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The art of optimization – smart management of fit-out projects in commercial real estate

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The art of optimization – smart management of fit-out projects in commercial real estate

The past two years have been marked by significant uncertainty. The Covid-19 pandemic has caused challenges with the availability of construction workers, supply chains’ disruptions, and materials’ shortages. In addition, it has increased the dynamics of price changes. This year is another one in which we have to face a situation that is difficult to predict due to the war going on in Ukraine. These uncertain times require flexible project management and the ability to deal with unpredictable situations, which is a challenge for cost optimization.

The entire market related to the construction industry, including fit-out companies, has already become accustomed to the constant increases in the prices of materials and their under-supply, the limited availability of employees on the market, and the rising costs of running a business. During the pandemic, some projects were put on hold. The retail and hospitality areas experienced stagnation. Once things calmed down, companies adapted to post-pandemic realities, another shock came, and the need to adjust to the current situation. Due to the ongoing war in Ukraine, companies having production facilities there have practically ceased to exist, which means more challenging access to materials. We also face rising fuel and steel prices. Another important factor is high inflation in Poland and growing labor costs. A numerous critical factors motivate the market to look for new ways to implement projects efficiently, on time, and within the assumed budget.

Optimization, reduction, or something more?

The term “cost optimization” is often used as a synonym for “reduction”. Nevertheless, this is faulty thinking, and the two terms do not mean the same thing. Cost optimization is a kind of investment – we provide the customer with quality at the best possible price. On the other hand, reduction is an action aimed at minimizing expenses, often accompanied by the resignation of certain costs, activities or functions of an enterprise.

Nowadays, it is more important than ever to have a flexible approach to the operations in all areas of the company. The same applies to costs – those companies that can reduce or increase them temporarily have the ability to function in the long term regardless of the market situation. The concept of Value Engineering comes to our aid here. It's nothing more than an analysis of activities in the project chain to optimize costs and raw materials while meeting customer requirements. In other words, we are searching for the desired effect we can achieve by using a substitute raw material or deciding on a different technological process.

Renata Nowak, Chief Operating Officer, Tétris

In the case of fit-out projects, cost optimization begins at the stage of evaluation of subcontractor offers. At this stage, one takes into account not only the price, but also the delivery time and credibility of the supplier. The simultaneous combination of the three factors "fast, cheap, good" is often impossible to achieve. The project manager needs to assess the client's needs and potential risks and select the right companies to cooperate with to meet the project requirements.  

Offers for customers are prepared several months in advance, and negotiations related to the project may last even a year. Therefore, a stable supplier is important, especially in long-term projects. Rapidly changing prices, this is a real challenge for the market recently. Often, an offer from a subcontractor is valid for several days. We are a large corporation that has developed methods to deal with such situations. What is crucial at this stage is to make a quick decision and provide financial guarantees. In this way, the supplier can order materials in the factory at the current price, and the customer's investment is secured.

Renata Nowak, Chief Operating Officer, Tétris

Globally and locally

The advantage of companies operating in several markets is the ability to implement a global purchasing policy. It's not just limited to analyzing the buying needs of individual branches and bulk orders for the entire group – although this is an essential part of such a strategy. It also includes in-depth price analysis based on historical and current cost estimates, reliance on long-term international partnerships, and payment control to ensure smooth order fulfillment.

Today, strong relationships, trust, proven suppliers, and subcontractors matter more than ever. Tétris is a company operating in 18 markets, and we aim to make the most of our global scale. Moreover, in Poland, we draw on over 20 years of experience. We do not forget the values or benefits of buying locally and supporting domestic manufacturers. The fact that we are a big player, running dozens of projects translates into large orders and makes negotiations easier. At the end of the day, when it comes to choosing materials or services, quality and ecology are also important.

Renata Nowak, Chief Operating Officer, Tétris

A vital element is controlling the processes at each stage of the project. The Building Information Modeling (BIM) system facilitates this. Allows you to achieve a higher standard in planning, designing, managing, and carrying out all construction works connected with a new investment or reconstruction.  

BIM is nothing else than a program that facilitates a proper flow of project information. For example, this tool helps eliminate errors at the early design stage and avoid costly changes at the construction level. Besides, it is a perfect tool to keep track of project schedules, orders, supply chains, or controlling subcontractors.

Renata Nowak, Chief Operating Officer, Tétris

Synergy means benefits

Following on the theme of eliminating design errors, it's worth pausing for a moment at the Design and Build project delivery model promoted by Tétris. It's a comprehensive approach to the design and fit-out of spaces, considering both the high aesthetics of the interior and financial parameters. The synergy between the architect's vision and the execution stage translates into no time-consuming and, most importantly, costly rework during the implementation process.

We have been present in the fit-out market for more than two decades, and we see how clients' expectations are changing. In the last two years the need for consulting on many levels has strengthened. On the one hand,  companies need personalized solutions. On the other hand, they also need simplified processes for cost optimization and taking responsibility for the project from start to finish. All this is included in the concept of Design and Build, which we constantly adapt to changing market conditions.

Renata Nowak, Chief Operating Officer, Tétris

The art of optimization is also the art of adjusting to current realities. The coming months will be a challenge for the whole market. Only proper skills in managing all processes will let the companies convince the customers to cooperate.