Digital Transformation: Saving Money In The Construction Industry

Dustin Anderson

The construction industry is changing as technology and resources grow. The industrial construction market has already seen numerous new business models that transform how every component of the construction industry works together.

One key change is in the way construction companies operate. Today’s business model involves fewer people and a more streamlined, cost-effective supply chain. This leads to higher profits and happier customers—all due to digital transformation.

Understanding the challenges of the construction industry

Numerous limitations in the construction industry relate directly to its supply chain. Many individuals are involved in the average construction project. Individual contractors may come from multiple companies. Supplies and raw materials come from numerous sources. And companies must find a way to bring together these parties to create a cohesive, completed project. That is not easy to do.

According to Sikich, one of the biggest problems impacting today’s construction industry is cost overruns. Even the largest construction contractors face escalating costs related to mismanagement, lack of planning, and raw material costs.

The supply chain within the construction industry is also quite complex. Unlike most other industries, where product and raw material remains the same, every construction project differs. The supply chain is constantly changing, as Designing Buildings discusses. The outcome is more cost, more overseeing of the details, and more risk to the business.

Within the construction industry, companies must take steps to minimize these situations. They add risk to every project. They also lead to lower profit margins and fewer satisfied customers.

Digital transformation means improved opportunities

Changes to the construction industry through added technology is significantly changing the way companies operate. For example, project management software for construction companies is working to streamline every facet of the supply chain. It also ensures every individual contractor is working together toward a better outcome.

Verticalization and new contract models are at the heart of this. Civil construction projects are rapidly changing. Company leaders are working toward verticalization, in which more of the supply chain is handled in-house. By performing more tasks, companies reduce risk while also managing the process in a more streamlined and efficient manner.

As Financial Times reports, increasing stagnation in productivity in the U.S. construction industry has become a costly problem. This problem stems from the complex processes of the supply chain. The design to bid to delivery method, which is common, is difficult to manage. It also limits information-sharing to prevent litigation matters.

However, integrated project delivery contracts can minimize this challenge. The best construction project management software makes such integration much easier, improving interactions between parties and enabling what is best for the project to come through. There is less focus on individual companies protecting themselves.

A secondary benefit to this type of verticalization is in the evaluation of the project. Individual participants can be evaluated based on the outcome of the entire project. As a result, contractors can reduce their overall project risk. This may also help improve relationships and give the customer a better perception of the finished project and the risk involved.

How simplification occurs in the construction industry

When businesses incorporate technology, these benefits become possible. Integrated project delivery contracts are one component of digital connectivity in the construction industry. Collaboration technology is also widely beneficial. It aids every facet of a project, from construction schedule development to design work. Creating an open opportunity to communicate enable new opportunities and better outcomes.

Technology also allows for true verticalization. Integration of projects can expand more fully and ultimately empower businesses to achieve more with less, simplifying the supply chain. This in turn helps companies reduce costs. Supply chains become more reliable because they can be controlled. A single entity is then controlling the entire project. From design to prefabrication to construction, the process is managed more simply.

Implementing technology: a solution the construction industry needs

Imagine cloud-based construction management. Consider the benefits of having fewer people to interact with during the construction project. With technology, verticalization and supply chain simplification becomes valuable and easily accessible.

A simpler view of the benefits technology can offer is this: Technology allows for a brand-new business model to become available to the construction industry. Now, construction companies can manage the entire project in-house. Contractors perform with each other more effectively because improved communication opportunities enable them to work together in a more streamlined and less litigation-focused manner. This helps them retain their workforce with improved productivity.

All of this can occur by investing in software designed specifically for supply chain simplification in the construction industry. It is a powerful yet very simplistic upgrade that changes the way companies work while improving outcomes and profits. Simply put, it enables verticalization through new business models and helps construction companies exceed their goals. Even small businesses can reap these rewards with integrated technology. It is within their reach and offers a significant ROI.

To learn more about digital transformation in construction, see “Building a Sustainable World, How to survive and thrive in a digital construction economy.”


Dustin Anderson

About Dustin Anderson

Dustin Anderson is a Global Industry Solutions Director for the Engineering, Construction, & Operations Industry Business Unit at SAP representing North America and Latin America. Prior to this role, Dustin worked at an SAP partner company implementing SAP Solutions. Dustin helps clients deliver value through SAP solutions.