With South Africa’s construction sector under growing pressure as a result of slow government infrastructure spending and a tightening economy, construction companies should be looking at ways to streamline their business processes, improve cash flow management and tighten risk management. Those that sharpen internal processes and systems today will be best positioned for an upswing in government and private sector investment in the years to come.
The local industry is facing a difficult period, with at least five major construction companies going into bankruptcy protection, liquidation or business rescue in the past year. The sector faces numerous challenges – poor economic growth, shrinking margins, skills shortages, rising resource and labour costs – which means it’s under pressure to start innovating.
Investment in tech is behind the curve
The challenges the industry faces are compound by the fact that many construction groups have not digitised operations such as cost-consulting. This means they lack visibility into – and control over – the many variables, changes, people and equipment involved in any construction project.
South African construction companies should be looking for ways to use technology to drive higher productivity, achieve cost-savings and improve project management to weather a tumultuous time for the industry. However, the lean years following the 2010 World Cup have seen IT spending in the construction industry stagnate, despite the accelerating pace of innovation around the world.
For example, adoption of wearable, 3D printing, driver less heavy vehicles, drones and building information modelling is rising in the global construction sector. To take full advantage of these advanced technologies, many local construction companies will first need to modernize their core back-office systems.
They should be looking towards tried and tested solutions for estimating, project control, enterprise accounting and operational costing. These solutions will enable them to drive down the costs of maintaining legacy applications, help them to become more agile and give them clearer real-time visibility into business performance.
Breaking down silos
Construction performance and progress cannot be monitored on financial data alone; engineering information is just as critical. Engineering control includes generating and managing allowable and actual quantities of resources, wastage, man-hours of labour, production of equipment and time for construction activities.
Without digitization, an organisation has no clear indication of the status of the contract because it doesn’t have real-time visibility into these factors. Today’s business solutions can break down the silos, enabling estimators and accountants to produce real time-reporting, and yet continue to work in the language that is meaningful to them.
Integrated back-office systems spanning procurement, project control, cost estimation, sub-contractor management and accounting give construction companies one source and view of the truth, enabling them to manage an entire project with real-time visibility into costs and performance.
Using this data can help construction firms make better strategic and operational decisions. Data-driven insights can enable them to better manage cash flow and project risks, so they can better predict and mitigate payment delays, rising costs and other challenges. It can also help companies to drive higher levels of profitability through better project planning.
Building a foundation for the future
Looking to the future, a robust business solution is also a foundation upon which construction companies can layer drones, robots, Internet of Things (IoT) sensors, artificial intelligence (AI) and other advanced digital technologies. Such solutions enable construction companies to manage and analyse big data produced by sensors, devices and workers so they can drive productivity and innovation – AI, for example, can help them rapidly process the data to find key insights.
Construction companies should embrace digital transformation to drive higher productivity, improve efficiency and gain a competitive advantage. Transforming their core business with a proven solution will help them prepare for the future, with a possibility that infrastructure spending will show signs of life again after the national elections in May. Now is the time to lay the foundation for the next wave of growth.