Challenges facing the current global construction industry
The picture painted by the global construction industry is rather concerning. While growth is still forecast for the industry as a whole, many countries, such as the UK and South Africa, have experienced upsets in their domestic industries, which negatively impacts the overall, global picture.
Given the global construction industry’s importance to economic performance, we thought it worth examining the challenges the construction industry – as a whole – is currently facing, as well as the ways in which these issues can be addressed in the years to come.
Low productivity
Odd as it may sound, the construction industry is not a productive one. While most industries have seen a constant upward trajectory in terms of productivity, construction has floundered.
A number of studies have been conducted to ascertain why construction productivity is so low, with fairly predictable results. A study by the Construction Owners Association of America found that a massive 63% of direct labor time involves waiting for materials to be delivered, discussing how to do the work, and taking breaks.
Addressing these issues is therefore key for all construction businesses, particularly in regards to the process of ordering and receiving materials; if this can be streamlined, perhaps by using newly-developed software applications, then productivity may finally begin to rise.
Operational disturbances due to machinery repairs
Construction businesses rely on their machinery arguably more than any other type of company. If machinery needs to undergo repair to vital mechanical elements, then the repair has to happen – it’s simply too important to forgo, and there are no “workarounds”, that can mitigate the issue.
For many construction businesses, removing machinery from business operations for repairs is inherently problematic. Repairs mean that an expensive machine is out of commission for a period of time, which can greatly reduce their ability to operate as normal, resulting in lost productivity for the business as a whole.
Worse yet, repairs can reoccur if inadequate parts are used, resulting in further maintenance needing to be conducted – and thus the operations-related issues threaten to become chronic.
In seeking to overcome the disruption of vital repair work, construction companies will likely need to focus on implementing robust maintenance schedules that can anticipate issues before they become catastrophic.
In addition, construction businesses could also benefit from only working with companies who supply original manufacturer equipment (OEM) when conducting essential repairs such as a drive shaft repair or axle replacement.
This combined approach could ease many of the issues caused by repair work to essential machinery, benefiting individual businesses and, as a result, the industry as a whole.
Poor performance
While the exact performance figures differ between countries, the trend for poor performance in the construction industry is found across the globe. In fact, KPMG’s Global Construction Project Owner’s survey found that only 25% of projects are delivered on time and within budget – an extremely concerning statistic.
While the reasons for poor performance vary from company to company – and, indeed, from country to country – the simplest method of improving performance is likely to be a greater focus on project management. As we touched on in the first point, construction companies often report that direct labor time is lost due to workers spending time deciding how to complete the work – an issue that more effective project management may be able to overcome.
If construction companies seek to implement improved project management techniques, projects can be planned from the outset, which ensures that direct labor time is more effectively used – which should, in time, result in a greater performance across the global industry.
Better profitability
Despite the size and influence of the industry, construction companies are not necessarily particularly profitable. Profit margins in construction are very low – usually between 2-8% – which no doubt contributes to the overall construction industry malaise.
In truth, there is relatively little that can be done to rectify this issue. Profit margins are dictated by the cost of raw materials and labor costs, both of which are predominantly outside of the control of individual businesses and, in fact, entire countries.
The best hope in terms of profit margin is for companies to focus on reducing their costs via efficiency savings, which again reinforces the importance of improving overall construction performance across the industry.
Lack of skilled workers
If there is one uniting factor that is harmfully impacting almost every construction business in every country, it’s a lack of skilled workers. From Canada to the UK to Australia, the issue repeats itself time and time again.
Unfortunately, the issue is just expected to get worse, as it is felt that those in the millennial generation – who will make up 50% of the global workforce by 2020 – just don’t consider construction as a possible career.
What is clearly required, then, is a complete, global push from the construction industry to effectively try and “sell” construction to younger workers. Companies who are struggling to recruit may find it beneficial to issue surveys to their local populace in order to understand why construction has fallen from favor as a career.
If every construction company does this, in every country, a global picture should begin to emerge – and the issues identified can then be remedied.
Theft
Finally, the issue of theft of construction equipment from companies may not seem like a particular challenge in and of itself; all companies and industries have to deal with theft, after all. However, the high rate of theft from construction sites is a particular concern given the other issues in the construction industry.
Given that performance and profit margins are already struggling, theft greatly exacerbates these issues, and thus needs to be addressed.
The only answer to this issue is greater security measures on construction sites and at locations where construction equipment is stored. Technological advancements are allowing companies to install real-time monitoring relatively inexpensively. Construction companies concerned about theft, and its knock-on effects, will undoubtedly need to invest in this area in future.
While the global construction industry is performing relatively well, and further growth is expected, there is no denying that the industry faces some key challenges, posing particular concerns. However, by addressing the issues, the construction industry should flourish, and realize its future growth potential as hoped.
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