It is estimated that the construction sector is only capturing 30-35% of their automation and innovation potential. Most of us have seen futuristic skunkworks videos showing automated brick-laying robots and exoskeletons (technologies that exist but are likely 5-10 years away from being on the average construction site). However, that is not where most of the immediate innovation opportunities reside.
Some of the best-in-class construction firms are unlocking opportunities to build efficiency and profitability in operational areas. These are areas that any size firm can capitalize on and they focus on ‘back office’ technology platforms that manage and share data.
Many IT systems in the average construction company are disparate—they do not talk to one another as much as they could. Firms bought technology over the years because it was the best at the time and it is far too easy to become comfortable in the technology that you know, not the technology that could propel you to the next level of profitability. The challenge is that many of these systems can not share data, or the analytical capabilities of those systems are limited.
Some of the problems created when systems are not integrated include:
- More time (and more people) are required to enter information.
- Risk of errors is higher.
- Costs are not fully allocated.
- Projects are not accurately priced.
- Firms can not react quickly enough to changing raw material prices.
- May not optimize staffing and labor utilization.
There are several ‘back office’ areas where most construction firms can unlock financial benefits and create operational efficiencies.
- Inventory / Costing
Material costs have risen more than 46% over the past 12 months, and prices are changing daily. This has made costing particularly challenging. Efficient inventory management and costing technologies can optimize how resources are purchased, estimated, and costed to the correct project, and tied to accounting systems so that project managers have instant visibility into changing job situations. Tying this system wholistically to other systems helps increase customer satisfaction (reducing costing “surprises” on the job site) and helps maximize profitability on a project.
- Labor and Staff Resourcing
Staffing and managing project labor is another key area in which an integrated construction IT system can help improve visibility into labor costs, help reduce turnover, forecast labor needs, and optimize labor utilization across projects (through better project planning). Efficiency comes in when it can be tied to other operational systems that also help eliminate wasted labor hours.
- Project Management
Many construction firms have invested in good technologies that can help with project management. Most of these miss key opportunities to reduce rework because they are stand-alone systems. New platforms can more easily connect with accounting systems, HR, and CRM systems. It reduces errors and optimizes management visibility into ongoing projects. These factors combined can help improve overall customer satisfaction.
- Sales Pipeline
New systems can use integrated AI technology to scan news and bidding systems intelligently, helping them find more projects that fit their optimum project type. In addition, an efficient sales pipeline technology (like advanced CRM technologies) can tie into project management and inventory/costing systems to be more competitive during a project pursuit. It can help cultivate relationships with customers and utilize analytics to help sales executives know where to focus more of their time because conversion rates on those projects are more likely (in a dynamically changing world where industries, decision-makers, and market conditions are rapidly changing).
- Invoicing Complexity / Billing Accuracy
Customer satisfaction and value studies have shown that billing accuracy is one of the most important factors to customers. Inaccurate billing can be one of the greatest dissatisfiers for a client and it can destroy a construction firm’s reputation. Giving customers early visibility into changes in project costs (beyond simple project overrun allowances) can help improve the overall experience – and may mean construction firms get paid more quickly. Tying billing accuracy to other costing and labor systems can also ensure that all costs are being captured completely, improving project profitability.
The objective for a construction firm should be to create a wholistic IT management system that ensures the most efficient and accurate operation as possible. It should also provide an optimum level of visibility for construction leaders so that they can make informed decisions throughout the project lifecycle.
Tackle it one system at a time – but have a roadmap!
Connecting these systems together sounds like an expensive, difficult task. MarksNelson can help firms create a strategic roadmap that allows a construction client to take incremental steps toward a wholistic, integrated IT management system. It is a step toward an innovative future. And with completion of each link in the chain, the construction firm will begin to see benefits.
