Posted: March 21, 2018
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If the construction industry is anything—it’s consistent. For roughly 20 straight years, the industry has racked up the “least improved” award for having the lowest annual productivity gains globally of any industry. This means construction is still way less productive now than it was in 1995, according to a 2017 McKinsey Global Institute (MGI) study.
The facts are pretty straightforward. The global average for the value-added per hour has inched up by 1% a year in the past 20 years—about one-quarter the growth rate of manufacturing. In the U.S. alone, construction productivity has steadily declined since 1968 while other sectors have seen productivity grow by 10 to 15 times.
What’s fueling this unfortunate trend? McKinsey traces some of this to a productivity boom in the 1990s that fizzled and the 2007-2009 economic downturn. Other factors include everything from project complexity to a skilled labor shortage to under-investment in technology and digitization. There’s also the fact that most contractors have difficulty planning ahead. This is especially true if they are dependent on erratic government funding for projects.
The answer? Many experts point to technology, aka digitization, as the linchpin when it comes to improving construction productivity. However, investing in digital technologies and advanced automation is also a huge stumbling block for many contractors—including small firms where profit margins remain extremely tight.
In fact, the U.S. construction industry has only invested 1.5% of value-added technology, compared with 3.3% in manufacturing, and an overall average in the economy of 3.6%. As a result, tackling the root causes of poor productivity becomes a vicious cycle where contractors routinely under-spend on technology by up to 70 percent.
What’s Holding You Back?
With contractors routinely blowing their schedule by 20 percent and their budget by 80 percent, new digital tech promises to boost productivity by as much as 60 percent. But where do you begin? Starting small is a great way to turn around productivity. Don’t attempt to boil the ocean with big, disruptive tech. For example, contractors can start by selecting, implementing, and training staff on software and tools that track all of the variables of a construction project—from takeoff to estimating to bidding.
When contractors have digital-level control over construction input, costs, processes, and relationships, they are more effective in using technology to complete day-to-day tasks. Using software over spreadsheets for takeoff, estimating, bidding, accounting, and project management means contractors can immediately capitalize on efficiencies. It is also important for contractors to look for integrated software solutions to step up productivity.
Once contractors have mastered the digital basics, they can begin to consider more advanced, whiz-bang technology like 3D building information modeling (BIM), drones, and emerging 5D BIM platforms. Or even more futuristic tech like the Internet of Things to improve on-site monitoring of materials, labor, and equipment productivity. In addition, cloud-based technologies are expected to increase on-site productivity by as much as 50 percent.
Tide is Poised to Turn
No doubt, playing catch-up with productivity can be a steep hill to climb. U.S. productivity will have to jump 44% over the next half-century to get anywhere near past rates of economic growth, according to McKinsey. It would be an improvement to see even a 2% increase in annual productivity growth. McKinsey suggests this can be achieved if the industry is willing to invest in retooling an aging workforce or training a younger generation on the latest equipment and digital tools. They even go as far as to suggest companies invest in establishing innovation officers.
The good news is that interest is growing when it comes to adopting new digital technologies to address productivity issues. A recent McKinsey survey noted that 44% of respondents in the construction industry have adopted some type of digital technologies—this is expected to reach 70 percent by 2020.
By adding more digital tools and getting stronger buy-in from the field, contractors are beginning to see productivity gains. When it comes to adopting tools, many estimators and project managers are already using takeoff and estimating software. With the addition of integrated bidding software, they can begin to more quickly fill their job pipeline.
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