Exclusive: Modular construction needs to take your business with it
Your ERP system needs to encompass off-site manufacturing and supply chain activities as well as site-based construction activities.
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Whether you call it modular construction, off-site construction, manufacturing-blended construction or construction integrated manufacturing, performing work in a shop environment instead of the construction site makes sense. The work is done more quickly at lower cost.
As Kenny Ingram, Global Industry Director for Engineering, Construction, and Infrastructure for IFS, explains, although most contractors run some type of enterprise resource planning software (ERP), it is usually one that only manages financial and human resources. This is not enough to reap all the benefits modular construction can bring. Your ERP system needs to encompass off-site manufacturing and supply chain activities as well as site-based construction activities.
"The modular construction market is predicted to be worth $157.19 billion by 2023, growing at almost seven percent per year," Ingram says. "It is transforming traditional construction models, moving on-site construction processes to off-site manufacturing or fabrication facilities where components or modules are instead shipped to site for final erection and assembly."
Modular construction on the growth path – skills shortage playing its part
Ultimately, the benefits in productivity are driving this trend. Off-site manufacturing allows construction organizations to build a higher quality of assets more efficiently—but a global skills shortage in the industry is also contributing to its rise. As skilled members of workforces retire, modular will help construction organizations manage a potential skills gap because less people can perform the same amount of work in a shop-based environment. Both contractors and project owners are now starting to see its true value.
It’s a win-win for ERP
Some modular builders have a construction contractor background, but over time have expanded into various off-site disciplines such as wall panels or mechanical controls. Because of their background, these companies are well-positioned to benefit from sophisticated supply chain and inventory management, lot and batch tracking, and bill of material management.
They can also benefit from moving to more standardized content as opposed to a unique, iterative design on each project. This standardization enables them to come into a client engagement with a more competitively priced project that can be delivered in a shorter lead time, and to a proven quality standard. While these companies have been involved in construction for a long time, they need comprehensive financial project controls built into all-encompassing enterprise software suites.
Other modular builders start out as manufacturers, perhaps working with construction contractors as partners for their pre-packaged, engineered system. Now, the client will often expect them to perform erection and installation work on-site. The once manufacturing-centric business needs to ensure their work is expedient, cost-effective, profitable, and carried out using construction industry protocol.
They need their ERP system to provide not just construction industry-centric project management and control capabilities, but also equipment asset or rental management because many of these environments require equipment to install structural members, control systems or other modular components. This will also give them the ability to manage the shipment and transport of materials to the construction site according to the project schedule, while managing subcontractors—a critical pain point for most manufacturing-blended construction contractors.
Enhanced project control – bringing management and manufacturing together
A good project-based solution (PBS) within an enterprise software system enables construction organizations to create and manage projects in real-time. This includes work breakdown structures, work package management, bills of quantities, project variation control and change orders. It will allow tracking of equipment cost against a specific project, regardless of whether you rent it externally or if the project ‘rents’ the equipment from your own internal division.
An effective PBS also has the functionality to deliver estimate to complete (ETC), estimate at completion (EAC) and margin forecasting based on real-time transactional activity. On-site project elements including subcontractor management and the delivery of materials for design, procurement, manufacturing, shipment, construction, installation, commission and maintenance purposes can also be tracked.
Such a comprehensive, mature and proven solution has the power to bring projects and manufacturing together—and can also act as a world-class enabler for traditional construction companies.
Building Information Modeling driving the change...
Emerging digital technologies such as building information modeling (BIM) are being mandated more and more by project owners and even governments, making off-site construction and standardization even more appealing. The need to firm up the design at an early stage increases if off-site construction methods are to be used, and the integration of the BIM model data becomes a necessity.
…And the need for ERP integration
In traditional construction, despite there being a plan at the beginning of the project, it is frequently amended and the as-built asset may differ in functionality from how it was designed. Each change to a design has an impact on multiple downstream dependencies in a BIM environment. The engineering of the asset therefore needs to be built using off-site, manufacturing principles from the first instance. This results in fewer design modifications midstream which reduces the cost and duration of projects.
From the start, the asset should be created with the ease of maintenance and cost-effectiveness in mind. The overall cost of the asset during its life is now the priority for asset owners, and an integrated ERP system should be recognized as the platform to integrate technologies such as BIM.
Disrupt or be disrupted
"There has never been a better time to invest in disruptive, off-site construction systems and processes," Ingram concludes. "But it is clear that off-site construction needs a broader ERP than simply software dedicated only to on-site construction. Modular builders need a comprehensive, integrated spectrum of ERP software with deep functionality to manage all stages of the project and asset’s life. This is where the margins will be made in the construction industry in the immediate and long-term future, allowing construction companies to stand out from competitors and ensure they capitalize on modular opportunities and their longevity."
Learn more at www.ifsworld.com.
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