Specialty trade contractors face unique challenges in purchasing and material management that often go beyond the capabilities of basic tools like email, text, and spreadsheets. Learn why embracing more advanced tools is essential for successful projects and...
Trends & Challenges: Delivering efficiency in project & material management
Procore, StructShare, and Electri International join forces on a LinkedIn Live session to discuss top trends & challenges around project and material management in the construction industry. They cover common practices in the field, critical must-haves for reducing risk, and what impact your material management strategy has on improving project delivery.
Watch the LinkedIn Live Session:
Edited excerpts from the LinkedIn Live session
Hey, everybody, I'm Nate Tockerman, partner manager here at Procore. We're here to talk about current trends and challenges many contractors face around material management and, more importantly, how that impacts your projects. There's a lot to cover in these next 15 minutes.
Joining me here today is Or Lakritz, founder of Structure, and Josh Bone, executive director at Electri International.
About the Panelists
Or Lakritz is the founder of Structure with the mission of helping specialty contractors improve material management procurement workflows. My background is in product and marketing strategy and digital transformation.
Josh Bone, Executive Director of Electri International, has been around the industry for almost 24 years now started at 3D modeling back in the late 90s along before the term BIM was being used and grew up through my career starting with 3D modeling, and that branched out from like so many things to BIM and mobile apps and other things. I still identify as a construction technologist at heart, but I've been running the Electri foundation, the R&D firm foundation for the electrical contracting profession.
Tell us about material management and why is this so important for the construction industry?
Or Lakritz - "I'm here in the past five years. I'm not a legacy construction guy. My partner is, but what I felt started coming to the US and understanding what's going on in their industry. We fast identify the crazy void in supply chain management and procurement management. Material management is the core of every project cost 30-50% of every project cost his materials. It relates and impacts every aspect of the project – timelines, quality delays, etc.
I think it's one of the last areas across the construction process which is lagging. When we see improvements and efficiency, the entire project management and estimating and every aspect will be accelerated and improved externally. In addition, it impacts every stakeholder, both the GC and trades, developers, and suppliers, of course, so I think it's a crazy thing that we'll see in the next few years going to boom with efficiency.
It's true right that this is the stuff that the owners are buying right the material that's left behind after we're all gone so there's the attention that we paid it should be of primary importance.
Josh, what are some of the major challenges you've seen around?
Josh: One thing is it has been primarily labor because you know there's one person typically the field is managing that labor. It's one point of contact with materials you start as early as your takeoffs and accounting, and you start dealing with the field, and then you got a fab shop. You got all of these different silos that material brings. It's hard to manage it from one stream to the next, and looking at that value flow, so I think that's why you've seen the focus around managing labor more so around materials. There hasn't been that consistency. It touches so many different aspects of the business. Still, we've seen through the pandemic now that material prices and escalations that we've seen in such short periods where contracts a lot of times took into a consideration price increase of 5%.
We've seen price increases now I've been on the job. I was awarded that job, and ten months from now, I'm ready to purchase wire for that job. The cost is 30% more, or 60% more, in it has created a real sense of urgency around material management over the past few months. It's impacting small, medium, large -- every contractor is affected by this and sees it as an opportunity to grow and mature in their process, and better more efficiently run their businesses.
Nate: "Yeah, it's interesting we've seen COVID accelerate a lot of things that companies are doing. Maybe we plan to do where the industry was interested, but it just moved it up substantially, so it's not necessarily a new problem.
Why do you think these continue to remain a challenge in the industry?
Or: We see increasingly crazy need and more awareness for solutions in the space from all stakeholders and construction tech players. I think. Naturally, the construction industry's evolution, like every industry construction tech story, is started with solutions for more office-oriented tech-savvy developers and general contractors like you see that Procore began.
Stakeholders, specifically material and procurement professionals, focus more on specialty trades, which have a legacy of being unaddressed with the solutions. Still, now we're starting to see a lot of companies' solutions and even education-focused on helping set specialty contractors with the understanding that in the end, they are the ones that are building the buildings. Therefore, they are one of the most important players within the entire value chain.
The impact of technology has I'm connecting the office in the field. We're talking about the different stakeholders but even within the business, and I think it's important to note that this information exchange is a two-way street, right? It's not about delivering information of the owner receiving it only if it's a back and forth. So hence, being able to provide now we think about the field right the tools the information the material to enable production as a starting point if it's a field ability to communicate what they need or things preventing that show it's just as essential and when multiple workflows across those numerous stakeholders across several companies are being done in a single platform and whether that's Procore or an integrated partner solution like Structure.
I think the resolution happens exponentially faster, and then that's where you save time, money, reduce injuries. So I guess I'm applying this stuff to like trade stacking and what's stopping you there or like your material management plan where we are going to layout receive this stuff this last information that we're all trying to close the loop on, you know I mean, I can go on and on here. But, still, payments against invoices not fully received affect financials.
Josh, walk us through, you know, sort of some of the impacts you see specifically on the electrical side of the industry.
Josh: I want to make sure all those things that you mentioned there are great because that's where that's what constructions all about buying and selling risk and that risk are being pushed down into the specialty contractors a lot for now and in the things that you just mentioned they are those things that they must do a better job managing. You have expectations that have changed from the owner's standpoint. I see this as a real opportunity, just like with prefab.
Material management can open several opportunities to sell your position and from across the board. I believe there's an opportunity to educate the owners and the general contractors that trade stack. Suppose you can manage your materials and streamline a lot of these processes. In that case, it's going to ensure your ability to increase your margins because you're getting it all time you're starting to clean up, and the way you handle materials improves your ability to sell. This is a big deal!
We have one of our contractors that I've been working with. He brought on a productivity manager that resulted in an owner that can measure manual labor units to go in. They can measure productivity, and some of these larger, more sophisticated owners go out and say, hey, what's wrong, why are you, why are you at such a low productivity rate. The owner of this company discovered material management was touching all these other aspects impacting their productivity. So, how do we streamline the handoffs and get better visibility into what we're buying across jobs? I think this is a sign of a maturing industry that's really in these initial stages of industrialization.
Nate: The view of production schedule and labor production tracking is planning right. The material management plan makes sure that you're prepared to execute as efficiently as possible is vital.
What are your thoughts on the industry's future, and what are we expecting to see given what we know right now about material management and technology?
Or: I think the first step is like you just both of you said it's starting small, not talking about general strategies. You know you've been taking prefabrication. It's only simplifying and digitizing the workflows and increasing collaboration and communication between the field, the office, and the suppliers. I think that's the key because that's what we're in first to access data, and that will facilitate frictionless communication improvement and measurement efficiency in general.
I see the future is the digitization of the workflow and communication and later utilizing on top of this a lot of things and providing a lot of values to the different stakeholders.
Josh: This is not going out on a limb. This is not some major prediction that I'm making here. We have other industries to look to with agriculture. We saw growth in mergers and acquisitions. We're seeing that construction we also saw decades ago in manufacturing. We saw how they shifted. I'm worrying about labor to materials first in the manufacturing industry that we're looking to these other industries as we industrialize. I believe that material management is going to start to trump labor.
I think we've got to find ways of in this industry if you look at the curve and our ability to recruit to the industry we are employing fewer people today than we were in 2007. we've got to find ways of doing more with less and being more efficient.
We need to evaluate materials and look at our suppliers and our partners and manufacturers, educating owners that they don't need to be buying some of these things because you're going to increase our ability to handle these materials and deliver them just in time.
We've got the ability from electrical contractors, mechanical contractors that manage risk, and let's be more transparent in how we do this because we have a better foothold on how we do it, so let's show you how we do it, build trust. The construction industry is industrializing. It's happening, and this is a step in that process of how we better manage our materials.
It will be a significant competitive advantage for the contractors that figure this out first.
What would you say is an organization that doesn't have a material management strategy today?
Or: First, as I said, strategy is too big of a word. It's just simplifying the processes and communication. Second, it's absurd that such a significant factor in the entire business and project is under-addressed. I think that it is just a must. We'll see a crazy increase in first solutions and contractors implementing the easy low-hanging fruits of improving material management.
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