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.”

Comments

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.

Transportation And Logistics Services: Is It Moving Radically Enough?

Juergen Roehricht

Exponential technologies like 3D printing, artificial intelligence, digital assistants, networks, blockchain, and many others are transforming the world we live in faster than we ever imagined. Recently, I joined a panel discussion about digital innovations and their impact on the transportation and logistics services industry. In fact, the discussion inspired me to start this new series of blogs, not just to share my thoughts but to challenge us as (digital) leaders by asking: Are we thinking radically enough? How do exponential technologies and the digital transformation impact our industry? Are we really making the most of digital innovations?

3D printing: It’s now or never

One of the questions the panel discussed was how 3D printing affects business. Interestingly enough, this turned out to be quite controversial.

Many companies are not taking 3D printing seriously. Some don’t see any need to engage with it, and others think it does not offer use cases for their business. Other companies clearly understand the benefits, such as being able to print spare parts for rolling stock. This becomes particularly relevant for older assets for which it is hard to obtain spare parts. Printing the parts they need, right where they need them, means companies can avoid supply-chain and logistics complexity, speed delivery, and potentially lower the costs of manufacturing and shipping.

Though I agree with this argument, I felt that the discussion lacked another angle to move it on to common ground. I asked whether it would be an option for companies to incorporate 3D printing into their core business or even to create a new business by offering 3D printing themselves or via a partner. That would give them an extended production workbench for customers and differentiate them from the competition in multi-modal transport. Companies could think about that model, regardless of any existing leading companies, competitors, or new kids arriving on the block.

The reason for this question is, for each new technology, I first ask myself whether it is likely to affect one or all three of the fundamental pillars of a business: the business model, the business processes, and the way we work. And in the case of 3D printing, I can confidently say that I see that all three pillars are affected.

To summarize the discussion around 3D printing, while I fully understand both perspectives, I have a different standpoint. For years, many transportation and logistics services companies have been providing value-added services like warehousing for their clients and charging premiums on top of the pure transportation service, which is a commoditizing market with declining margins, despite a growing transport volume. Why not extend this now to become an even bigger contributor to manufacturers’ value chains by starting a 3D printing division, closely connected with logistics and, potentially, with warehousing services as well?

A related option is to use outsourcing and leveraging partners, i.e., to work with companies specializing in 3D printing through a dedicated network.

There are already some transportation and logistics companies that are actively using 3D printing, like UPS. Why should printing a sneaker for a consumer differ from printing spare parts for a business customer?

Big Data, predictive analytics, and the Internet of Things: Untapped opportunities

Another interesting topic is how Big Data and predictive analytics are being used and how both will develop. Limiting the conversation to Big Data and predictive analytics is too narrow, unless you combine them with sensors and Internet of Things scenarios. Consider the example of a sensor attached to a container that uses signals, geofencing, and transmission into an analytics-based UI to track containers anywhere at any time. Imagine how much value this could bring to transportation and logistics services providers and to the shipping and receiving companies.

By knowing where a given container is at any time, companies can take action to prevent problems such as not meeting the contracted expected time of arrival (ETA); security problems such as intrusions or high-risk routes; or incorrect handling of the containers (such as temperature irregularities or physical shocks). In addition, these technologies can enable companies to save on operational costs by optimizing logistics to better handle empty transport resources. Sensors that can track, analyze, and predict relevant data could be a solution in all these scenarios.

Not everyone is convinced that these technologies are the way forward. You may hear comments like: “Our customers would not pay for this, and we are operating with very low margins.” Others might complain about the high costs associated with such an approach. While these concerns are understandable, I think they are short-sighted when considering the future impact on business and services. Sensors are now much cheaper, and adding them to a cloud solution that receives, streams, and interprets the data before displaying it on a user interface, and even adding machine learning and prediction algorithms, can be done very fast.

You cannot argue only from a cost perspective. Especially when it comes to ETA as a key metric for transportation companies and the risks of not meeting the contractual agreement. Would you prefer paying unreasonably high compensatory costs instead of installing a system that would help you avoid costly delays?

By decreasing the risk of insurance events, companies can negotiate better rates. Especially when combined with blockchain, technology can put all key data (contracts, IoT and geo-signals, payments, etc.) into a secure, transparent, auditable, and risk- and fraud-minimizing blockchain. And, with the right proposition, why should a customer not be willing to pay a few cents more for better service? Why not leverage this to set yourself apart from your competitors?

Last but not least…

In a world driven by exponential digital technology advances, the average life span of a Fortune 500 company has shrunk from 75 to 15 years over the past 50 years. There are more digital-native and digital technology companies in the Standard & Poor Top 12 ranking than ever before. Startups are popping up everywhere, driving change, and chasing and partially taking over markets that were owned by established companies for years. And companies are realizing that their existing organization might not be capable of changing fast enough, so they are creating digital venture funds and startup programs to drive those new business models and processes, sometimes with ideas that even disrupt themselves. In this world we always need to ask ourselves: Are we thinking radically enough?

The costs of managing, powering, and moving products and services are about to change dramatically. Tick Tock: Start Preparing for Resource Disruption.

Comments

Juergen Roehricht

About Juergen Roehricht

Juergen Roehricht is General Manager of Services Industries and Innovation Lead of the Middle and Eastern Europe region for SAP. The industries he covers include travel and transportation; professional services; media; and engineering, construction and operations. Besides managing the business in those segments, Juergen is focused on supporting innovation and digital transformation strategies of SAP customers. With more than 20 years of experience in IT, he stays up to date on the leading edge of innovation, pioneering and bringing new technologies to market and providing thought leadership. He has published several articles and books, including Collaborative Business and The Multi-Channel Company.

Happy And Healthy Livestock: The Promise Of The IoT

Christian Kern and Marius Oestreich

As long as humans have lived in settled communities, we’ve been raising livestock. Goats, sheep, and pigs have all been domesticated for at least 7,000 years. The ability to harvest meat was essential for fueling the growth of civilization.

Over the millennia, our animal husbandry practices have evolved considerably. Once, raising livestock was a very labor-intensive, hands-on process. Today, with the advent of factory farming, that process has become mechanized, digitized, and scaled up beyond the wildest dreams of our ancestors.

One thing has remained constant, however. To be successful, it’s critical to maintain happy, healthy animals. Today, the Internet of Things is helping farmers fulfill that mission, while also making the process of raising livestock vastly more efficient.

What is the Internet of Things?

The power of online connectivity was once largely confined to computers or computing devices. These days, however, vehicles, buildings, household appliances, and untold other objects are all networked and connected. The use of embedded sensors, actuators, and software allows these devices to collect, manage, and analyze data.

When these devices are connected, they can sense the environment and communicate – allowing them to understand complex situations and respond quickly. Machine learning capabilities allow some of these systems to act independently of human intervention.

Ultimately, this means IoT-enhanced processes can radically improve efficiency and performance. They can use the power of advanced data analysis to help us solve problems and improve existing strategies.

One of the areas in which IoT technology has proven particularly useful is in the realm of livestock management.

How the IoT is keeping animals happier and healthier

The sheer size of the world’s managed livestock supply is staggering. There are roughly 19 billion chickens, 1.4 billion cattle, and 1 billion pigs globally. The task of caring for these animals and preparing them for harvest is enormous. The economic value of these animals is also profound. In the European Union alone, livestock are worth 125 billion euros annually.

Given these numbers, it’s easy to see why effective livestock management is critical. These animals are a major financial asset. They are also responsible for feeding billions of people. On the other hand, large-scale livestock raising creates pressure on the environment. Fertilizers, fuel, and feed must be used, and greenhouse gases and other chemicals are released into the environment in large quantities.

Fortunately, the IoT and other technological advances are making livestock management more efficient, cleaner, and safer. Farmers can monitor the health and well-being of their animals remotely, which in turn reduces the number of animals lost to illness. This monitoring happens in real time and can stretch over large, dispersed physical spaces. Farmers can also use IoT technology to assist with animal movement and location tracking – a major efficiency boon.

The delivery of feed can also be optimized to reduce waste, saving money and reducing the load on the environment. Data can be analyzed to improve production, minimize fertilizer use, and manage stock levels.

Remote livestock management requires only the use of sensors, a cloud platform. and low-power WAN connectivity. Today’s applications allow ranchers and farmers to track key herd data (such as weight, growth, and mortality), control environmental conditions, and efficiently manage the feeding and growth of any group of livestock.

Ultimately, these IoT-assisted benefits help create healthier animals and greener pastures – while allowing ranchers and farmers to reap the financial advantages of greater efficiency and less waste.

The takeaway

Livestock management is big business. Yet its importance extends far beyond mere numbers. By helping ranchers and farmers improve their processes, IoT technology helps ensure that animals remain healthy and well cared for. Meanwhile, greater efficiency gains ensure these operations become more profitable – while also reducing strain on the environment.

And that’s an outcome that virtually everyone can support.

Learn how to bring new technologies and services together to power digital transformation by downloading “The IoT Imperative for Consumer Industries.” Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?

Comments

Christian Kern

About Christian Kern

Christian Kern is a Product Manager at SAP Innovative Business Solutions taking care of the Agricultural solutions for the Meat- and Dairy Industry as well as for the Farming business. Christian has a PhD and is Agricultural Engineer, with more than 25 years of food industry experience. The last 13 years at SAP he stayed focused enhancing the SAP footprint at food industry companies. As global Business Developer in the Service area he initiated many meat industry customer engagements globally, as Industry Value Advisor Consumer Products he accompanied and led different sales cycles at food industry customers and as Product Manager he helped to enhance the assigned global agribusiness solutions.

Marius Oestreich

About Marius Oestreich

Marius Oestreich is a solution manager at SAP, taking care of the agricultural industry business unit with a focus on the meat and dairy companies. With more than 10 years of experience in solution management for industry specific software applications, he has engaged closely with customers all over the world. Marius provides industry thought leadership and helps companies to thrive with innovative business software.

Human Skills for the Digital Future

Dan Wellers and Kai Goerlich

Technology Evolves.
So Must We.


Technology replacing human effort is as old as the first stone axe, and so is the disruption it creates.
Thanks to deep learning and other advances in AI, machine learning is catching up to the human mind faster than expected.
How do we maintain our value in a world in which AI can perform many high-value tasks?


Uniquely Human Abilities

AI is excellent at automating routine knowledge work and generating new insights from existing data — but humans know what they don’t know.

We’re driven to explore, try new and risky things, and make a difference.
 
 
 
We deduce the existence of information we don’t yet know about.
 
 
 
We imagine radical new business models, products, and opportunities.
 
 
 
We have creativity, imagination, humor, ethics, persistence, and critical thinking.


There’s Nothing Soft About “Soft Skills”

To stay ahead of AI in an increasingly automated world, we need to start cultivating our most human abilities on a societal level. There’s nothing soft about these skills, and we can’t afford to leave them to chance.

We must revamp how and what we teach to nurture the critical skills of passion, curiosity, imagination, creativity, critical thinking, and persistence. In the era of AI, no one will be able to thrive without these abilities, and most people will need help acquiring and improving them.

Anything artificial intelligence does has to fit into a human-centered value system that takes our unique abilities into account. While we help AI get more powerful, we need to get better at being human.


Download the executive brief Human Skills for the Digital Future.


Read the full article The Human Factor in an AI Future.


Comments

Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

Tags:

Finance And HR: Friends Or Foes? Shifting To A Collaborative Mindset

Richard McLean

Part 1 in the 3-part “Finance and HR Collaboration” series

In my last blog, I challenged you to think of collaboration as the next killer app, citing a recent study by Oxford Economics sponsored by SAP. The study clearly explains how corporate performance improves when finance actively engages in collaboration with other business functions.

As a case in point, consider finance and HR. Both are being called on to work more collaboratively with each other – and the broader business – to help achieve a shared vision for the company. In most organizations, both have undergone a transformation to extend beyond operational tasks and adopt a more strategic focus, opening the door to more collaboration. As such, both have assumed three very important roles in the company – business partner, change agent, and steward. In this post, I’ll illustrate how collaboration can enable HR and finance to be more effective business partners.

Making the transition to focus on broader business objectives

My colleague Renata Janini Dohmen, senior vice president of HR for SAP Asia Pacific Japan, credits a changing mindset for both finance and HR as key to enabling the transition away from our traditional roles to be more collaborative. She says, “For a long time, people in HR and finance were seen as opponents. HR was focused on employees and how to motivate, encourage, and cheer on the workforce. Finance looked at the numbers and was a lot more cautious and possibly more skeptical in terms of making an investment. Today, both areas have made the transition to take on a more holistic perspective. We are pursuing strategies and approaching decisions based on what delivers the best return on investment for the company’s assets, whether those assets are monetary or non-monetary. This mindset shift plays a key role in how finance and HR execute the strategic imperatives of the company,” she notes.

Viewing joint decisions from a completely different lens

I agree with Renata. This mindset change has certainly impacted the way I make decisions. If I’m just focused on controlling costs and assessing expenditures, I’ll evaluate programs and ideas quite differently than if I’m thinking about the big picture.

For example, there’s an HR manager in our organization who runs Compensation and Benefits. She approaches me regularly with great ideas. But those ideas cost money. In the past, I was probably more inclined to look at those conversations from a tactical perspective. It was easy for me to simply say, “No, we can’t afford it.”

Now I look at her ideas from a more strategic perspective. I think, “What do we want our culture to be in the years ahead? Are the benefits packages she is proposing perhaps the right ones to get us there? Are they family friendly? Are they relevant for people in today’s world? Will they make us an employer of choice?” I quite enjoy the rich conversations we have about the impact of compensation and benefits design on the culture we want to create. Now, I see our relationship as much more collaborative and jointly invested in attracting and retaining the best people who will ultimately deliver on the company strategy. It’s a completely different lens.

Defining how finance and HR align to the company strategy

Renata and I believe that greater collaboration between finance and HR is a critical success factor. How can your organization achieve this shift? “Once the organization has clearly defined what role finance and HR must play and how they fundamentally align to the company strategy, then it’s more natural to structure them in a way to support such transformation,” Renata explains.

Technology plays an important role in our ability to successfully collaborate. Looking back, finance and HR were heavily focused on our own operational areas because everything we did tended to consume more time – just keeping the lights on and taking care of our basic responsibilities. Now, through a more efficient operating model with shared services, standard operating procedures, and automation, we can both be more business-focused and integrated. As a result, we’re able to collaborate in more meaningful ways to have a positive impact on business outcomes.

In our next blog, we’ll look at how finance and HR can work together as agents of change.

For a deeper dive, download the Oxford Economics study sponsored by SAP.

Follow SAP Finance online: @SAPFinance (Twitter)LinkedIn | FacebookYouTube

Comments

Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 16,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.