A recent Construction Industry News (CIN) article stated there were 3 key challenges facing the UK construction industry in 2019.
Challenge #1: Poor Productivity and Profitability
The construction industry is saturated and competition is fierce. And where competition is high, price becomes a key differentiator, driving down project profit margins.
Challenge #2: Project Performance
Many firms have made great strides in improving on the delivery of projects with tighter supply chains and highly negotiated subcontractor agreements. According to Construction Industry News however project management on the whole still lacks transparency, and gaps in policies, procedures and controls are resulting in small, rudimentary tasks becoming barriers to progress.
Challenge 3#: Access to Skilled Labour
An ageing UK workforce and little interest in careers in construction amongst millennials’ means that fewer skilled resources are likely to be readily available in the future and is therefore likely to drive up the cost of resourcing a project.
Restrictions on the freedom of movement caused by Brexit will only serve to exacerbate this issue. As this is a geopolitical argument however that will be the subject of ongoing discussion across the EU I will not even attempt to comment in detail as part of this blog. Although I do make some observations below.
None of these challenges will surprise industry pundits because they are basically the same challenges being faced since the industry high in 2016.
The other challenge we at Yordex see that is not however mentioned by Construction Industry News, is the negative impact that ‘tighter supply chains and highly negotiated subcontractor agreements’ can have on subcontractor relationships.
Good subcontractors are hard to find, and even harder to retain when in high demand, as they are now. So firms need to balance the need for reduced costs against the need for a (currently diminishing) skilled workforce delivering quality work. In order to do this firms need to involve them in the process, ensuring they get paid the right amount at the right time, first time and that cost of change disputes are kept to a minimum.
What Is Needed?
According to Construction Industry News “technology should be playing a more significant role in the day to day operation of construction firms”. Yet evidence shows that despite some improvements in digital adoption since 2016 the industry is still largely antiquated in the area of project management and streamlined communications.
The catch-22 is of course that, the challenges being faced now reduce the likelihood that firms can afford to invest in the technology needed to address them. A situation that is not helped by the high cost and long timescales associated with implementing or updating traditional supply chain management, ERP and Finance systems.
Poor Project Productivity, Performance & Profitability
According to Construction Industry News, poor productivity comes from the fact that existing processes are inefficient. In many cases still revolving around paper, emails and legacy back-office systems. Making it impossible for the project team on the ground to make decisions or gain approvals quickly based on having a real time view of spend versus budget and understanding if and how proposed changes will impact cash flow and profitability.
The situation is exacerbated because budgets allocated to a project are often out of date before the project has begun, there is no way to re-align the two quickly and the impact of further change is not understood until well after the event. Moving performance management to a real time rather than post-event activity is therefore an essential part of maximising project profitability.
How Yordex Helps
Yordex, provides the ability to monitor and manage project profitability and productivity in real time. Helping project managers and budget holders to see the impact of spend and spend changes versus budget across the project lifecycle means potential problems can be flagged and early warnings given. Thereby reducing the likelihood of preventable challenges that can cause significant delays and cost increases. And where additional costs are necessary to identify how, where and when they can be mitigated
Our real-time communications portal streamlines online exchanges between all parties in the process. For example, project managers can raise, have approved and send orders to subcontractors and confirm completion of subcontractor work directly from their phone or tablet. In the same way, finance and budget holders can have an up to date overview of all the work that is in the pipeline and the associated costs.
Approvers, budget holders, project managers, finance teams and contractors, collaborating together in order to tackle spend and performance concerns. Something that cannot be achieved using widely used technologies such as email, EDI, ERP systems or PO and Invoice processing networks without significant cost and time commitments.
Having said the above, Yordex does not seek to replace but to complement existing systems. We provide the ability to bring what are currently back office processes to where they should be, in the hands of those people responsible for delivering a project on time and under budget. At a fraction of the time and cost of upgrading current IT systems.
Low Risk Solution
Yordex is quick to implement and is priced to be affordable to all sizes of company. Our ‘per use’ price model is similar to paying for your utilities at home. Our contracts do not require a long term contractual commitment nor do they include onerous cancellation terms.
As a result, Yordex represents a low-risk solution for firms with tight margins and uncertain [spending plan ] (https://yordex.com/blog/a-new-approach-to-spend-management)that can address the current reluctance to invest in system improvements.
Access to Skilled Labour
Access to skilled labour is difficult to fix in the short-term and is not something for which Yordex has a solution. The growth of new technologies such as ‘Modular’ or ‘Offsite’ housing, pre-built in factories, is one potential approach proposed to address this challenge. Nicky Gavron, former deputy mayor of London and long-time advocate for modular housing believes that a factory environment is more likely to attract workers and apprentices, compared to working on a construction site. A workplace she describes as “a confusing and harsh environment”.
Modular technology is also quick and cost-effective to assemble with some estimates putting completion rates at 60 per cent quicker than traditional construction. She also believes however that it (modular property) will only be used more widely “if we can crack the issue of scale”. A change she believes is dependent on strong political leadership from all spheres of government acting collaboratively to coordinate policy and resources and provide continuity of demand. So, we would suggest, not a solution that the industry can buy into in the short term.
Using the latest digital technology Yordex offers an affordable, low risk and innovative SaaS platform that can enable construction firms to:
deliver projects based on a clear, real-time, understanding of spend and budgets across the lifecycle of the project.
ensure strong subcontractor and supplier relationships by allowing real-time collaboration between project managers, spend approvers, suppliers and contractors.
use streamlined and transparent communications so that subcontractors and suppliers can be paid correctly and on time for the goods and services provided.
Enabling firms to meet the challenges of project productivity and performance management in order to increase profitability.
Some large-scale developers are testing future alternative building strategies, such as modular housing, that could address the growing skills shortage. Considering the focus on Brexit however, there is almost certainly a long way to go to deliver the necessary political support to make such initiatives mainstream. In the interim, the industry as a whole will need to put in place incentives to get more young people interested in a career in construction. One thread of which will be to allow them to use up to date tools, such as their mobile devices as part of their day to day activities.