Jul 05, 2020The construction industry is all about getting things done in the most tangible way. From laying a simple foundation for a new house to erecting architectural marvels that seem to challenge the laws of physics, every day on a construction site ends with visible, measurable progress toward a defined goal.
But who defines that goal? Who decides what needs to be done, when, and by whom? Who makes sure equipment and consumables are at the site when needed, and are then returned promptly when used? Who crunches numbers to make sure costs are in line? That “who” is the collective—and often unheralded—internal operations staff. They are the back office, yard and warehouse teams who plan, manage, monitor and analyze every project from start to finish. Without them, no project could even be undertaken, much less successfully completed.
Yet too many construction companies fail to take full advantage of the talented staff who keep things running smoothly and profitably. As a result, global construction sector labor-productivity growth averaged 1 percent a year during the past two decades, compared with 2.8 percent for the total world economy and 3.6 percent for manufacturing. Less than 25 percent of construction firms matched the productivity growth achieved in the overall economies in which they work throughout the past decade, according to a McKinsey analysis.
Part of this shortfall can probably be explained by the nature of the construction industry. Historically, the industry grew up from tradespeople who knew how to build—and build well—but were not educated about business or process. They relied on antiquated spreadsheets and back-of-the-envelope methods and were reluctant to adopt new technologies like cloud computing, RFID tracking, Bluetooth Low Energy (BLE) and interconnectivity, at the expense of their companies’ bottom lines.
Fortunately, that attitude is changing dramatically. The new generation of construction operators have a voracious appetite for technology—we talk to very few younger operators who are technology-averse—and they not only grasp the fundamentals of operating an efficient business but are educated in business management and know the importance of their internal operations team in making the business maximally profitable. They understand that a connected business is a profitable business. To this new generation of construction industry leaders looking to optimize their internal operations, I suggest a four-step process:
Supply Chain Analysis
The supply chain is more than just buying an item from a vendor. It’s also the internal movement of equipment and consumables to worksites. So look at everything that moves, whether procuring from outside vendors or in-house transfers, and make sure that no step or item is omitted. Consider the whole loop from needing something to acquiring it and then deploying…