Published on:
January 31, 2024
GREAT NEWS! The construction industry is forecasted to grow steadily over the next 5-7 years, doubling its size between 2020 and 2030. The construction market was recorded at around USD 6.4 trillion in 2020. The projected size will reach USD 14.4 trillion in 2030.
However, this projected growth doesn’t mean that the problems that have existed in the industry will magically go away. It may even magnify these problems if left unaddressed.
Some of the problems construction companies (builders/main contractors, developer-owners, and construction managers) face include age-old issues such as regulations, communication, skills shortage, and safety. But among all of these challenges, there’s one major problem that keeps the world’s top builders up at night – cost & profitability.
It doesn’t take an MBA graduate to know that costs directly affect profits, and that more projects doesn’t mean higher profitability. From materials to labor to equipment, managing resources can make or break the growth of a construction business. Depending on your business model, you may care about resource costs more often or less than others. It doesn’t change the fact that it is a universal concern. Already faced with slim margins and logistical challenges even before the pandemic, even a single percentage change in the cost of resources can significantly hit a profitability and lead to bankruptcy. Let’s not even get started with materials & equipment getting lost – or worse – stolen from the job site.
Let’s look at an example: On the average, materials make up 65% of the total project cost. While the price of materials is determined by markets, it’s upon a company’s management team to make sure that utilization of materials is optimized – in other words, minimize wasteful material consumption. This is why resource management is a critical aspect of every construction project. It's become an even bigger concern in countries where inflation has skyrocketed such as the Philippines because it’s the builder’s margins that are worst-hit when the cost of materials and labor go up.
We all want our businesses to grow with the uptick in the market, but this shouldn’t come at a price.
Other than profitability being directly affected by the mismanagement of resources, construction companies also run the risk of tainting their reputation when resources are mismanaged, because this can also mean project delays. Builders, construction managers, and developer-owners face a lot of pressure to meet deadlines to deliver projects on time, and failure to do so can lead to clients finding other builders for their next project.
We have a solution for you to address the big resource cost management concern: go digital on your construction management activities.
They say construction is one of the oldest & biggest sectors, yet one of the least digitized in the world. But it’s not to say that companies like yours haven’t tried. We’ve talked to a lot of companies and learned that they use some form of online solutions to manage resources. Some of the more common tools mentioned were shared Excel files, email, and chat. This is what we call “patchwork digital transformation.” It’s fine to take this approach when managing 1 or 2 projects. However it’s hardly sustainable and scalable – meaning when you’re managing 10 projects simultaneously, not having a system in place would be messy. This is where a construction management software comes in – where it consolidates all information, communication, and decisions in one place.
The bottom line is this: if you care about profit margins and want your company to thrive, using a construction management software is the ONLY way to go.
