Construction companies and the challenges of their complex operations, especially when they engage in multiple disciplines, are not always well understood by ERP system and technology providers. Here are some recommendations and ideas for construction enterprises looking to use technology to run their business. You can build a connected business management infrastructure that serves all of your activities, and you can also take advantage of mobility and the cloud.
When you think of construction companies, what do you visualize? Complex projects in various stages of completion. Heavy equipment excavating sites or demolishing decrepit buildings. Cranes looming over neighborhoods and moving large loads. People with helmets, goggles, and ear plugs performing daredevil tasks that call for outstanding physical stamina, perfect planning, and high tolerance for risk.
Those observations may all be accurate, but what you see is only a small part of what goes on in a construction enterprise. These companies compete aggressively for a limited number of projects, enduring complicated quoting and bidding processes to provide quotes that include generally slim margins. When they win a project, they have to pull off the improbable stunt of having all the right resources and materials at exactly the time they are needed, so they can execute in line with their contracts and sustain the profitability of the business.
Need for control and manageable complexity in construction
Many of the larger construction companies, especially those bidding on public-sector projects, commit to fixed-price contracts, where they alone run the risk of cost overruns. Contracts may provide incentives for completing a project early, but they often include severe financial penalties for finishing late. Especially on complex projects that take years, the likelihood of delays and cost overruns is quite high. Some of them, such as resource costs, are at least somewhat within a company’s control. Others, including weather and “acts of God,” are not.
Construction companies often function in a very complex business model. In addition to building projects, they provide engineering services, serve as subcontractors for other companies, and perform projects jointly by partnering with one or two companies. They may also manufacture materials and architectural elements such as pre-cast concrete components, erosion control products, prefab sections of walls or buildings, and others.
As happens in other industries, construction companies either grow organically or through acquisition. When they compete for projects outside of their region or country, they often need to involve subcontractors, thereby increasing the challenges of quality management and cost control.
Limitations of traditional construction technology
Business management software has not always served construction companies well. A criticism we sometimes hear from people in the construction industry is that ERP systems often provide too many capabilities they don’t require, without delivering all the functionalities they need. For some construction companies, implementing an ERP system includes extensive customization. As a consequence, system maintenance and upgrades become complicated and expensive.
When companies make acquisitions, they may become owners of business systems that are not always easy to integrate with their own. Technology may effectively serve company leadership, finance, sales, marketing, and human resources, but not help much the project managers working on sites.
Over the years, we and our partners have assisted many construction companies in creating a business management infrastructure that fits their business model, projects, and growth outlook. These include such leading organizations as Altez Group in Belgium, Beton 6 in Vietnam, Groupe Segex in France, Performance Contracting Group in the U.S., and Turner Construction in India.
In our experience, what often works best for construction companies is to use a proven, reliable, flexible ERP solution to support the essential functions of the business, such as finance management, with only minimal customization. Add to that solid, extensible industry-specific software that can facilitate bidding and quoting, project management, contract and subcontract management, planning, resource management, and other tasks in the business.
Building a connected business infrastructure
If you choose the technology that best fits your organization and complete a successful deployment of such an integrated ERP solution, you may already own almost all of the capabilities you need, and customizations can be minimal. If your new business management solution encompasses all business activities, it also serves as the single resource for all business information, available to decision-makers across the company.
Your vendor should be able to help you link stand-alone business systems to the ERP system and transfer data from existing systems into the new solution. Sound solutions and best practices for integration and data migration are readily available, as discussed in other blog posts.
If your enterprise delivers construction projects and also manufactures building components or materials, your ERP system should be able to support all of these lines of business. For example, Advanced Project Management from To-Increase supports both construction and manufacturing projects—companies can run both types of projects, managing resources, costs, project milestones, performance, and customer service levels, in a single tool.
Our Enterprise Asset Management helps businesses operate and maintain their own or their customers’ facilities, plants, equipment, and fleets, no matter whether they are construction, manufacturing, or professional service companies. To-Increase Visual Project Planning enables managers in construction and manufacturing enterprises to practice best resource efficiency and cost control.
Putting mobility and the cloud to work
Almost everybody carries a mobile device today. Smartphones and tablets are probably the most common. Imagine how effective site management could be if mobility could serve your projects. Project managers on construction sites could use their mobile phones for more than calls and text messages. If they had access to information and capabilities from the ERP system, they could review contract information, resource updates, project milestones, and other important detail right where they are, informing a planning decision or conversation. In turn, they could also record information and make sure company executives know the latest regarding project performance, subcontractor quality, bottlenecks to be addressed, new risks and challenges, and completed milestones. The technicians who keep equipment and facilities in perfect operating condition could also use their mobile devices to review asset histories, order parts and materials, schedule maintenance services, and record their time and expenses. To-Increase is providing many of these mobile capabilities already, with more to come soon.
As you think about the technologies that best fit your company, you also want to leave a door open for considering a variety of deployment models. On-premise implementations still work well for many companies, but especially those construction firms active across multiple regions and engaging with many subcontractors should think about taking advantage of the cloud.
Easy availability of the ERP solution for all users anywhere, automatic software updates, and low-overhead IT administration can be of great value in enabling an efficient, distributed enterprise. Some companies also find it makes good business sense to follow a hybrid deployment practice, where the ERP system is on-premise and industry-specific capabilities are in the cloud. Your technology provider should be able to make sound recommendations for the most effective deployment, given your company’s needs and growth expectations.
If you’d like to learn more about our suite of construction ERP solutions, get in touch with me.
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