The construction industry is a major driver in the world economy, employing nearly 180 million workers worldwide. From welders to manual laborers to supervisors and machine operators to engineers and architects, there’s no telling how many people are working in the construction industry at one point or another. Since construction is such a booming business industry all around the world, there is a lot of competition among businesses, and the ones most adaptable to change and what the customer wants are the most successful. However, that comes with its own set of difficulties and construction businesses struggle in order to meet their demands. Here are the top 6 things construction businesses struggle with that hold them back or impede their progress.
Shortage of Skilled Labor
According to the Associated General Contractors of America, 75% of construction businesses want to expand their payroll but 82% complain of unqualified recruits that they can’t hire. Fifty-three percent of respondents said that they weren’t able to hire construction professionals like supervisors, estimators and engineers. Though there are about 10 million people working in construction in the US, there is a shortage of skilled labor. Skill shortages are prevalent with carpenters, millwrights and electrical technicians.
Couple that with an ageing population around the world and an increasing interest towards software and tech-based jobs, and you have a skilled labor shortage on your hands.
This skilled labor shortage is currently and will continue to be a thorn in the side of construction businesses. The demand for a temporary construction workforce from contractors is increasing as their requirements for specific needs are limited to specific project stages. Not only will this force them to automate and/or outsource these kinds of jobs, but this will also make sure that the smaller construction businesses will either pivot to another business model or simply declare bankruptcy. However, by 2020, the construction sector is expected to contribute to 4.5 percent of the total employment, up from 3.9 percent in 2012.
Rising Costs of Raw Materials
Contractors have to bear the risk of cost changes for fixed price contracts and home construction. The cost of land and raw materials can change rapidly depending on the economy or the current political climate of the country or the region. The cost variations eat in to the margins that small construction companies rely on to keep themselves afloat. Construction businesses struggle with this and will continue to add infinitum.
Slow Invoicing and Payments
Small construction businesses specifically struggle with this problem of slow invoicing and payments. When their clients don’t pay on time or when they can’t get orders processed quickly, it forces them in to a corner. Cash flow depletion and working on credit isn’t really an option for them since they’re small players in the game. Hence, they need steady cash flow or their entire business goes kaput.
Project Performance
While opportunities in construction are growing around the world due to enormous construction projects going on, the complexities of these projects is also growing. While some of it is down to planning and efficiency, much of the complexity arises due to the implementation of better machines and more sophisticated technology capable of building stronger structures and longer lasting buildings.
Companies already operate under razor thin profit margins; hence a production surprise or a detour can eat in to their profits and render them insolvent if it gets bad enough. The 2015 KPMG Global Construction Survey found that more than half of all construction companies experienced a single or more underperforming projects in the previous year. This means, in layman’s terms, that the overall performance of construction projects around the world is abysmal. This is a real deal breaker for most companies when they hire a construction company. If they aren’t able to perform to expectations, there is a great chance of them switching to someone else. This is something that most construction businesses struggle with because a single bad project can mean your reputation takes a major hit.
Late Technology Adoption
In the 21st century, yesterday can be ten years ago. Technology advances so fast that you can’t even afford to blink. Something as complex as construction needs to move with the times in order to take advantage of the best technology available.
Digital technologies like hiring Virtual Construction Administrators who are more familiar with the digital work can help one business catch up with the other and leave it behind. These technologies aren’t just about increasing profits or efficiency, but they’re about introducing new advantages in to the company that can help their workers do their job better and to be safer while they’re doing that job.
These can include advanced GPS tracking of workers, drone reconnaissance of a construction site before, during and after a project, increased automation of heavy machinery and repetitive manual tasks such as contract approval.
While these investments in technology do yield profitable results down the road, most small businesses can’t afford them. Choosing to save the buck that will keep their company going for longer ironically leaves them behind.
Poor Productivity and Profitability
At the time, the barriers to the construction business aren’t very high, and that’s creating a very saturated marketplace that is wont to unemployment and frequent failure. The shrinking competition is eating in to the profit margins and constraining reinvestment in to new technology and business practices.
This has led to a productivity problem in the construction business. And since the number one priority in construction or any business is productivity, a real problem has begun to form in construction. Over the last fifty years, construction productivity has remained stagnant.
This has been blamed on a variety of issues, most of them whittling down to waiting for materials and equipment (according to the Construction Owners Association of America). Other productivity breaks are due to taking early breaks and lack of planning and traveling to the construction site.
While construction businesses struggle with a lot of issues that can cost them hundreds of thousands of dollars a year, this is common throughout the industry and embracing technology may be the answer to solving it.
For more information on how we can help with that by speeding up mundane, everyday tasks that impede workflow, contact us today.
Join the Conversation