Construction is a competitive business. To stay streamlined and profitable, companies must think about a system that will carry them forward — not just for the next six months — but for many years to come. Opportunities to make money appear regularly. However, unless you know your service levels and margins, you can quickly put yourself out of business.
An article published recently by Small Business Growth Partners noted that off-site construction is a trend to watch in 2020: “Through modular construction advancements, better tech workflow, and an increased prevalence of the Lean movement, the offsite trend is projected to continue growing in the coming years.”
“Recent modular projects have already established a solid track record of accelerating project timelines by 20-50 percent,” noted a McKinsey & Company report. “The approach also has the potential to yield significant cost savings.”
Yet off-site construction also comes with challenges when you aren’t in control.
Schedule. Prefabrication requires more time upfront in the process for decisions, design and engineering. When ordering from a vendor, contractors may encounter long lead times with offshore suppliers.
Financing. Prefab construction requires upfront purchasing, and the invoices can be large. This can hinder cash flow and be difficult to monitor in real time.
Engineering changes. Changes requested from the field can result in costly project delays as you wait for the vendor to manufacture and ship new items.
“A good example of this is a mechanical contractor,” Rebello said. “They measure the job, engineer it, build the components in their fabrication shop and then deliver it to the job site for installation. Whether they consider themselves a subcontractor or a steel fabricator is a vocabulary issue.”
In fact, construction companies and manufacturers can operate nearly identically today. Both have inventory, labor, profitability and revenue issues. However, a big hurdle to acting as the off-site manufacturer and the contractor isn’t skill or warehouse space; it’s the lack of a system to support functioning as both. Companies unable to find the right enterprise resource planning (ERP) solution to track construction processes and off-site prefabrication are either hacking together software or trying to run their businesses on various Excel spreadsheets.
Support Off-Site Construction With a Modern ERP
For off-site construction to succeed, companies need to accurately manage costs throughout the project’s life cycle. Firms wanting to support off-site construction should seek an ERP that can handle the expected construction functionalities — projects, contracts, commitments, costs and compliance— and those needed to accurately support off-site construction — bill of material, routing, engineering change control, product configuration, advanced planning and scheduling.
A modern ERP solution has these key attributes:
The traditional per-license model is replaced with paying for only the resources used.
It’s cloud-based, and every screen is mobile. The app isn’t an abridged version of the desktop view.
Pricing: Pay Only for What You Use
“A stumbling block in evolving businesses is the traditional ERP pricing structure that charges per user license,” Rebello said. “Companies find the easy workaround by sharing user IDs, but all this does is limit productivity and mask any audit trail.”
Rebello’s advice is that companies wanting to grow their off-site construction seek an ERP that charges by the resources used (i.e., data stored), not by the seat. Contractors benefit because they can add a casual user, suppliers or customers as needed. And they can tier up or down based on services used, not based on an influx of seasonal help.
“Most construction companies hire temporary employees during high production months,” he said. “Whether they are in the field, on your service team or in the prefab shop, you can provide each of them with a temporary ID for accurately tracking the cost of labor and materials against your projections.”
With an average of 35% of all construction projects expected to have a major change, access to accurate data at every stage of a project is critical. A modern ERP provides all team members — no matter where they are — with access to up-to-date information and makes the entire operation more efficient.
“The construction industry is a mobile one, with decisions that need to be made outside of the office every day,” Rebello said. “It’s important that your ERP has the capability to provide you with all the data on every screen — and not just a watered-down version.”
Whether you build and install trusses, windows and doors, or custom cabinetry, you can compare standard and planned production costs to actual costs to quickly determine if your project is on budget.
Additionally, if the field team sees something that needs to change, they can attach a photo to the project that’s still in prefab. The shop can then react faster and make the necessary adjustments, which saves you time and even the potential headache and cost associated with rework.
Real-time visibility also applies to ERPs built with a customer relationship management system — not loosely integrated. When implemented, it enhances communication and efficiencies among the trades and empowers a firm to give customers access to the case information via a self-service portal.
“This is particularly useful for subcontractors who are doing service and warranty work on behalf of their customers,” Rebello said. “From prefabrication to field work, they can provide the status of projects in real time, which improves customer service and ultimately increases the likelihood of repeat work.”
“A modern ERP isn’t limiting,” Rebello said. “It is designed to allow contractors to expand operations seamlessly so they can pursue opportunities, especially those in the growing off-site construction sector. And when the environment changes, they easily adapt and continue to move forward.”
Read the full article on Construction Drive here