Supply Chain Transformation Cited As Biggest Productivity Opportunity For Billion Dollar Nz Construction Industry
A survey of Australian and New Zealand construction companies by industry analysts Frost & Sullivan has identified supply chain transformation and overcoming roadblocks as key future shifts for the billion-dollar sector as it builds stronger foundations post COVID-19.
Frost & Sullivan today released its survey findings in a whitepaper supported by construction payment management experts, Payapps, entitled Connecting the Construction Workplace of the Future: Digital Transformation & Collaboration in the Construction Industry.
The report details insights into challenges and opportunities facing the construction sector, a critical indicator of New Zealand’s economic health given its significant contribution to GDP. The findings were based on a survey of project and operation directors, engineering managers, IT managers, CTOs and CIOs across New Zealand as well as Australia and the UK.
Frost & Sullivan identified five future shifts likely to impact the construction workplace of the future in the NZ (and Australian) markets.
The top five shifts were:
- Supply chain transformation and overcoming roadblocks (55%)
- New materials (52%)
- Off-site construction (42%)
- Needs and requirements of employees (42%)
- Sustainability-driven changes (41%).
Frost & Sullivan found that construction firms continue to face significant challenges, including operating with a heavy dependence on manual labour, mechanical and outdated technology, and rigid operating and business models resulting in low productivity.
Those able to adapt faster and reduce their cost base are more likely to experience greater productivity.
Inherent factors to productivity stagnation include inadequate planning and scheduling leading to delays and backlogs; idle time spent waiting for materials and equipment; and lack of collaboration and communication between stakeholders leading to job fragmentation, inefficient contract approaches and disputes over claims.
Along with the aim of reducing operating costs, increasing competitiveness and reliability of operations, and income growth, 47% of organisations are looking to improve contractor relationships and outcomes through digital transformation. This, in turn, is leading to greater digital transformation in the industry with those leaning on technology are removing pain-points.
As one example, the analysts found mature construction companies are increasingly investing in the automation of back-office processes and generating a more positive return on investment by innovating what are traditionally complex, cumbersome, and manual tasks - such as the management of progress claims across the supply chain. For instance, 73% of the survey respondents for the Frost & Sullivan whitepaper are leveraging cloud computing software and services in 2021 for operational support.
Digital tools remain under utilised with around 30% of surveyed respondents using spreadsheets and similar applications for payment data management systems but cloud and software-as-a-service solutions, that provide payment options on a flexible basis, are becoming increasingly popular.
Speaking to the survey findings, Ravi Krishnaswamy, Senior VP at Frost & Sullivan says, “Digitisation will play a big role in the transformation of the construction sector with many companies still operating inefficient manual processes.
“There are a lot of strategies and plans, and one of the concepts that has gained a lot of ground in recent years is lean construction. This is the general concept of co-locating project participants, general contractor, designer, sub-contractors, in one single room - aka virtual platforms. This is clearly the way forward and is an obvious way to create value for the end user and customer.”
Krishnaswamy also highlights technology tools impacting the industry at large. “The industry is taking steps towards full autonomy as the likes of AR and IoT, autonomous machinery, prefab and 3D solutions, become mainstream. Drones are already being extensively used for monitoring - specifically for security and maintenance purposes. As we move forward, we’ll continue to see significant changes taking place, even with the next two to three years dictating how key stakeholders will utilise the likes of AI to advance operations.
“The inherently competitive nature of the construction industry and technological advancements in adjacent industries are expected to push the industry toward automated solutions by 2030. Although the path to machine and man coexisting requires work from both the company and technology side.”
Tony Simonsen, Chief Operating Officer of Payapps, says the findings by Frost & Sullivan demonstrate the construction sector is undergoing significant change to build stronger foundations for the future.
Simonsen says, “In the NZ market, the survey found the major influencing factors driving digital transformation in construction are the need to reduce operational costs, increase competitiveness and ensure their operations are reliable. Like all businesses, construction firms are seeking to achieve income growth but for those awarded contracts, improving contractor relationships and outcomes is vital as they move out of a COVID-19 environment and towards a more sustainable future.”
He says, “In construction, time is money, and solutions that allow for connectivity or a platform that promotes interoperability is a more cost-effective way forward. Easy integration of data that allows for data analytics is crucial to reduce the arduous nature of the process and performance management functions.”
The whitepaper also details that the introduction of cloud-based automated payment systems using cloud-based tools is helping construction industry players handle progress payments from a single interface.
Simonsen concludes, “Paying vendors on time is key to attracting top-notch sub-contractors to bid for projects and enabling project and accounts teams to streamline the management of payment claims, onsite, saving considerable time and money and freeing up staff to focus on higher value tasks.”