Technology

Technology to Get Ahead of Construction Materials and Supply-Chain Challenges

Modernization is relieving the materials burden for today’s leading contractors.
By Rachel Blair Winkler
May 17, 2022
Topics
Technology

Over the course of the past couple of years now, the global pandemic has tried its best to throw a wrench into the works for construction companies’ business operations. From delayed projects and tightening profit margins to pivoting on how teams work and deepening labor shortages, contractors may have felt like they had targets on their backs. Two key, connected hurdles they have had to endure are rising materials costs and supply chain challenges.

Even before the pandemic, the construction industry was already seeing rising materials prices and higher demands that put pressure on materials providers. Today, even as it seems like the worst of the pandemic may be waning, those materials and supply chain challenges remain. And, Russia’s March 2022 invasion of Ukraine, along with the subsequent economic sanctions imposed and supply chain strains they could create, mean the industry could continue to see rising prices and reduced supplies for oil, gas, metals, timber and much more.

So what can contractors do to try and ease the burden these materials and supply chain challenges add to already complex and challenging construction projects? The answer lies with technology—specifically leveraging a connected, cloud-based construction management suite that replaces outdated, legacy workflows and redefines how construction work is done. More and more, these tech transformations are becoming necessary moves, allowing contractors to be more agile and responsive in real time, streamline materials management and other operational processes, and unlock cost savings that offset potential profit fade that materials and supply challenges can bring.

A Closer Look at Key Materials and Supply Chain Challenges

For commercial and residential general contractors, lumber and glass are often among the most in-demand materials. Lumber costs are on the rise again after prices dropped slightly over the summer of 2021. Quality wood is not only expensive but hard to come by as well, and delays in shipping during the pandemic have meant less lumber to work with. Glass, despite being common, tends to be among the pricier materials used. It is also hard to work with, as certain types of glass are very delicate, requiring specialized workers to handle.

COVID-19 and weather-related work stoppages or slowdowns in steel mills, cement and asphalt plants, manufacturing facilities, and more, have also affected materials production chains used in commercial, heavy highway, utility and civil projects across the globe. Some contractors working in these spaces have tried to stockpile materials—especially in the United States where highly-anticipated project starts from the $1 trillion-plus Bipartisan Infrastructure Law—is expected to put even more pressure on supply chains.

Specialty contractors are also closely watching their materials usage amid cost increases. Steel, aluminum and other metals are key to piping and ductwork and consistently in demand. Copper, meanwhile, is essential to everything from electrical wiring to plumbing. Already considered a semi-precious metal, contractors have had to keep copper under lock and key thanks to increases in theft from jobsites.

Fuel, too, is being closely watched as oil refineries halted some production during the pandemic with less demand. As transportation—and petroleum production—ramps back up, the Russia-Ukraine war created a new challenge that could mean wildly fluctuating gas prices in the months ahead. Oil jumped to well over $100 per barrel in the early days of the invasion and global sanctions aimed at Russian oil supplies, though they eased to below $100 in late-March trading, have climbed again to around $106 per barrel in mid-April. For contractors managing large equipment or transportation fleets, this could ding their bottom lines.

Without access to some Russian resources, there is more demand to find these materials from other countries or boost domestic production—all while incurring additional costs. When added to supply chain issues that already included slowed manufacturing, delayed shipping, backlogged orders and more, there’s an expectation that contractors are going to have to incur more costs to get the materials they need. When combined with a rising annual inflation rate (up to a 13-year high of 5.4% in Sept. 2021) and ongoing construction labor shortages, these issues are increasing the price tags of construction projects.

Additional Challenges

Rising prices and critical supply chain issues have also led to an uptick in the theft of construction materials at jobsites. As noted above, everything from copper to steel to lumber has the potential to be pilfered if it is not under lock and key during off-hours on construction sites. Contractors are also seeing a slight uptick in inside theft from employees, subcontractors and others.

With or without insurance coverage in the picture, theft is worth preventing. Losing essential assets or materials could throw off multiple parties’ schedules and sabotage the timeline or ultimate success of construction projects. Cameras, mobile apps, geofencing technology, materials tracking devices, alarm systems and delivery scheduling tools are all examples of how construction companies are using modern technology to keep their construction materials safe.

Misuse of materials, construction re-work, weather-related destruction and other materials waste issues also cost contractors tens of millions of dollars each year in potential profit. And the volume of annual construction waste is expected to double by 2025 to nearly 2.2 billion tons worldwide, according to a 2018 report from Transparency Market Research, leading to a greater push for closer materials tracking and recycling programs in construction.

Then there is mismanagement of materials processes, which can add even more avoidable costs to contractors’ balance sheets. This includes everything from poor estimates and procurement/pricing mistakes made during pre-bid processes, to on-project procurement issues, to missed vendor payments due to lack of data or missing paperwork.

With significant competition for work on the market, many contractors are looking to other areas to cut costs rather than raising contract estimates too much. The challenge though, is that without a solid materials procurement, usage and tracking strategy in place, any materials misstep could eat further into contractors’ already razor-thin profit margins.

Technology to the Rescue

Though there’s no crystal ball for predicting tomorrow’s materials costs, and shortages and supply chain issues will continue as demand spikes, there is a pathway to ease contractors’ materials burden. It is modernization. Thanks to today’s cutting-edge technologies, contractors have access to the real-time construction management solutions they need to create a truly connected construction experience.

Contractors that have already modernized by digitizing data, moving to the cloud and deploying connected construction management suites are finding that they can adapt to challenges in real time, better understand how their projects are faring, automate many once-cumbersome workflows and source better materials at the right costs to improve their estimates, and ultimate their projects’ quality and profitability.

The problem though, is that there are still many contractors that have yet to modernize, instead relying on legacy processes and older, disconnected software packages that are not equipped with the right real-time tools and functionality they need. In a recent survey produced by Dodge Data & Analytics and Trimble Viewpoint, many contractors were still using some form of manual processes that included spreadsheets and paper. In fact, more than half of contractors noted spreadsheets still accounted for at least half of their data collection processes. And, while spreadsheets certainly play a valuable role in the construction process, some 13% of general contractors and 9% of specialty contractors reported they relied solely on spreadsheets for all of their operational and financial workflows.

These leave the door wide open to errors, misinformation and delayed information, meaning that contractors may not be building the most reliable estimates, they are hard-pressed to achieve accurate materials counts in real time, and they may not be able to effectively track materials usage and waste—while there’s still time to make course corrections or plan ahead.

A connected, cloud-based construction management suite, on the other hand, puts contractors in the driver’s seat, with scalable solutions to better manage today’s projects and stay ahead of the materials management curve. Not only do they provide real-time tracking capabilities, they can sync real-time data on materials purchasing, usage, inventory, and more directly back to project job costing capabilities and reporting. Other materials benefits of connected construction suites allow contractors to:

  • Track raw materials inventories and easily manage inter-company sales and inter-plant transfers;
  • Track inventory and costs across multiple locations, with automatic updates recorded to accounting;
  • Automate materials reordering;
  • Easily process materials tickets, with ability to upload from scale ticketing systems;
  • Seamlessly track quoted, ordered and actual units sold;
  • Automatically generate and track surcharges for fuel and other fees;
  • Track owned equipment and independent haulers; and
  • Create real-time reports and dashboards to inform project teams and materials managers.

Quicker Access, Better Pricing and More Reliable Materials Workflows

Modern, connected construction management suites also provide contractors with the best options for materials pricing and sourcing. Leveraging the cloud and connected data, contractors can instantly access real-time tools that provides product and pricing information and allows contractors to electronically connect with suppliers for instant pricing and quotes to build faster, more accurate submittal packages.

Once a project is underway, materials tickets can be captured in the field with mobile devices and assigned types or classifications, linked to specific jobs and more. Enabled workflows then reconcile these with third-party hauling or vendor materials payable. This data instantly connects back to ERP level job costing, accounting and billing functions to speed up procurement, save administrative time and costs and increase cash flow.

When working with subcontractors, connected construction solutions can streamline procure to pay processes as well. Subcontractors can easily submit pay applications and compliance documents through online portals or kiosks. Project managers are instantly alerted and can review and approve invoices. The subcontractors can use their online portals to check the status of invoices, payments, update compliance information and more.

Staying on top of materials, whether prices rise and supply chains struggle, or prices fall and materials are in long supply, will help contractors gain a competitive edge over their competition. When a contractor can show owners its house is in order and run a tight ship to control costs, they are much more likely to develop long-term relationships and win more work.

by Rachel Blair Winkler
About the author: Rachel Blair Winkler is the Vice President & General Manager of the construction-specific finance and human capital management (ERP) business at Trimble Viewpoint. Trimble Viewpoint’s SaaS solutions help contractors around the world operate more efficiently, safely, sustainably and predictably. She has roughly two decades of product development, go-to-market and management experience working in the transportation, geospatial and construction industries.

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