Labor shortages cause serious problems for the construction industry, and globally, they are only getting worse. The problem is demographic and systemic and will not be affected by momentary economic dips or corrections.
The scale of the problem even in a developed, mature market like the United States is significant: there were 404,000 open construction positions in the United States late last year, according to National Association of Homebuilders analysis of Bureau of Labor Statistics data. In the UK, construction industry recruiter Randstand said that during the summer, they see 30 percent of all permanent construction jobs filled, while last summer only 16 percent were filled. The European Center for the Development of Vocational Training reports that almost 45 percent of construction companies have a hard time finding skilled labor.
While contractors and the industry as a whole need to do better at attracting young talent into the industry, there are overarching demographic and economic shifts working against them. The population of many developed countries, for instance is aging. In a study by the Chartered Institute of Builders, 76 percent of construction industry respondents said they were aware of challenges facing the construction industry as the result of the ageing population. Fifty two percent said the ageing population is a serious challenge facing construction in the future, and 33 percent said it may be a problem. Respondents said that the percentage of the construction workforce in the 16- to 30-year-old category was decreasing, while the percentage over 61 was in-creasing.
Other trends and regulatory changes pile on to exacerbate this problem:
- In the United States, unemployment has hovered at 3.6 percent, and this combined with strong demand and a crackdown on immigration mean 80 percent of contractors are having trouble filling positions and 44 percent have been forced to raise prices
- Brexit-related regulation in the UK will dis-incent reliance on European workers and encourage investment in technology and automation
- According to the European Commission, double-digit construction sector growth in Bulgaria, Romania Cyprus, Hungary and Malta have lead to stronger wage increases than average, suggesting an emerging labor shortage
- Shortage of workers overall is compounded by a global construction skills shortage, with developing markets like Malaysia, Colombia and Indonesia affected
Software To The Rescue
Across multiple sectors, enterprise resource planning (ERP) software has played a role in reducing the amount of labor required to produce a specific asset, and construction ERP is bringing these lean methods to the industry. Lean methods are easier to implement in a shop environment as opposed to on site, and that is one reason that offsite construction, or modular construction, is gaining popularity. One study was able to show how optimized task scheduling in a shop environment can reduce total fixed labor personnel requirements by almost half.
Management of a modular or offsite construction organization can use lean principles common in manufacturing to find the ideal balance between total labor utilization and takt time—the turn time required to meet customer demand.
According to McKinsey, innovative companies can combine multiple new methods including improved onsite execution and adopting new digital technology and automation, to improve productivity by 50 to 60 percent.
How IFS Can Help
IFS delivers construction ERP with essential construction functionality for project financial control, project management, human resources, equipment rental and materials purchasing. But we also have a deep application suite for engineer-to-order manufacturing—ideal for the fabrication and assembly requirements of a contractor’s offsite facilities.
Regardless of whether you are a general contractor or specialty contractor, regardless of whether you have dabbled in offsite construction or not, we give you a complete application suite that covers the full project and asset lifecycle, including on-site and offsite components of the project and the essential handoff be-tween the two—marshalling and shipping assemblies and subassemblies to the job site according to an optimal schedule.
In a shop environment, IFS solutions can help you adopt lean processes across the project lifecycle—automating essential tasks in estimating and getting bids from subcontractors, helping you design around standard parts, adopting lean inventory management to ensure you have the required materials available according to your forecast. The great labor savings though come in scheduling, and the ability to look at the project pipeline and also demand driven by signed contracts and schedule to meet these requirements. This will eliminate over-scheduling or under-utilization caused by back-of-the napkin calculations many contractors rely on.
Better Processes, Better People
Not only will modern and comprehensive construction ERP help you adopt leaner practices and increase productivity, but it will make you a more attractive employer for tech-savvy younger workers and help you retain talented management and professional staff. Employees today expect access to modern technology that eliminates things like duplicate data entry and manual processes. And their ability to proactively plan and execute against a plan will increase their job satisfaction. Rather than reactively scheduling and re-scheduling projects, resources and employees as poorly-laid plans shift, they can feel effective and capable as they help you increase the productivity and output of your construction organization.
Moving the labor landscape from the field to the shop also means less reliance on skilled trades, which are expensive, and more reliance on employees who can be quickly trained to execute specific assembly or fabrication processes. This enables you to attract younger people to the workforce while reducing your labor cost.
The time has never been better to invest in offsite construction systems and processes. This is where the market is going, and where the margin will be in the coming months or years.
To learn more about how IFS can help you differentiate your construction business from the pack, visit IFS.com
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