What does the future hold for building and construction organisations? Can it be best summed up as change management, problem-solving, and survival of the fittest? It’s always been a highly competitive sector.
However, the construction industry has also been facing unprecedented challenges, including escalating costs, the ripple effects of a pandemic, Brexit, and a massive push on sustainable solutions.
Fortunately, as we explore here ERP tools to help plan and forecast combined with business optimisation techniques already exist to help those in the sector overcome obstacles that limit growth.
Rising costs in construction
The upward trend of base-level costs is hitting the sector hard as the cost of basic materials has been skyrocketing based on availability.
The industry has experienced an 80% rise in timber prices since the end of 2021 and similar increases are being experienced for steel joists due to the rising price of iron. Softwood prices have also escalated by almost 100%, while aluminium now costs 25% more. Paint prices have risen by around 33% and plastics by 60%.
The well-documented increase in energy prices is also having an impact on the sector. Gas and electricity - plus their associated carbon costs accumulated in production – not only affect construction operations but also impact the affordability of supplies such as ceramics, glass and bricks.
Working with or for developers and building commissioners and understanding, where what and who is willing to absorb these additional costs is no easy task.
Construction material shortages
Being able to meet building deadlines or the ability to take on construction projects has also been put under threat as basic materials are problematic to source. For example, British Steel froze its order books when demand for structural steel sections exceeded engineering capacity.
Some inventory essential to a construction project is being stifled by global shortages of raw materials, residual pandemic effects and the growing cost of shipping across our international waters. A vivid illustration is the cost of getting a container from China to Northern Europe which in May 2020 would have cost around 1,475 USD and by May 2021 ended up costing 8,303 USD.
Lead times and last-mile transport
Every challenge the industry is facing contributes to making it harder for construction companies to get materials delivered on time, as well as on budget. Moving goods into and out of the UK is more time-consuming and requires additional administration due to the knock-on effects of Brexit.
Arranging for inventory to be delivered to sites in the UK has become far from straightforward, and the 100,000 shortfall in drivers continues to cripple the transport industry.
Workforce deficits and labour costs
The transport sector is not alone in suffering labour shortages. Construction businesses are increasingly relying on technology to manage their futures, and investment in reskilling, upskilling or reengaging existing and potential talent to attract them to fill skills gaps on a global scale is critical to their long term success.
In addition to this, the cost of labour has risen sharply, and according to the UK’s Office for National Statistics there are over 3,000 more construction job vacancies to fill now, on top of the deficits reported in previous years.
The shrinking pool of potential new recruits into the construction trades, combined with an estimated 500,000 UK-born workers retiring in the next decade, has also been reported by the Economics team from the UK Construction Products Association.
Positive influences for construction
Lean manufacturing and environmentally-sound principles are already being applied to construction trades, and the search is on for new ways to be agile.
A similar response is needed to the way that the automotive industry reacted to the 1970s energy crisis. Achieved by reviewing business models, amending processes, and managing costs intuitively, which made them come back stronger!
How can construction businesses find new ways to do fundamental processes, optimise resources and be responsive to threats and opportunities? The answer is by taking the steps to review and implement Enterprise Resource Planning systems designed to simplify and make it easier to add value to your processes.
ERP software gives you greater transparency and control over inventory, resource allocation, supply chain management and communication. Matching material’s lead times to project deadlines becomes more accurate.
Other advantages of ERP include the ability to forecast or model raw material costs to projects where savings could be made, for example by potentially buying in bulk or in advance aligned with lead times.
Construction professionals are increasingly assessing their skills with their responsibilities and up-skilling or cross-training is a key area many businesses are reviewing; this is also a trend that features manufacturing industry-wide. It’s reassuring to know that the best ERP software can be integrated into your planning processes without a massive investment in new IT or skills, offering you the chance to optimise processes as you implement if there are lots of steps that could be streamlined at the same time.
ERP is the future
If you are ready to take the leap to learn more about how ERP software systems can help you record, review, assess and innovate how you operate – contact the team at WinMan today.
Let us help you map your future and access better ways of managing all of the processes that feed into your construction projects.