“Fiber Factory” Must Scale Up Deployment Capacity and Reduce Deployment Unit Costs
The client faced two key challenges that were essential to delivering the approved strategy:
- To scale up significantly its deployment capacity (homes connected per year) by >500% across two years’ time;
- To reduce unit deployment cost so that the fiber plan provides the required ROI,
In the beginning, the client had limited fiber deployment capacity to rely on, and it was essential to increase it by onboarding additional contractors.
To scale up deployment capacity is a challenging task due to the number of fiber projects across Europe nowadays, and other government-supported infrastructure projects (e.g. electric cars charging infrastructure). The result is that it is a “seller market” and not a “buyer market.”
Throughout the engagement, the project team identified several initiatives grouped into three areas that addressed one or both of key challenges.
Sourcing and management addressed both client challenges. The remaining two areas, i.e. Technology and process improvements mainly dealt with the cost savings challenge.
A “partnership” approach, instead of the more usual buyer/seller model, has been identified as a key initiative to help increase the number of contractors. It consists of continuous dialog at different levels between involved entities with the goal of learning and constantly improving the processes. Indeed, these sometimes might make a cooperation challenging (e.g. long payment terms, multiple IT systems or extensive manual processes, complex contractual arrangements that a partner must comply with, lack of risk sharing arrangements, complex material sourcing, documentation processes, etc).
Reducing unit costs is a complex task. it consists of several different initiatives that individually have a smaller impact but which, if taken together, should help the company at least get closer to its goal. This is especially true when rollout volumes predictability and stability of yearly production levels were discovered as key initiatives that would allow contractors to reduce the risk premium they charge on top of their costs (estimated effect on the unit costs of 10% – 15%). Another promising initiative was overall process improvement and automation (supported by specialized off-the-shelf tools), with an estimated effect on unit cost of up to 10%.