Stories from the field: Improving processes with ERP for the construction industry
ERP for the construction industry streamlines materials planning, work in progress inventory, and ordering, adding a real-time ability to forecast inventory and materials needs.
My colleague Dennis Gilhooley, Jr. recently shared an Ultra ERP blog post entitled “Stories from the field: Benefits of ERP cut across the enterprise.” The business process transformation stories he summarized in his blog post inspired me to share my own recent “story from the field” which involves ERP for the construction industry.
This past year, I served on the ERP consultant team for an engineering and foundation repair services company. The company provides services to new and existing commercial and residential buildings via their 50 field service locations around the U.S. Our team was originally called in to help the growing company adapt and function as their operations scaled. Specifically, Ultra was engaged to assist the team with business process improvement services as well as technology selection.
The genesis for the project was recognition by the firm’s leadership that it was difficult to be effective using outdated enterprise technology. As the company took on more complex and larger engineering and foundation repair projects, it became more challenging to operate as efficiently as required and still properly manage operations. While the company had managed to adapt and function, it was doing so thorugh the use of multiple disparate legacy systems, inefficient and manual processes, data stored in multiple systems, and shifting market conditions. These factors created obstacles to proactively manage and improve processes and caused significant pains that hurt the bottom line.
Issues with inventory management
As a dramatic example which illustrates that pain, about a year ago the construction and engineering services company won a large contract to assist in the construction of a large energy facility. It was the biggest project the firm had won to date. Without proper processes and systems in place, especially around materials requirement planning and inventory management, the firm accidentally placed an order for all of the steel needed over the entire length of the project, all at once. It was an understandable issue since there was no centralized, integrated enterprise system to track ordering and delivery. Instead, the team relied on manual-paper based and standalone ordering methods.
The massive steel delivery caused a major overflow of steel being delivered to the manufacturing facility steel yard. It was such an unwieldy amount of steel purchased and delivered at once, from various suppliers, that the delivery trucks were backed up from the manufacturing facility all the way back to the highway and beyond.
This is an understandable but regrettable outcome when processes and methods are out-of-date and over-reliant on manual record-keeping.
Areas for improvement
As the project got underway, we guided the project team to uncover the multiple areas that needed improvement and that could potentially deliver a significant ROI in terms of business performance.
Given the dramatic example of steel trucks backing up to the highway, maintaining visibility into accurate inventory usage and scrap was a key factor for potential improvement. The installation teams frequently took out more inventory than was needed for the job because the drawings and information captured by sales were not the most accurate or current.
The team was consistently losing visibility of which material was being brought to and from jobs, as well as scrapped.
All told, the areas of improvement included the following functional areas:
- Automated WIP
- Inventory management
- Costing and quoting
- Order entry
- Lot traceability
- Reduction of redundant and manual processes
ERP for the construction industry brings benefits
A modern, integrated and automated ERP system was needed to handle the ever-increasing and complex supply chain, client base, projects and extended enterprise.
while also providing insight into the strengths and weaknesses of the supply chain. This integrated functionality means the company would avoid the over-ordering problems it previously encountered.
We guided the company to integrate all business systems for resource planning with other functional areas so that data flows seamlessly among all domains. Breaking down barriers between applications is a critical factor for success for all construction and manufacturing firms.
Andrew Stein is business consultant at Ultra Consultants. Ultra Consultants is a CFE Media content partner.