We are at an interesting convergence in the construction industry today. Projects are becoming more complex, as the need for sustainability and resiliency puts new requirements on projects. All this comes amid overarching labor shortages and ongoing supply-chain disruptions that are causing the construction industry to reconsider how to be more productive. Enter digital transformation, which is no longer a nice-to-have, it is a must-have on today’s construction projects.
I unpack some of the biggest trends facing the construction industry today in a discussion I had with Paul Connell, senior strategy and enablement consulting lead, Hexagon and Mark Mehta, senior solutions consultant, Hexagon. Let’s take a moment to explore a few of those topics from our candid conversation.
The Labor Shortage
According to ABC (Associated Builders and Contractors), the construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet the demand for labor. That is half a million workers. Without question, that is a terrifying number for the industry.
Connell stresses, “Labor shortages are absolutely one of the biggest issues we have been dealing with in construction for quite a long time and it is one of those things that effects our ability to execute effectively, and that gap is huge, especially when you get into specialized industries like oil and gas where a lot of these workers need very specific technical skills in order to complete the projects.”
Certainly, lacking the right skilled labor is irritating at best, but it is financially damaging at worst. In many cases, the shortage is slowing things down and it is leading to cost overruns on a lot of construction projects.
How can we solve this problem? Digital transformation. It is not about limiting the number of people or reducing the headcount, but rather it is about making the most use of the people we do have and using their skills effectively.
“Right now, what we need are workers with the right technical skills who can use these systems effectively,” says Connell. “As the industry continues to evolve with digital transformation, it is really crucial that we focus on getting that next generation in to fill in the gap and that we are making the most of these technologies.”
The labor shortage is probably something that is not going to go away overnight, but if companies are willing to invest in some of these digital tools and training, they can at least start to alleviate some of that pressure.
Labor Productivity
We have all heard these horrifying statistics from McKinsey & Company. Globally, the construction sector labor productivity growth averaged 1% a year over the past two decades compared with 2.8% for the total world economy and 3.6% for manufacturing. That is bad news. The good news is that we know about it and now we can take some action and do something about it.
Mehta suggests, “One of the things we can do about it is to focus on those people in the field and give them everything they need on a silver platter—and that silver platter is a work package that has all the information they need and just the information they need so they don’t have to go digging for information.”
He shares with me how he was on a project where people came into his office with an iPad and said, “Hey, I like what you do with a 3D model, can you put it on my iPad?”
Having an up-to-date model is key. Mehta says it is all about the data and with that data we need it to be accurate, consistent, and up to date.
The Supply Chain
Deloitte suggests material shortages, price fluctuations, and delays are all things that can increase project costs by up to 30% and that is huge depending on the size of a project.
One way to alleviate this is global sourcing because it gives us access to a broader range of materials, components, and equipment at competitive prices. But it also makes us vulnerable because now we are exposed to geopolitical issues, transportation bottlenecks, weather events, port strikes, and so many other things, according to Connell.
To manage some of these risks, some companies are converting back to a model of stockpiling materials on site, rather than just-in-time delivery.
Digital tools play an essential role here, beyond things like predictive analytics. That is great, but what we also see are these supply-chain visibility platforms that help track shipments in real time, according to Connell. We also have tools to help optimize inventory levels. We have tools to help optimize the procurement decision-making process, he explains.
The Rise of Sustainability and Project Complexity
With the rise of natural weather events and the need for greater sustainability and resiliency, alongside new regulations and owner expectations, today’s projects are more complex and more intricately designed than ever before. This growing complexity is often a challenge for many companies. KPMG has a report that says 70% of construction projects are delivered late or over budget.
Digital tools, BIM (building information modeling), AWP (advanced work packaging) are all proving invaluable. The technologies improve coordination, enhance the decision-making process, and give the right people access to the right data. It gives a more structured approach to planning and execution.
“I was on a project several years ago where we were able to strip off about 25% off the initial estimate of the project,” says Connell. “It was pretty incredible how we were able to do that. And we were able to do that because of some of the digital technologies that we brought onto the project.”
We have these cloud-based platforms. We have data ecosystems where now all the data is living in a single source of truth. That is essential when you are trying to collaborate—especially across multiple parts of the world.
At the end of the day, as Mehta tells me, “Digitalization isn’t just a good idea; it is something that is required now to know where we are at.”
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