The prices of construction materials such as concrete, steel, and lumber rose with the supply chain disruptions caused by the COVID-19 pandemic. And they have remained higher than usual due to increased post-pandemic demand for new construction, particularly commercial construction, and the impact of inflation. Volatile fuel prices and the higher labor costs caused by a scarcity of skilled labor have added to the financial strain on contractors.
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The Impact of Inflation on Construction
The interest rate hikes implemented to combat inflation have hit the industry particularly hard by increasing the cost of borrowing for construction projects, further narrowing already slim profit margins. At the same time, financial institutions have become more cautious, leading to tighter lending conditions and making it harder for companies to secure loans.
In the current economic environment, contractors are understandably looking for ways to increase operational efficiency and productivity, shorten construction timelines, improve the accuracy of their bids, and otherwise reduce costs and boost profitability to offset the impact of inflation. Increasingly, construction companies are turning to advanced technology for solutions.
Some companies have made significant progress in pursuit of these goals through the use of digital technologies, including artificial intelligence. But many others are starting from scratch.
Enhanced Project Management and Efficiency
From a project management standpoint, Building Information Modeling (BIM) takes center stage. It allows for the creation of detailed 3D models of buildings, which facilitates better planning, design, and management while reducing errors, rework, and delays, all of which lead to cost savings.
Additionally, project management software tools such as Procore and PlanGrid streamline project management by improving communication, and facilitating real-time tracking of progress and sharing of documentation. The resulting workflow efficiencies can significantly reduce project costs.
Automation and Robotics
Companies that are using drones for site surveys, autonomous machinery for repetitive tasks, and robotic systems for bricklaying or concrete pouring are experiencing increases in productivity and reduction of labor costs. Onsite 3D printing of components or even entire buildings can reduce material waste, shorten construction time, and decrease labor costs. Such applications of technology can reduce operational costs and relieve human workers of repetitive or potentially dangerous tasks so they can focus on tasks that make better use of their skills and energy.
Cost Management and Procurement
AI and machine learning technologies analyze data to predict project costs more accurately, optimize procurement processes, and manage supply chains more effectively. This helps in minimizing cost overruns and in developing realistic budgets. Implementing blockchain technology for smart contracts ensures transparency and efficiency in transactions, which prevents disputes and reduces administrative costs. Companies benefit greatly from the resulting cash flow improvements.
Safety and Risk Management
Wearable devices monitor workers’ health and safety in real-time, preventing accidents and reducing insurance costs. Predictive analytics tools use historical data to forecast potential risks and hazards so that companies can be proactive in implementing measures to mitigate them.
Supply Chain Optimization
Technologies like RFID (radio frequency identification) and GPS (global positioning system) tracking both improve inventory management and logistics to ensure timely delivery of materials and reduce storage costs. RFID tags attached to materials provide real-time tracking information, allowing inventory levels to be monitored and inventory records updated automatically, without the risk of errors due to manual data entry. RFID tags also enable real-time tracking of equipment, ensuring that it is deployed and used efficiently, while GPS technology assists in coordinating the movement of materials and equipment on large construction sites, reducing congestion and improving workflow. Improved asset management through technology plays an important role in cost reduction.
Remote Collaboration
Virtual and Augmented Reality (VR/AR) facilitate remote collaboration, 3D immersive walkthroughs, and site inspections from anywhere in the world, and real-time problem-solving. For example, detailed and accurate virtual models can be explored virtually, providing a clear understanding of spatial relationships and design elements, which is crucial for remote teams. Teams can interact with the virtual model, make changes, and see the immediate impact of those changes, reducing the risk of costly errors.
Workers can access real-time data and instructions directly on-site through AR devices, such as smart glasses or mobile devices, improving productivity and reducing errors. AR enables remote experts to see what on-site workers are seeing through AR-enabled devices and provide real-time guidance and troubleshooting. Multiple stakeholders can view the same augmented reality feed, allowing for collaborative diagnostics and quicker decision-making when issues arise on-site. Eliminating travel costs is the tip of the iceberg in terms of the cost reductions and operational efficiencies gained through the use of virtual and augmented reality tools.
Worksite Monitoring
Surveillance drones and IoT sensors enable continuous monitoring of construction sites, ensuring compliance and efficiency without the need for constant physical presence.
By integrating these advanced technologies, construction companies can streamline operations, reduce costs, and enhance productivity, thereby improving profit margins and effectively combating the pressures of inflation.
Business Development
The technologies that increase operational efficiency also help streamline the process of putting together project proposals and quotes. With easy access to data and documents, detailed proposals can be generated much more easily, with much more accurate cost estimates than are possible without digital cost estimation tools.
Final Thoughts on Construction Tech Tools to Mitigate Inflation
Smaller companies may be concerned about the return on investing in advanced technologies. Such concerns are legitimate, because, with little practical experience of their own, it can be difficult to estimate the resulting improvements and cost savings. The ROI calculation for a technology investment takes into account the same factors as for any other major purchase, including the company’s business goals and objectives, initial and ongoing costs, productivity improvements, impact on quality and safety, potential cost savings, and revenue enhancements, the value of intangible benefits, and so on.
Companies without a technology track record of their own can use industry benchmarks or case studies from companies of comparable size to estimate potential gains. Data from industry reports and studies can also be helpful in validating assumptions and projections. Another option is to implement the technology on a smaller scale as a pilot project and measure its impact. Engaging with industry consultants or technology providers can also give a company insights and recommendations tailored to their specific business needs. The one thing even smaller construction companies cannot afford to do is delay thinking about introducing technology tools until they find themselves at a competitive disadvantage.
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