At present, the construction industry is going through an extensive transformation. Though 2020 turned out to be an unfavorable year for many, the business has started to boom again, paving the way for opportunities in the pipeline.
The situation has resulted in construction companies experiencing extraordinary pressure due to competitive bids and timelines. In addition to this, the ever-growing scarcity of skilled workers and labor resources has made contractors bear the challenge of projects running 20 percent over time and 80 percent over budget, as per the reports shared by McKinsey.
However, construction companies are trying to curb this pressure by embracing advanced construction management technology. Technology has the potential to overcome the competitive burden and give companies the tools to adapt to the fast-paced and ever-evolving industry.
It is vital that construction firms, general contractors, as well as subcontractors, all understand the necessity of implementing software technology for streamlining their business operations and maintain a competitive edge. As technology is improving with every passing day, construction-based accounting, reporting, project management, and other processes associated with a construction project can easily be tracked and managed, increasing productivity, cash flow, and overall revenue.
Technology & The Construction
Whenever it comes to the innovative future of the construction industry, it is the advances of technology that can help improve existing operations and legacy practices. Some of these trends include the use of drones, cloud-based software solutions, and mobile devices that can improve the collaboration between site teams, office staff, contractors, and project owners.
Also, construction firms that have access to technology can experience advancements related to productivity, information sharing, and sustainability, while driving secure data capture practices.
In spite of all the progress made with technological advances, there are still many construction companies and contractors who are not able to or not willing to upgrade their operational practices. This is why a report shared by McKinsey & Company has shown a drop in productivity during the last 20 years. On the other hand, the manufacturing industry has managed to leverage productivity for their business benefits by quickly aligning with progressive technology solutions.
Looking At The Industry
At present, the construction industry is one of the fastest-growing industries across the globe. The need for development and infrastructure has opened the way for so many opportunities. That being said, the construction industry has also gone through extensive downtime due to the unexpected ups and downs throughout history.
Whether it is the existing pandemic or the recession of 2008, the construction industry has taken a huge toll on GDP causing loss of business, jobs, and overall position of the construction industry.
- The early 2000s & The Recession
The early 2000s was one of the most productive phases of the construction industry. The housing boom of 2000 opened the way for so many contractors and construction firms to enter the market and make some profits. However, a report shared by newyorkfed.org said that the sudden jump in housing construction was the main contributor to the financial panic that began in 2007.
It all started with the government policies to promote homeownership while further caused a subsequent burst of housing prices. Moreover, the loose lending conditions caused a sudden inflow of money into the housing market causing a greater impact on the overall GDP.
In July 2014, the total evaluation of the construction industry for both public and private construction stood at $981 billion, rolling down rapidly from the peak of $1.2 trillion back in 2006. Though the housing industry and other private construction started to recover slowly during this period, the impact made by the recession was a big shock to the construction industry.
Though it was active efforts of the construction companies that aimed at providing unique offerings to the customers, technology was a major drive that helped the recovery. Technology solutions helped construction firms grow while utilizing analytics, digital construction tools, and other software technology.
The introduction of advanced construction project management software technology helped construction firms drive productivity while streamlining everything from supply chain to project management.
The recession of 2008 resulted in the construction industry losing around 1.5 million jobs, but the American Recovery & Reinvestment Act helped the construction industry get back on track. The goal of the recovery act with respect to construction was to identify and implement construction technology in businesses for overcoming loss and downtime. In 2019, the global construction market size expanded to reach $11,217.4 billion making it one of the fastest-growing and essential industries.
The Pandemic & Construction
Unfortunately, the spread of COVID-19 that started in December 2019 caused a massive impact on the construction world. With restrictions from global health agencies and governments across the world, construction projects were called to halt causing a major jerk to the construction companies. The situation caused delayed projects and terminations of the contract pushing the total job loss to 2.3 million making the situation even worse.
The pandemic exercised restrictions on construction jobs entirely making the situation much worse as the market size started to decline from USD 11,217.4 billion to USD 10,566.8 billion in 2020. The situation even made way for lawsuits and clashes between project owners and construction companies for not adhering to project timelines. However, the government intervened to provide aid to the industry by launching the Paycheck Protection Program and even worked on stricter laws to keep the contractors protected against any claims made due to the public restrictions that caused the projects to stop.
Surprisingly, the industry started to gain pace and managed to get back on track, taking the assistance of technology and remote construction practices. The recovery signs showed the likeliness of the industry to grow to a market size of USD 11,496.7 billion in 2021 while having a major focus on residential and private construction.
- Hyper Competition & Liabilities
Amid the rise, one factor that held some construction companies back was the growth of hyper-competition that was majorly based on the adoption of technologies that helped construction firms to proceed towards sustainable growth.
The pandemic urged construction firms to adopt construction management software technology with influential features like Business Intelligence and Cloud. These dedicated tools have proven to be invaluable to construction companies and contractors who were looking for aid with their limiting profits and rapidly changing business dynamics.
Digital Transformation and Technology
Whether it was the Recession of 2008 or the most recent COVID-19 pandemic, most contractors found themselves losing grip on cash flow due to old-school legacy practices and outdated systems. However, the introduction of advanced construction accounting software technology has simplified operational processes, providing real-time checks on accounting data and reporting. From estimates to expenses, using construction software allows contractors to accurately manage finances with improved control on cash flow benefits.
Since the modern-day construction accounting and project management software allows contractors to take command over all financial data and expenses, the entire task of budgeting and planning becomes much easier with these tools. From allocating the budget to every job-specific task to measuring the backup resources, using construction software allows contractors and project managers to ensure smooth progress.
Contractors who avoid using construction software to manage their labor resources often struggle with the issue of overpayments and time theft. On the other hand, using a construction ERP software technology could help project managers to track productivity hours to ensure no over-expenses are made on labor resources. Also, when having an integrated construction software in place that allows access to CRM features, driving opportunities, and sustaining clients can be done much more effectively.
Since quality management determines if construction companies will meet their efficiency goals and drive profit margins, using software technology, such as project management software, can aid remote leadership, which is the need of the hour. From project managers to project owners, using construction management software can serve as a single source of truth for data. Such practices help to improve transparency in leading construction projects and open ways for longer-lasting unions with clients.
The adoption of technology has increased productivity and growth across the board for construction companies. With 65 percent of contractors already using mobile devices on the job site, the construction industry is taking maximum advantage of the technological resources to streamline processes across job site locations. Since mobile phones are easy to access to contractors these days with 93 percent of them using smartphones, project owners and managers could easily keep in sync with contractors regarding existing and upcoming project progress.
As project management is one of the most crucial phases of the construction project lifecycle, contractors are showing rapid interest in adopting project management software technology for both site staff and office teams. Project Management tools like ERP systems, BIM or Virtual Design systems, Workflow automation tools, etc. have all helped contractors to benefit from an improved and more intuitive experience working toward project management goals. These tools have helped contractors with time tracking, communicating, documenting, and field productivity management.
The adoption of construction technology is not just limited to software solutions but has also extended to devices and tools. Some of the modern tools like Drones, 3D printing, wearables, and robotic constructors have helped construction firms have improved control of the project development process. Using these tools and technologies, combined with real-time insights and data from software dashboards, will help magnify the visibility of the progress at every stage of the project lifecycle.
Walking Towards The Future
The construction companies that have a strong belief in the success of their legacy practices are more likely to stick with the old school techniques that are more guesswork than data analyzation. However, the truth is that the modern age of technology allows contractors to gauge the financial impact in real-time while working on sustainable productivity.
Whether it is financial risk management or routine tasks like monthly cash flow forecasts, advanced management tactics allow project managers to track every single detail of project data and leverage it for improved and more accurate analyzation.
In addition, the added advantage to work on detailed budget reporting allows contractors to have a watch over every facet of projected growth. Also, the clear and comprehensive data allows easy configuration of the project for actionable cost management.
Chasing Goals With Technology: Managed Costs & Cash Flow
Since the primary and ultimate goal of any business is to generate revenue and meet the cash flow objectives, the advanced approach to cost management offers a more dynamic perspective to the business. With improved connectivity and collaboration, the portion of the construction industry that is aligning toward modern technology tends to enjoy a smooth data flow between their teams.
The use of advanced technology and tools have brought synergy between field and office data in regards to managing costs. Also, the digital impression has helped construction companies to adopt necessary changes related to job site management, converting timesheets to budget data, invoice submissions, and other tasks that have a direct impact on costs.
Moreover, using these tools has cut down on the time project managers are required to calculate costs using excel sheets, making the entire process of cost amendment accurate and simplified. Since all cost data from project analytics is aggregated, project teams get the chance to identify any financial risks before they start to show their impact on the project. In short, it more of the connected and collaborative approach offered by the advanced software technology and construction tools that helps meet the cost objectives of the projects allowing a margin for pre-estimated profits.