Benefits of Using ERP In The Construction Industry – Reviewing The Pros and Cons Of An ERP System

What is an ERP system?

ERP (Enterprise Resource Planning) software is a solution that integrates and manages core business processes within a single platform.  

Processes managed through an ERP system includes: 

• Finances  
• Materials 
• Assets 
• Human resources 
• Customer relationship management 

 

ERP connects all of your teams across your business, and provides one view to all stakeholders across the business in real-time. 

The ERP market is growing and is projected to reach $117.9 billion by 2030, driven by the adoption of cloud and mobile applications. Adoption is also growing across the fragmented construction industry to help increase efficiency and protect profit margins.    

What Is ERP In The Construction Industry? 

The construction industry has traditionally been slow to adopt new technologies, but ERP platforms are particularly suited to the construction industry as construction is a fragmented process which combines lots of elements, teams and processes. 

ERP has grown in popularity in construction because it coordinates those disparate elements together in one system, which helps improve CVR (cost value reconciliation) and avoids rework in construction projects.   

Construction businesses range from small specialist subcontractors to large ‘Tier One’ enterprises, and ERP solutions are similarly diverse.  

The benefits of construction ERP are common across the different sizes of construction companies, but choosing and implementing the right ERP also presents many challenges.   

Key Benefits of ERP In The Construction Industry 

• Reduce costs 
• Teams can collaborate on-the-go 
• Avoid mistakes, delays and rework 
• Helps your construction company scale up  
• Gives managers the power to make data-driven decisions 

Reduce Costs 

Overtime costs can be a major problem within construction, but using ERP means businesses have better visibility of projects to manage resources, demand and capacity, enabling businesses to increase or decrease staff levels as they need. It is also easier to identify areas with high cost demands to help refine future projects.  

Having access to accurate, real-time data on construction projects can also help with material costs and buying decisions. Using ERP frees up time on manual tasks so finance leaders can review data and look at ways to reduce costs by analysing recent projects and supply chain costs.    

 

Teams Can Collaborate On-The-Go 

Enabling your teams to have access to all relevant data and files 24/7 from anywhere results in increased efficiency in project planning. An ERP system will pull together data from across your business, covering everything from costs and labour to material requirements.   

Using an ERP system helps construction teams extract all relevant information so nothing is overlooked during the planning and costing of projects whether teams are on site, in an office or working from home.    

This ease of collaboration allows teams to quickly handle any issue which may arise during the project.   

 

Avoid Mistakes, Delays And Rework 

48% of costly rework in construction can be chalked down to poor communication. Poor communication in construction can be down to different teams working within different systems, a problem which is resolved with an ERP system.  

Another leading cause of rework is poor coordination between teams covering different parts of a project. Design errors spotted too late, incorrect materials or a poorly coordinated labour force can lead to construction mistakes which in turn will result in dreaded delays and rework. 

An ERP system allows leaders to identify issues early, provides a central environment for communication and coordinates teams to help reduce the amount of rework on a project.  

Learn more about how to reduce rework in construction. 

 

Helps Your Construction Company Scale Up 

Standardising processes and procedures across different projects and locations helps construction businesses operate more efficiently and increase productivity.  By automating manual processes such as scheduling and data entry, construction staff will be able to focus on more valuable tasks such as planning, taking on more work and scaling up a business.    

Real-time visibility on costs, resources and revenue means leaders can make more informed decisions on future projects and business strategy.  

 

Gives Managers The Power To Make Data-Driven Decisions 

ERP gives construction businesses all the data and information they need at their fingertips, organised in a way which is easy to understand and analyse.   

This visibility provides real-time data and analytics so managers can not only monitor and track performance across the business, but make more informed and data-driven decisions.   

This will help optimise resources, manage risk, and help complete more construction projects on-time and within budget.  

Cons of ERP In The Construction Industry  

 

• Initial costs 
• Customisation 
• Training and training costs 
• Slow implementation process 
• Needs buy-in across your team 

 

Initial Costs 

When starting to compare costs of ERP solutions, you need to consider not only the cost of the solution but additional costs such as training and hosting to ensure a smooth transition across your company.     

ERP is a major investment and will require change management across your business.  Construction leaders will need to consider how their existing IT infrastructure will need to adapt to and migrate to ERP.    

 

Customisation 

When considering ERP for a construction business, users will need to compare ‘out of the box’ solutions vs customisation needed for their specific operations.  

Many ERP solutions are standardised which can limit their ability to meet your specific needs. Users will need to work with the chosen vendor to understand if they need customisation and how much is required.   

Bear in mind that in a recent report, most ERP implementations cost three to four times than what was initially budgeted.  65% of the time, required customisation was the key culprit.  

 

Training Is Needed 

Like all software, ERP will need training across a team. It is worth considering what training is included as part of a vendor’s ERP package and, if so, what is covered?  If basic training is included, will this meet your requirements and include all users?  Will you need more intermediate/advanced training for your team and, if yes, what is the additional cost?   

Work with the ERP vendor and your stakeholders to outline a clear training plan for deployment across your business. For your ERP solution to be successful, all users need to understand the new processes and impact.  

 

Slow Implementation Process 

Implementation is more than just switching to a new software system. ERP will impact many functions across a business, which means implementation is rolled out in multiple phases.   

One of the many challenges for companies moving to ERP is not setting realistic expectations, time frames and  milestones as part of the implementation process.    

Construction projects can be complex, with requirements changing as the project progresses, and a construction ERP will need to be able to handle these. Data is critical to the success of your ERP solution, but data may be currently stored within paper-based systems. Construction companies need to consider if they have built in enough time for data integration, including validation and cleaning of data.  

Finally, your ERP implementation should not be viewed as a one-off effort which ends when the new system goes live.  To stay competitive, a construction businesses’ ERP should continue to evolve to support a growing business.  

 

Needs Buy-In Across Teams 

The decision-making process of buying an ERP solution needs buy-in from key stakeholders across a construction business.  Teams need to be clear on what challenges they are looking to solve. ERP requires a shift in mindset and a change in everyday work processes for many employees.