As I mentioned in my last post, there are a number of reasons construction companies are not as productive as companies in other sectors. In fact, construction projects often come in late and over budget, according to research by McKinsey & Co.
As a rule, large projects across asset classes take 20 percent longer to finish than scheduled and go over budget by 80 percent, McKinsey notes. And since the 1990s construction productivity has declined in some markets, often resulting in relatively low financial returns for construction firms.
This lack of productivity among construction companies is due in part to poor organization, i.e., decision-making and procurement processes don’t have the necessary speed and scale.
PAPER PROCESSES STYMIE PRODUCTIVITY
The construction sector is hindered because it still relies on paper-based processes, including blueprints, designs, drawings, procurement, financial reports and supply chain orders as well as regular progress reports, that don’t allow teams in various departments to collaborate in real-time, according to McKinsey.
Stakeholders typically work from different versions of the truth.
Because these processes aren’t digitized, it takes longer for information to be shared, and even then it may not be shared across the entire enterprise. Therefore, all stakeholders typically work from different versions of the truth.
In addition, paper-based processes make it difficult to capture and analyze data. This is an important consideration in procurement and contracting because understanding how your enterprise has performed in the past can enable better outcomes and improved risk management.
To reduce procurement costs and execution times, you need timely access to the data to ensure that all your current and future projects take full advantage of the best features of your earlier projects.
During construction, if processes and contracts aren’t well defined, you can also lose a lot of time when it comes to making decisions on claims and change-order management and that can lead to major delays that build upon each other sequentially.
Developing more efficient processes for change-order and claims management can cut down on the time it takes to resolve discrepancies that crop up during construction.
ONE INTEGRATED SYSTEM IS KEY TO REAL-TIME MANAGEMENT
Comparatively, the construction industry is one of the least digitized. This inability to utilize technology to improve processes and information flow is a major reason why the industry lags behind in productivity and is plagued by budget overruns and project delays.
Digitizing the construction-planning process will let you capture data that you can’t capture using paper processes. And adopting integrated advanced analytics will give you the real-time insights into your construction projects you need to improve efficiency, timelines, and risk management.
A single database of shared information that can be accessed by everyone will allow you to avoid data duplication and pass on updates to relevant parties, enabling potential issues to be highlighted and addressed in real time.
An integrated system with instant information flow, enables potential issues to be addressed in real time.
With accurate and timely information flowing seamlessly between business units, decision-makers will have visibility into what’s going on inside the enterprise in real time as well as greater control over all parts of the business and alignment among teams.
The solution, then, is to integrate all these functions (project and portfolio management, project financials, resource management, and project analytics) into one enterprise resource planning (ERP) system that will enable project-driven companies, such as those in the construction sector, to operate in real time and create business rules to enforce their critical processes. This approach can cut costs and significantly improve results.
Although many in the construction industry may be skeptical, an integrated real-time approach to construction management is possible and is a major difference between the construction industry and other industries that show greater productivity gains. Those that adopt a real-time approach to operations will improve organizational efficiencies and improve the on-time, on-budget performance of their business.