T
GeoStructure will give thrust to effectiveness of operations and
job satisfaction. This will, in turn, enable us to achieve sustainable
business growth.
Cost Leadership Through Quality
Quality means those features of products which meet customer C
 ontinuous assessment of works
needs and thereby provide customer satisfaction. throughout the project cycle
against workmanship standards and
Customer dissatisfaction has its origin in deficiencies. In other
specifications
words Quality means freedom from deficiencies - freedom from
errors which require doing work over again (rework) or that result Identify process deviations and address
in field failures, customer claims and so on. appropriate corrective action at process
level and thereby prevent problems
The Effect of Quality on Cost Mr. Srinivasan. T
reaching final product
Internally for an organization,
preventing product deficiencies T o arrive at objective product quality
/failures can have major positive score for the project
effect on the profitability Assessment Approach
by eliminating unnecessary
U
 sing sampling approach with samples distributed uniformly
amount spent on account of
throughout the construction stage
Cost of Poor Quality i.e., All
those costs would disappear A
 ssessment is based on site inspection, laboratory testing and
if there were no deficiencies - field testing
no errors, no rework, no field
No re-score to encourage DO IT RIGHT THE FIRST TIME
COST OF QUALITY failures and so on.
Assessment Cycle
Product Quality Assessment P reparation of sampling plan to suitably represent the whole
System project
Therefore, it is imperative to
C
 onduct assessment of identified samples through trained &
bring in quality as an integral
identified assessors
part of overall operational
excellence. To this effect, we P repare assessment report indicating both areas of conformance
at L&T GeoStructure, have & nonconformance
developed and deployed a
S eek corrective action plan from the concerned sites with
GeoStructure specific product
targets
quality assessment system with
focus on achieving high product quality levels in our project sites. E nsure corrective action on the identified areas and continue
The system based on CONQUAS (Construction Quality Assessment further assessment of samples
System) was modified and customized for the following
C
 ompute product quality score based on number of compliances
GeoStructure works.
over number of items assessed
BCIS Piling Works
The assessment system was first introduced in our project sites
Diaphragm Wall Works during November 2013. Since then, there has been a marked
improvement of awareness level as seen by the improvement of
Purpose of Assessment System
average product quality scores from 71% to 76 % currently.
The purpose of the system is to improve product quality levels by

L&T GeoStructure migrated to EIP 2010

The launch of EIP 2010 for L&T GeoStructure was celebrated on 16
May 2014 with cutting of a cake by Mr. S. Kanappan, Head & Chief
Executive, L&T GeoStructure and Mr. B. Srinivasan, Head - ISD, L&T
Construction.
L&T GeoStructure took the initiative of converting their earlier EIP
version to EIP 2010, and was the first S&A Company to do so. Our
congratulations to Mr. S. Rajagopal, Head - ISD, L&T GeoStructure,
who took the initiative to test the software and coordinated with
ISD - HQ team in migrating to EIP 2010. Our sincere thanks and
appreciation to Mr. B. Srinivasan and the software team for their
innovative development of the application, which can handle
multiple companies in a single database.

3
Competitive Forces in the Deep
Foundation Industry
It is very important to understand the competitive forces in the deep foundation construction industry. Michael E
Porters Five forces model is a simple framework to understand and diagnose these competitive forces that prevail
in this industry as seen in Fig 1 below. These forces have been assessed on a strength scale of very low to very
high. The factors contributing to the intensity of these forces keep changing over time and relative strengths of
these forces need to be carefully assessed regularly. Understanding the relative strengths and importance of these
competitive forces helps to strategize accordingly. Mr. Prem J

Firms in Other Industries

Offering Substitute Products

Competitive Pressures from the

attempts of companies outside
the industry to win buyers over to
their products

Rivalry Among
Competing Sellers Competitive
Suppliers of Competitive
Competitive pressures Pressures
Raw Materials, Pressures from
by jockeying for coming from
Parts , Supplier
better market Buyer
Components Bargaining Buyers
position, increased Bargaining
or Other power and
sales, and market power and
Resource Supplier Seller
share and Buyer Seller
Inputs Collaboration
competitive Collaboration
advantage

Competitive Pressures coming

from the threat of entry of New
Rivals

Potential New Entrants

Fig 1 Porters Five Forces Model

Porters Five Forces in the context of Deep Foundation
Industry
Rivalry of Sellers
The foundation equipment sourcing is done from countries having
cost advantage like China and Europe where they have economies
of scale. The industry is highly dependent on import of equipment.
There is no indigenous production / manufacturing facility of these
sophisticated equipment. The sellers collaborate with buyers for
pre-tie up in some cases. However the equipment suppliers are
well-established and have penetrated into Indian market.
The existing foundation companies give stiff competition by
quoting competitive pricing and thereby boosting their sales
volume. During previous financial year, due to lower than expected
economic growth, the fresh project launches in the market stalled.
This led to fall in buyers demand both in infrastructure and real
estate sectors. The competitors are often left with excess capacities
leading to slashing of their prices to such an extent that they
could merely recover their costs or operate at very thin margins.
In terms of the product nature, the differentiation is weak. This is
attributable to nature of our business which is primarily equipment
driven. There are more sellers available in the existing market. The

4
switching cost of the clients is low in this business. On the whole,
the rivalry of sellers is high in the market.
New Entrants
Competitive force is relatively strong for new entrants in terms of
entering into the business. The equipment used in our business
requires huge capital investment which means the new entrant
needs good financial capability for owning these equipment fleet.
Also since the existing sellers in the market are larger, competing
in the already competitive market for a potential new entrant is
very hard.
There is a considerable high degree of customer loyalty towards
select sellers in the market based on historical performance and
association. Word of mouth feedback plays an important role in
this business. The new entrant needs capability and brand building,
thereby earning buyer confidence to sustain in the industry. Also,
the demand cannot be assessed with certainty which puts the new
entrant at great risk while prospecting for projects to start with. On
the whole, the threat of new entrants for the business is low.
Substitute Products
The threat of substitute products in this business is very low. The
methodology for construction of foundation is well established.
Unless a new methodology or new technology is entering the
market, there is no threat of substitute products in this business.
Supplier Bargaining Power
Labor supply contractors who supply the skilled, semi-skilled labour
play a key role in foundation construction. Labor supply plays a
major role in competitive position in terms of operational efficiency
and cost competitiveness. Also the same labor skill set has overlap
with other construction activities in real-estate and infrastructure
projects where there is shortage of manpower prevailing already.
There is a tendency of labor shifting between projects very easily.
Tools and critical wear and tear spare parts requirement for the
foundation equipment have to be ordered from outside India.
These spares are manufacturer specific. Advanced planning and
inventory holding of critical spares plays a key role. The project
schedule has the risk of slippage due to non-availability of critical
tools and spares.
The raw material suppliers are large in number. Except for
transportation to remote project locations, material suppliers like
cement and steel hold a relatively weak commanding position.
Equipment suppliers for rental or leasing hold a weak position.
They do not have adequate financial muscle at present to forward
integrate into construction. On the whole, the supplier bargaining
power in this business is moderate.
Supplier - Seller Collaboration
The threat of supplier- seller collaboration in this industry is low
as the items being supplied are generally available except for
the critical equipment spares. The sellers have advantageous
negotiating leverage with suppliers and also the switching cost
of the sellers in our industry is low. On the whole, threat due to
supplier seller collaboration is low.
Buyer Bargaining Power
The buyer power is very high in the construction industry. The
foundation construction cost has an impact in the overall pricing in
5
case of real estate assets. Buyers offering premium for our brand
are very few in number. The switching costs are very low, thereby
putting buyers in a commanding position with high negotiating
leverage. The buyers and their procurement departments are well
informed about the product and services of this industry. Also
government clients generally tender their projects and lowest
bidder is selected.
The rival sellers are virtually identical in terms of the product. The
product cannot be differentiated in terms of appearance. The
quality cannot be directly observed or assessed as the foundation
structures are below the ground. The buyers can negotiate well
with the sellers for price concessions. Since foundation construction
constitutes only a minor portion of the overall construction cost,
the buyers and consultants generally have a tendency to put a
cap on the foundation cost allocation. On the whole, the buyer
bargaining power is very high.
Buyer- Seller Collaboration
The threat imposed by buyer - seller collaboration is high. The
buyers cost of switching brands is low, giving the buyers a very
high negotiating leverage. The pricing rivalry from the sellers to
retain the customers is high, as the sellers tend to hold on to the
prospective repeat order customer in this business. The buyer seller
collaboration trend is prominently seen in smaller real estate projects
and some of the infrastructure projects. The threat of buyer seller
collaboration in foundation industry is moderate to high.
Summary of Porters Analysis
The various forces and characteristics of Porters analysis helped us
to understand the competitive forces in our industry. Table 1 shows
the summary. The industry on the whole is very competitive and
challenging. A clear understanding of our business environment
along with continuous operational excellence, innovation and
cost competitiveness would set a distinct place for us in this highly
competitive business environment.
Table 1: Summary of Porters Five Forces model
Threat Scale
Force / Threat (Very Low, Low, Moderate,
High, Very High)
Rivalry of sellers High
New entrants Low
Substitute products Low
Supplier bargaining power Moderate
Supplier seller collaboration Low
Buyer bargaining power Very High
Buyer seller collaboration High

An accident in a project site can result in a setback, not only in the
progress of the project, but also has its own impact on peoples
emotion, morale and in fact on the economic status of the project
also. A single serious incident will damage the long standing
image of an organization in society and projects an indelible
image of not-caring-for-the people. In short, safety is also one
of the aspects of the business which results in significant financial
and business loss to an organization, if not handled correctly.
The cost of poorly managed safety will bring significant drain
in the financial and other resources of an organization. The
financial justification for the safety function can be measured
by the cost benefit provided by the systems and procedures
existing and practiced sincerely without deviation, compromise
and complacency. The problem on assessing the loss due to an
accident on the financial aspect is that accidents always cost more
than the assessed loss. The reason behind is, the loss is assessed
mainly on factors which are visible and calculable or measurable
entity known as Direct Costs. Many factors, which are hidden,
immeasurable and not considered causing financial implication
many folds, are known as Indirect Cost.
Direct Costs of Accidents
These are the measurable costs arising from an accident and/
or any claim for liability under the civil or criminal courts. They
include sick pay, repairs or replacement of damaged equipment
and buildings etc. product loss or damage, loss of production,
6
Mr. K. P. Ravinath
accidents
cost
` us
public and/or product liability, fines, legal fees, increase in
insurance premiums etc.
Indirect Costs of Accidents
These are costs which may arise as a consequence of the event,
but do not generally involve the payment of money. Often, they
are unknown, but it can be estimated and in certain circumstances
they may be extremely high. Indirect costs include business
interruption, loss of orders, cost of time spent on investigations,
loss of corporate image.
Now let us examine these costs by reference to different classes
of accident or events.
1) Events which cause no damage to property or injury to
people
There are no direct costs associated with this type of event.
However, near misses may incur minor indirect costs in relation
to a temporary stoppage of work, with the extent of losses
depending upon the duration of the stoppage and that in itself
depends upon the nature and severity of the event.
2) Events which cause damage to material / plant and
equipment but no personal injury
The direct costs for this type of events are
Value of the material wasted
Value
 of any finished products or work-in-progress lost as a
result
 Replacement or repairing costs of plant and equipment
Cost on loss of production while repairing and replacement
Increased
 overtime costs incurred for compensating the
production loss
The following are the indirect costs
Loss of time spent on the job
Loss
 of goodwill from customers due to delay in production
and fulfilling orders-followed by cancellations and further loss
of orders.
Levied
 penalty for delay in delivery, resulting in low profit from
sales.
3) Events which cause injury to personnel but do not
damage property
The direct costs for this type of incidents are
Costs
 incurred in medical treatment to the injured like first-
aid, ambulance, out-patient cost, in-patient cost, nursing,
specialist consultation, surgery medication etc.
Compensation payable to the victim
Fines
 imposed by Enforcement Authority for breach of criminal
law.
Loss
 of victims production capacity and possible knock-on
efforts to others resulted in overall production loss before
progress and rearranged work allocations.
Increased
 costs on overtime payment to make up the loss of
progress.
The indirect costs incurred for this type of events are
Loss
 of production time due to workers stopping their work to
assist the victim and discussing about the incident
Idle
 time of machinery or equipment due to switching off in
order to provide assistance to the victim
Loss
 of staff from productive duties in order to investigate the
incident, prepare reports, undertake hospital visits, deal with
relatives, attend court proceedings.
Costs of training replacement
Costs incurred in recruiting a suitable replacement
Increased overheads, if plant and machinery are idle
Loss
 of goodwill from customers following delays in progress
may result in cancellation of order.
Penalty
 imposed due to delay in progress, resulting in low
profits from sales
4) Events which cause both injury to people and damage
to Material, Plant & Machinery
The costs here are likely to be a combination of those liabilities
arising separately for events involving only damage to plant and
machinery and those involving personal injury.
Ratios of direct to indirect costs
Safety advisers have long used the ratio of indirect to direct costs
of accidents to inform management on total accident costs. No
published ratios are currently valid because the increase in direct
costs in the past 15 years has substantially exceeded the increase
in indirect costs. The ratios are different according to different
industries and vary from country to country or region to region. In
America, the roofing contracting industry claims that the indirect
costs of injuries may range from 2 to 20 times the direct costs
as mentioned in ASSEs Journal of SH&E Research. U.S. Fish and
Wildlife Service Division says For every dollar spent on direct
costs, $4 to $10 are spent on indirect costs. Western National
Insurance and North Carolina Industrial Commission states that
the indirect costs are 3 to 10 times the direct costs of the accident.
International Labour Organization introduction to Occupational
Safety and Health training module states that the indirect costs or
illness can be 4 to 10 times greater than the direct costs or even
more. OSHA (2007) indicates that the ratio of indirect costs to
direct costs varies widely from a high of 20:1 to a low of 1:1. But
the most commonly used ratio is 4:1.
For example, the visible direct cost incurred due to accidents in
a project during a year assuming 1 fatal accident, 2 lost time
accidents and 10 cases requiring medical treatment shall be
estimated as follows:
Human life is invaluable and we cannot estimate it in terms of
money, however for the purpose of calculation, have considered
an average compensation payable as per Employee Compensation
Act for young workmen.
Fatal accident in a year : 1 X 8,00,000 = ` 8,00,000
Lost Time accident in a year : 2 X 80,000 = ` 160000
Medical Treatment cases in a year :12 X 3000 = ` 36000
Total estimated annual cost : = ` 9,96,000
Impact of the above cost of accidents on a project with a sales
volume of 50 Crores and 10 % margin will be approx. 2% of the
profits.
If we include the impact of indirect cost taking into account the
most commonly used ratio of 4:1, then the total cost of accident
will be around 50 Lakhs that is approx. 10% of the margins. It
needs to be noted that the above estimated costs are illustrations
of a single project.
Apart from the direct and indirect costs involved in the accidents,
it brings down the morale of the workforce and also causes
immense sufferings to the near and dear ones of the accident
victims. Hence it is highly crucial that we take all safety measures
to prevent accidents at our project sites.

7
 Innovative Cost
Consciousness @
L&T GeoStructure
In order to enhance our competitive advantage, a culture of
innovation, creative thinking and cost consciousness is being
nurtured to optimize cost at L&T GeoStructure.
We are all set to celebrate the month of May - June as
Innovative Cost Conscious month. As a part of the
celebrations, an online survey in EIP portal is being conducted
wherein the staff can suggest/propose their innovative ideas
to optimize cost and the best-of-the-best suggestion will be
awarded with exciting prizes. Various training programs and
pep talk are also being planned both at the office and at
sites for promoting awareness about innovation and creative
thinking among the staff.

Mr. Jitesh Jain

L&T GeoStructure Mr. Gerald Sahaya Raj .J

welcomes the new editorial team

and wishes them all the very best!!!

Mr. Prem J
Mr. Shanbhag Ramdas

Ms. Meenapriya K Ms. Anila Manoharan

L&T GeoStructure
Mount Poonamallee Road, Manapakkam Chennai - 600 089, INDIA
Tel: +91-44-2270 4040 Fax: +91-44-2270 4343 e-mail: geostructure@Lntecc.com | Website: www.Lntecc.com
Editorial
Mr. C. Jayakumar, Ms. Anila Manoharan, Mr. A. Vetriselvan, Mr. K.P. Ravinath, Ms. V. Sheeja
Team

Published by L&T GeoStructure from Chennai. The views expressed in this bulletin are not necessarily those of the management of L&T
8
GeoStructure. The contents of this bulletin should not be reproduced without the written consent of the editorial team. Not for sale - only
for free circulation to employees of L&T GeoStructure through e-mail.