Allam Homes

www.allam.com.au

Executive Summary

Allam Homes is one of Australia's largest residential construction companies specialising in the building and development of home and land packages, contract construction and complete residential developments. A family-owned company based in Penrith, New South Wales, Allam has 105 full time employees and has been operating since 1991.

The company introduced e-commerce in 1994 to reduce reliance on an increasingly cumbersome paper-based system.  Allam Homes has also introduced electronic communications and a company website with customer service facilities.  E-commerce has improved the company's ability to communicate with customers and staff in remote locations enabling faster and more accurate information transfer.

Allam Homes has equipped each of its site supervisors with Personal Digital Assistants (PDAs) in order to transfer information electronically between the office and building sites. Online documents have made access to current and accurate information seamless, minimising order tracking problems and costs related to building errors.

Within three months of the website launch in 2001, additional revenue of $600,000 was generated. Cost savings resulted from the introduction of increased efficiencies in communications and information distribution in 2001. The total investment in e-commerce amounted to $99,780.

The Business

Allam Homes is one of Australia's largest residential construction companies with over 600 homes planned for completion in 2002. They specialise in the building and development of home and land packages, contract construction and complete residential developments.

A family-owned company based in Penrith, New South Wales, Allam Homes has 105 full time employees and has begun expanding into the Central Coast area of New South Wales.

Getting Started

The company introduced e-commerce eight years ago to minimize reliance on an increasingly cumbersome paper-based system. The management of large document volumes had become expensive and susceptible to error.  Often several different versions of each document were created which presented problems with keeping information current. Other documents were photocopied repeatedly causing gradual deterioration of quality.  In distribution, documents were often lost, resulting in unreliable communication processes.

Colin Staunton, Information Technology Manager, recognised that the ineffective documentation process was impeding overall productivity and sought a suitable solution.

Current e-commerce strategy

Allam Homes introduced e-commerce into its business through a three stage incremental plan. The first stage included the implementation of technology to automate tasks and increase the efficiency at which information was distributed to suppliers, contractors and customers.  A website was also developed in the initial phase.

The second stage involved enhancing the website for interactivity and provision of project information exchange with suppliers and customers.  This also incorporated the development of an Electronic Data Interchange (EDI) system whereby supplier orders are placed online and each product's delivery progress can be tracked online via the Internet. The broadband connection has allowed real-time information exchange with suppliers.  Also during this phase, Allam Homes implemented processes whereby all documentation was created and managed electronically.  This included the use of electronic documents such as Acrobat PDF format. This ensured that each document was both the latest version and readable. Furthermore, through the use of email and a centralised database, the storage, distribution and accessibility of documents became a more manageable process.

Furthermore, during the second e-commerce implementation phase, Allam Homes implemented processes where supplier research was conducted online, enabling the company to ensure their products are competitively priced and to keep abreast of new products emerging in the industry.  Correspondence with customers, contractors and suppliers is increasingly via email rather than phone or fax.  In addition, banking, payroll and supplier payments are now processed online.

A Virtual Private Network (VPN) via an Integrated Services Digital Network (ISDN) connection is used for real time data transfer between different offices.  Replication of data between offices ensures that a purchase is processed instantly.  This prevents the double booking of a property and also provides a method of backing up the system's data.

The third stage of the e-commerce initiative involved initiating an 'm-commerce' solution, whereby Allam Homes equipped site supervisors with Personal Digital Assistants (PDAs) connected via mobile phones to allow real time communication and document retrieval.

Allam Homes recognises the need for security mechanisms to prevent, detect and recover from any security issues. In addition to physical security, a firewall, data encryption, and a strong password system are used to prevent unauthorised access.  Regularly updated anti-virus software and security patches also limit the possibility of external attacks.  The database is replicated in real time at a remote location while a nightly tape backup is also made and stored offsite.

A disaster recovery plan has been implemented in order to minimise the impact and cost of a security breach. The company's website itself is hosted remotely with security measures provided by the host.

M-Commerce

Mobile commerce (m-commerce) involves communication via wireless handheld devices, which negates the need for landline connection to transmit data or access the Internet.  Due to the dispersed locations of work sites, the company has adopted m-commerce technology to allow information input and retrieval remotely from each work site.  Customer order tracking errors had incurred major costs to the company due to superseded specifications being used for construction.

Allam Homes has equipped each site supervisor with a PDA.  Data transmission is via a mobile telephone with General Packet Radio Services (GPRS), a wireless communication protocol, allowing a continuous connection to the Internet and the office network. The PDAs are connected to the mobile telephone via Bluetooth technology, a short-range wireless connection standard.

The use of mobile technology has allowed site supervisors to become immediately aware of late changes to site plans to avoid building to outdated or incorrect specifications. Hence, additional labour and material costs incurred to make the necessary changes to construction are avoided.

Revenue and Costs

* Note: Capital Expenditure was amortised over a four-year period

Financial Analysis

Allam Homes invested $99,380 in establishing the online system.  This amount was recouped during the first month of trading since the website launch.  Following website development, the company received over 300 online enquiries, three of which were realised as house sales totalling $600,000.  As a result, online sales contributed $150,000 to gross profit in 2001.

A major portion of initial costs were incurred in infrastructure investment.  New network cabling was required ($30,000), whilst hardware including data tapes and server, routers, printers and scanners were also purchased ($25,400).  Development of the website by external technicians incurred $25,000. 

Use of PDA's on-site has decreased the incidences of delayed or erroneous communications between customers, site supervisors and contractors.  This in turn has reduced the occurrence of building errors, saving Allam Homes approximately $450,000.  Further savings included travel ($15,000) and staff time ($80,000).

Cost savings associated with the shift to electronic documentation and communication include $55,000 in telephony costs and $100,000 in staff time otherwise spent in phone and fax correspondence.  The remainder is attributed to the decreased reliance on photocopying ($8,000), printing ($6,500), and postage ($2,000). 

Ongoing costs totalled $79,145 in 2001.   Costs associated with maintenance of the website and online systems include website hosting ($6,000), Internet Service Provider (ISP) fees ($1,740) and ISDN connection costs ($2,700).  Annual licensing fees for the anti-virus software incurred $4,000, with additional Information Technology (IT) staff and training costing a further $3,000 and $1,000 respectively. A further $23,345 has been allocated for the amortisation of capital expenditure over a four-year period.

Non-financial Benefits

The new system has reduced the amount of paper handling by employees, allowing a greater allocation of time towards productive tasks.  The new communication technologies have enabled more work to be achieved by staff without having to leave their desks.  Sales and service staff are able to respond promptly to customer queries through easier access to documents and online research.  Site supervisors in particular, can facilitate improved communications between customers, office staff and builders.  This in turn has a positive impact on houses being built to customer specifications and finishing times.

Development of an interactive company website provides customers with the ability to inspect floor plans and visualise house models with different facades without having to visit the physical site. Enquiries can also be made away from the sales environment.

Challenges

The company initially encountered user acceptance problems with introduction of the PDA's into the workplace.  Most of the site supervisors had no previous experience with computers and there was some resistance to the new technology.  To manage this issue, Allam purchased user-friendly software incorporating a simple push-button interface to automate complex manual processes.   The software was successful in encouraging staff to adopt the technology and eliminated the need for intensive training.

The security of the PDAs was an issue as mobile devices with large information storage capacities are prone to theft or unauthorised access.  Allam limits the amount and type of information stored on the PDAs on a need-to-know basis.

Future

The next stage of the company's incremental e-commerce strategy involves developing the website further to increase its interactivity. Allam Homes aims to provide customers and suppliers with log on access to their website, so they can access details of their particular project. Colin also hopes to offer a resource to suppliers where they will be able to receive specific instructions for each of their current projects.

The website will allow clients to reserve land, request houses, pay deposits online, and request changes to their properties. The company also will be able to demonstrate its products in more detail with the use of virtual tours where any potential customers can not only look at the floor plan, but also visually inspect a fully constructed virtual home.