Data Alone Isn’t Enough To Reduce Costs In The Construction Industry

Construction hat on papers

Data is changing the construction industry for the better. But data alone Isn’t enough to reduce costs in the construction industry.

One of the benefits of working in the construction industry is that each job creates mountains of data. Every time you complete a project, you can look back at data points. Items such as material costs, equipment inventory, and material waste can help inform future projects. But while it’s impossible to deny how valuable this data can be to cut costs and maximise efficiency, it’s useless without a way to make sense of it.

Many in the construction industry don’t know what to do with this data. Sure, they know that their last few projects have all gone over budget and behind schedule. They’re powerless to pinpoint the exact reasons why or how to fix it. Business intelligence provides a simple and easy way to sort through these mountains of data, analyse it, and present it clearly and concisely to help the company make intelligent business decisions.

Construction companies invested in business technology have reaped great rewards, using BI to control costs, optimise efficiency, and manage their projects. Even more in the construction industry are preparing to jump on board with business intelligence. McKinsey’s 2020 report The Next Normal in Construction shows that 71% of construction companies believe the winning moves in the future construction-industry ecosystem will prioritise digital skills and make data-driven decisions.

How Business Intelligence Helps Cut Costs

Using business intelligence to make data-driven decisions can yield many benefits to construction companies willing to invest. But how exactly does BI help companies cut costs? Here are a few of the ways construction companies can leverage business intelligence to reduce spending:

Track spending throughout the project

Margins for a construction project often land between 2-3%, making controlling spending more important than ever to ensure a profit. This requires ongoing cost and performance analysis to compare actual costs to budgeted costs and make cuts where needed. For example, labour cost reports can help you track expenses such as material waste and remedial work across projects. These reports can show you whether or not these costs are inflated, allowing you to make the necessary changes to rein in spending.

Prepare accurate estimates and bids

Often the deciding factor in whether or not you land a project depends on the accuracy of your bid. If you’re in a low-bid situation for a government contract, you need to ensure that your bid is low enough to win the deal but high enough to accurately cover the project’s cost. Instead of using your best guess to create an estimate, business intelligence can help you utilise the data from similar projects to make an accurate bid. This is especially helpful in situations where you’re forced to come up with a bid at the last minute.

Uncover inefficiencies

One of the most significant ways to cut costs in construction is to uncover and eliminate inefficiencies. These minor inefficiencies can add up to significant expenses that evaporate your profit from defective materials to improper collaboration. Business intelligence helps you sift through the data and spot what’s holding your project back. For example, these data reports can show if you’re dealing with suppliers with a high rate of defective materials. It also allows you to share the information throughout the company and switch to a more reliable supplier.

Improve collaboration

Business intelligence can keep you informed on whether or not your project is ahead of or behind schedule. If you’re running behind, you can use the status reports on field logs to analyse patterns and reveal where the delays are. You can then share this data with everyone on the team, including those working in the field. When everyone has access to the data, you eliminate scheduling inefficiencies and improve communications about changes. This improvement in communication allows field managers to make the necessary adjustments to avoid costly delays.

Set goals and track progress

It’s not enough to wait until the end of a project to look back at the data and analyse what went wrong. It would help if you had a clear idea of your goals for each project and tracked your progress along the way. Business intelligence will give crew managers a daily report to show them where they are in relation to the budget or schedule. This can alert them instantly to whether or not they’re meeting the benchmarks they’ve set for themselves. What if projects are consistently running behind schedule. You can either use the data reports to identify what’s slowing you down, or you can adjust your benchmarks for the timeline of future projects.

Mitigate risks

Risk is unavoidable in the construction industry. Factors like cost overruns, schedule delays, and even safety issues can all run you behind schedule and over budget. To truly cut costs, you have to mitigate risks as much as possible. This requires you to be proactive rather than reactive, which requires making data-driven decisions. With data reports from business intelligence, you can get a comprehensive picture of the risks. Then deal with them quickly and efficiently, and make adjustments to prevent them in the future.

Safety incidents are one of the most costly setbacks a construction project can have. OSHA fines for safety violations currently have a maximum penalty of $13,653 for serious violations. This can add a significant price tag to a project, not to mention the expenses in damages, delays, and increased insurance premiums. Business intelligence can help you monitor projects to identify common types of safety incidence and build proper safety programs.

When it comes to the construction industry, you can’t afford to make investments in business intelligence a part of your cost-reduction strategy. Trends show that every industry’s future lies in data analysis, and the construction industry is not immune from this. An investment in business intelligence is an investment in the future.