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DECISION SUPPORT SYSTEM FOR IMPROVING CONSTRUCTION COMPANIES' BUSINESS PERFORMANCE
Sudarto Chairman of the Indonesian Contractors Association
Indonesia E-mail: [email protected]
Bambang Trigunarsyah Queensland University of Technology, Brisbane
Queensland, Australia E-mail:[email protected]
Ismeth Abidin University of Indonesia
Jakarta, Indonesia E-mai1:[email protected]
Leni S.Riantini University of Indonesia,
Jakarta, Indonesia E-mail:[email protected]
ABSTRACT
As part of a decision making process, tlte controlling process in construction companies can be supported by computer application that provides faster and reliable decision. This paper discusses tlte development of a knowledge-based decision support system for controlling constrr~ction companies' business performance. Tlre knowledge-base was developed using questionnaire survey and case studies. A questionnaire survey was conducted to identify potential problems that can occur in construction companies as well as the source of tlre problems and tlteir impact on companies' performance. Case studies were usen to identify and analyse various corrective actions. Tfre result of tlte study shows tlrat decision support system using knowledge-based management system improves tlre effectiveness and the efficiency of decision making process for selecting tlte most appropriate corrective action tlrat can improve construction companies' performance The application, wlriclt had been developed in this research, was designed to support the process of controlling construction companies' business performance and to assist young manager in selecting the most optimum corrective actions for the problems related to aclzieving companies' objectives. Tltis computer application can be used as a learning tool for ident~ifyingpotentialproblems that a construction company faces and tlre most optimum corrective action.
Keywordr: DSS, knorvIedge base, performance
1.0 INTRODUCTION
Initiated by the ASEAN Free Trade Area (AFTA), Asia-Pacific Economic Cooperation (APEC) and other international commitments, the fiee trade era provides opportunities for foreign investors to expand their businesses in Indonesia. This situation will enlarge the level of competition between local and foreign companies. In facing this competition, various improvements are needed to raise the business performance of Indonesian construction companies. This is primarily necessary in order to improve their competitiveness with foreign constructors.
Problems which often occurred in Indonesian construction companies are caused by, among others: lack of competition with foreign contractors due to limitation in funding and technology; the lack of awareness from the public towards the benefit and importance of construction industry; poor organization management; lack of experience in international projects. Those problems can generally be grouped into 3 (three) main factors, which are: internal factor (human resources, management, organization, customer, etc); external factor (social-politic environment, law environment, technology, macro-economic, etc); and market forces, which can be described as the external force that affects the market trends (Wideman and Myers, 1992). These 3 main factors can decrease the business performance of a construction company.
The company's business performance can be measured from its: ability to gain profit (profitability); ability to grow and develop (growth); ability to sustain and maintain business performance (sustainability); and ability to compete (competitiveness). The controllig process towards these factors consists of 3 (three) phases, which are: measuring the performance progress, evaluating by formulating problems and solution alternative, and implementing solution with corrective action for any problems and deviations occurred O(erzner,1995).
As part of a decision making process, the controlling process in construction companies can be designed into an effective model, which is supported by computer application for providing faster and reliable decision. Based on the development of advanced computer programming technology, this process can be automated by using a Decision Support System (DSS). Decision support system using knowledge-based management system (KBMS) improves the effectiveness and the efficiency of decision making process in providing corrective action recommendation.
The number of DSS or KBMS development and application in various industries had been increasing in the last decade, including in construction industry. KBMS had been developed as tools for both technical and administrative aspects in construction industry. The system can be a practical tool for young construction engineers with minimum experience to solve problems as efficiently and wisely as experts. The benefit of KBMS, which continually deveIoped though knowledge base enhancement, will likely improve the quality of a construction company, and eventually will reduce problems or threats in the company. Hence, the corporate management can increase its productivity and decision quality.
This paper discusses the development of a knowledge-based decision support system for controllig construction companies' business performance.It starts with the summary of literature review on construction industry, construction company's performance and decision support system. It is then followed by the description of the research method. In the subsequent sections, the results are presented and discussed, which then followed by the conclusion.
2.0 LITERATURE REVIEW
The role of construction industry in economy can be viewed from the potential in job opportunities, material needs and its impacts, public regulations that support the economy, and also the impact of construction industry's expansion towards the economy (Ofori, 1998). Construction industry can be categorized as one of the industry that plays an important role in a country's economic development process. The construction company's contribution in the total Gross Domestic Product (GDP) of a developed country is approximately 7%-10%. For developing countries, construction industry creates about 3%-6% from the total GDP. Construction industry also contributes job opportunities and income distributions for lower income society.
The research done by World Bank shows that construction sector in developing countries has important contributions and influence towards the national development (World Bank,1984). This sector intluences almost all of the economic sectors. Roads, dams, irrigation, housing, schools and other construction activities are the physical foundation for developing business and improving life standards. In most of the developing countries, improving construction's capacity and capability is ~ . . ~ ~~ ~- -. - .. .~... .- . ~ . .~ -- .~ ~. . . ~. . ~.~ ---. . . ~ ~
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important, including increasing cost and time efficiencies, and also the quality of the construction activity.The role of construction industry in Indonesia is increasing, but not optimum enough. This can be seen from the fact that the market for foreign construction companies in Indonesia is still large, and also the national development process is still ineffective and inefficient.
Nowadays, Indonesian construction companies are still having difficulties in competing with foreign contractors. Indonesian contractors are still experiencing bank guarantees rejection by the project owners, while foreign contractors have financial support with low interest from their countries. Special facilities for contractors which intend to bid abroad had been implemented in countries such as Singapore, Malaysia, China, and Korea, where this effort is given in order to increase more income for their respected countries.
Construction industry in developing countries has typical problems in. a high capital import; labour and material inefficiencies; high exchange value of currencies, except from import taxes and low interest in capital import and capital-intensive production; low skills and material, including the management and entrepreneurial ability; financial wealcnesses and delays in payments ; weakness in planning and administration system; foreign contractors dominations and low capacity .from the local contractor; inaccurate target achieved through social-economic planning that resulted job flow disorders, inefficiencies, and low quality products.
Indonesia, as a developing country is also experiencing problems described above. Other major problems in Indonesian construction companies include: bad personal mental and behaviour; low competitiveness with foreign contractors caused by constraints in fund and technology; public awareness of the benefit and importance of construction industry needs to be developed (Trisnowardono,2002).
In understanding the situation of a change in business environment, determining the proper and accurate business strategy is also needed. Hence, there are some aspects of external factors that need to be considered for understanding the business environment, such as: Law and regulation, i.e. investment, consumer protection, monopoly1 oligopoly (UU No. 511999), etc; Economic condition in its past, nowadays and future; Economic crisis, government regulation, Economic cooperation (APEC, AFTA, WTO), trend of global economic, and many others; national, regional and global business development; Supply and demand, consumer preference, market competitive, etc; Technology changes including information, operational, distribution, production, etc. Moreover, determining the proper and accurate business strategy is also essential. Problems in construction company's market forces factors generally divided into 5 (five) factors, which are: customer factor, competition factor, marketing factor, innovation factor, and entrepreneurship factor.
As mentioned before, the business performance indicators of construction company can be grouped into four main indicators, which are profitability, growth, competitiveness, and sustainability. Profitability is the company's ability to gain profit. Ram Charan (2004) describes that profit can be derived from the company's ROI (Return on Investment), which is the ratio of income and investments/outcome. The fmancial condition and performance of a company can be viewed from the financial ratio, which are: liquidity ratio, solvability ratio, profitability ratio, and growth ratio. According to Albach (1965), the definition of corporate growth is the improvement (in the form of a positive change) of the company's size through a long term period. Sustainability is also called 'the triple bottom line', which involves the company to own a firm commitment towards economic, environment, and social objectives. Economic sustainability means to improve the profitability by using efficient resources, including labour, material, energy, and water. Environmental sustainability means to protect the environment from emission and waste impacts, and exploit the resources carefully. Social sustainability means to consider the stakeholders' needs (Team, 2004). Competitiveness is the core of the company's success or failure. Competition determines the proper activities in a company that can give contributions towards its performance such as innovation, cohesive culture, or a good implementation. Competitive strategy is an effort to
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find a competitive position in the industry that intends to form a beneficial and sustainable position (Porter,l990).
In facing problems related to the company's business performance, a decision making system is necessary. One of the action needed in the decision making process is solution recommendation. The types of recommendation consist of before process (preventive action), in process, and after process (corrective action).
In order to provide a fast corrective action recommendation, a computer system based on Knowledge-based management system (IU3MS) can be used. As a tool in decision making process, KBMS may help an inexperience or inexpert user to decide and think like experts. Moreover, it can help increasing work productivity by improving efficiency, time saving in finishing assignments, simplify various numerical analyses, automating repetition process, acquiring and saving expert's knowledge into a valuable knowledge base that can be used by public (Mockler,1989).
The development of KBMS requires time, resource and money. Hence, the development phase can be divided into KBMS model, KBMS operational prototype, and KBMS operational. Generally, the application of KBMS in construction industry is still in the stage of KBMS operational prototype, which is a validated KBMS and already used internally by the user (contractor, system developer, and consultant).
3.0 METHODOLOGY
The objective of this research is to develop a decision support system for controlling construction companies' business performance. The research approaches were surveys using questionnaire and structured interviews to Indonesian construction experts, and case studies in Indonesian construction companies and several benchmarking from foreign contractors. Statistical and non-statistical analyses, AHP (Analytical Hierarchy Process), cluster and Delphi method were used to analyse the data. These analyses were the initial analyses in developing a knowledge base. The KBMS was developed by determining rules and logical algorithm which was embedded in an object-oriented computer programming language.
In order to simplify the rules and logical algorithm, the knowledge, which was compiled in a knowledge base, was converted in a form of a coding system. The coding system was given to:
1. Construction company's problems (based on the 3 main factors) 2. Impacts fiom the problems 3. Root causes of the problems 4. Corrective action or treatment for each root causes of the problems 5. Supporting knowledge such as impact risk level, business performance indicators, and
graphical results.
Figure 1 illustrates the research framework, which is the main process in the KBMS.
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Figure 1. KBMS for Controlling Construction Companies' Business Performance
4.0 RESULTS
The result of this research is the KBMS prototype. In addition to developing the knowledge base's '
rules and logic, the user interface was also developed to simplify the interaction between the user and the system. The interface was designed by using object-oriented computer programming language (C* program). Several illustrations of the system's appearance are discussed below.
The main page of the system consists of Home icon, Information (for documenting the user's data), Lesson Learned Analysis, Performance Analysis, Dictionary (providing glossary for construction terms), Help function (providing tutorial for new user), and Close icon (exit the system).
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The users are recommended to fill in the company or user information (provided in the Information icon). Those data will be useful for historical archives in the system.
Lesson Leamed Analysis
The program application in the Lesson Leamed Analysis is started by determining which problems occurred in the user's construction company, either in the internal, external or the market forces group factors. The user will then be asked to determine the impacts that is caused by the problems based on the impact lists provided by the system. After the user has provided those inputs, the system will provide alists of root causes of the problems, complete with corrective action recommendation for the related root causes. Finally, the system will summarize the interaction process in the form of tables that can be used by the user as a reference for decision making. The summary of the lesson learned analysis is shown in Figure 3.
Figure 3. Lesson Learned Analysis Summary Page
Performance Analysis
On the construction company's business performance analysis, the first step of the process is to identify which problem factors occurred and performance indicators that have been affected. Based on scoring measurement on the level of the problems provided by the user, the system will analyse the business performance value and provides the output in the form of performance index. The index will be classified as either good (on the area of good performance) or poor (on the area of poor performance). If the business performance is good, then there is no need to take any corrective action. On the other hand, a poor business performance will result in a recommendation of applying various corrective actions. These corrective actions are already linked with forecast analysis by the system, where the output fiom the analysis will provide the forecast of performance increase (in percentage) due to the corrective action implementation.
An example of a good business performance can be seen in Figure 4, where red dot shows the construction company's performance is still in the area of the window of success. In Figure 5, a poor performance sample is shown, where the performance is outside the area of the window of success.
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Figure 4. A Good Business Performance Summary
Figure 5. A Poor Business Performance Summary
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Figure 6 and 7 will illustrate the corrective action recommendation provided by the system and the forecast of performance increase (shown in green dot).
Figure 6. Corrective Action Recommendation for a Poor Business Performance Sample
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Figure 7. Forecast of Performance Increase
The computer application (the system) received adequate responses from the sample users, who are construction experts and project managers. From the system verification, the respondents gave several constructive feedbacks for further development. The majority of the respondents commented that the interface of the system can be enhanced into a more attractive page, and the language should be in the form of general usage. Moreover, the process and analysis in the system are distinct.
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5.0 CONCLUSION
The application of KBMS as a tool in decision making process can improve the effectiveness and efficiency in choosing the proper corrective action as an effort of improving the construction companies' business performance in Indonesia. The KBMS program can support the performance control process in a construction company and beneficial to young managers who had minimum experience in deciding suitable solution for corporate management problems.
The KBMS may be used as a learning tool in identifying problems and corrective actions which occurred in the construction company. The recommendation provided by the system are used as reference in choosing the proper action, and eventually the decision will still be in the hand of the decision maker itself.
REFERENCES
Wideman, R. E. and R H. Myers (1992). Project and Program Risk Management. A Guide to Managing Project Risk and Opportunities, Project Management Institute. Pennsylvania
Kerzner, H. (1995). Project Management. A System Approach to Planning, Scheduling, and Controlling, Van Nostrand Reinhold. New York
Mockler. J, R. (1989) Knowledge BasedSystem f o r Management Decisions. Prentice Hall. Singapore. Ofori, G. (1998). "Sustainable Consiruction: Principles and A Framework for Attainment-Comment."
Construction Management and Economics. World Bank (1984). The Consiruction Industry: Issues and Strategies in Developing Countries. Washington,
DC, The World Bank. Trisnowardono, N., Drs.B.E (2002). Menuju Usaha Jasa Konstruhi yang Handal, Abdi TANDUR. Jakarta Charan, R. (2004). ProJitable Growth is Eveiyone's Business. USA, Crown Business. Albach, H. (1965). Zur Theorie dcs Wachsenden Unternehmens, in Theorien des eizelwirtschftlichen u n d d e s
GesamtwirtschftIichen Wachstums. W. Krelle. Duncker & Humblot, Berlin. Team, C. E. (2004a). Sustainable Construction: A n Introduction, Constructing Excellence, USA. Porter, M. E. (1990). The Competitive Advantage o f Nations. The Free Press, New York.
Sudarto war born on the 27Ih May 1951 in Bandung, Indonesia. He is currently the Chairman of Indonesia Contractors' Association @CAI and the Chairman of Asean Constructors Federation (ACF). He earned his Doctorate degree in 2007 at Universiry of Indonesia majoring in Project Management. In 1999 ond 2001, he earned his master degrees in Management and Project Management. Besides actively involved in and lead the ICA and ACF, he owns and leads FINDO consulting group. It is a construction and design consultant group. Up to now, he is also one of the special advisory s t d s for Riau Province Governor in providing feedback for the province's plan and development. Thepaper that will be presented is part of his dissertationjindings.
Bambang Trigunarsyah is currently ~ s s o c i a f ~ Projksor and Course Coordinafor for Project Management, School of Urban Development, Queenslond University of Technology, Australia. He joined QUT in Jantro?y 2007. Previously, Bambang was the Head of Department of Civil Engineering at the University of Indonesia and Associate Professor in Conshuction Project Management. Before joining the Universiw of Indonesia, Bambang has worked for Kondur Petroleum S.A. (previously called Htrdbay Oil Malacca Strait Lld.), a Production Sharing Contractor for the Indonesian Slate Own Oil Company, for IOyears. His lastposilion with the company was as a Senior Project Engineer. He earned his Bachelor degree in Engineering (Civil) )om Colorado School of Mines, USA in 1988. He completed his masfer degree in Conrtruction Management in 1988, and his PhD degree in Engineering Projecf Manogement at the Civil & Environmental Engineering Department, the University ofMelborrrne, Australia in 2001.
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~- ~.. ~~ . Istnetlt Abinli~z was born on 19" October 1913 in Cirebon, Indonesia. He is currently a senior lecturer at Project Management graduate program in Civil Engineering Department, University of Indonesia. He is also on advisor at Technology Institution, Faculty of Engineering, University of Indonesia. Besides that, he also teaches at Project Management graduate program in University of Pelita Harapan and Universiw of Torztmanogaro. He eorned his Bachelor, Master and Doctorate degree at Melbottrne University, Australia. He had many and various experiences in providing consults for construction design and engineering, regional master plans, infastructure plans, and regional economic and strategic plans.
Leni Sagita Riantini was born on 11" June 1977 in Pekonbaru, Indonesia. She is currently a lecturer at Civil Engineering Deportment, University of Indonesia. She earned her Master and
..-i B Bachelor degree at University of Indonesia. Besides teaching, she also hod several experiences working as research assistant at her campus and collaborating research with Indonesian government concerning project management topics.
