The Constructor

6 Reasons Construction Needs Enterprise Resource Planning

enterprise resource planning

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Enterprise Resource Planning (ERP) is a system that provides powerful analytics using information from different construction processes such as contractor management, financial management, inventory management, project management, human capital management, vendor management, bid management, etc.

ERP system combines all the different essential software into one all-encompassing pedestal so that the project managers can effectively manage the complete lifecycle of a project.

The following are the six main reasons why ERP system should be incorporated into construction projects:

1. Optimized Planning

The haphazard planning process during the different phases of a construction project affects the quality of the project and, therefore, the company's stature. Moreover, contractors may incur heavy losses in the form of labor costs and loss of clientele due to untimely completion of targets.

Delay in the project handover also reflects poorly on the goodwill of the company. Therefore, planning for optimum use of labor, raw materials required, architectural design, and schedules is essential for the proper distribution of resources.

ERP software in construction can be implemented to make provisions for budgetary allocation and controlling expenses. It also assists in avoiding contractual issues and unnecessary downtime throughout the project.

2. Streamlined Project Management

Monitoring project progress and distributing assignments across different work locations have always been a difficult task in the construction industry.

ERP system allows project managers to monitor the status of each project, create project milestones, allocate assignments to the desired staff, and keep track of attendance with a few clicks. Real-time information enables contractors to record the time spent by their staff on different tasks, thus helping them to generate more accurate bills.

3. Facilitation of Cost and Revenue Estimation

Generally, construction companies work with their clients on a contract basis. Prior to acquiring a tender, contractors are required to submit their estimated costs. Based on their priorities, the client selects the bid based on the proposed design, the prominence of the company, and, essentially, the estimated costs offered.

Here, ERP software can be used to create an accurate estimate for raw materials, designs, labor, and the time period required to carry out a project, so that the deviation between the actual costs and the projected costs doesnโ€™t surpass the allowable limit.

Besides estimation, ERP software can also help contractors to determine the revenue or the profit/loss margin for the projects. This will, therefore, help the contractors with the judicious management of time and costs for future projects.

4. Simplified Exchange of Information

Larger construction firms juggle multiple clients at a time, because of which the exchange of information within the firm may become confusing and tedious. Also, compiling and managing data for all the tasks in the form of Excel sheets or PowerPoint slides is inefficient, impractical, and not secure.

ERP software can ease the exchange of data through firewalls and resources that provide maximum data security. It allows the users to choose who they want to share their data with - they can switch between the clients, employees, stakeholders, etc.

5. Improved Decision-Making Process

A centralized system augments the efficiency by providing a larger view of a situation before making pivotal decisions.

Whenever the employees are required to correlate information from various sources, the ERP software can assist with the data extraction process and provide relevant criteria that require changes before fulfilling a request.

For instance, prior to making a purchase order for some materials, the estimated amount must be submitted to the project in-charge, based on the requirements of the engineering team and the formulated construction design. The purchasing manager then creates the purchase order, which is screened by the accounting department before getting approved.

6. Increased ROI

Return on investment (ROI) can be measured in the form of money as well as in the form of other benefits. Irrespective of the way it is measured, contractors would certainly want to increase their ROI periodically.

This can be accomplished easily with ERP software, which allows firms to eliminate manual, labor-intensive, and time-consuming processes. It also controls expenditure for employees and raw materials, brings down IT costs, reduces unnecessary idle time, and helps meet project deadlines.

Today, a variety of construction ERP software are available for purchase.
Custom ERP security protocols such as electronic identities management, Role-based Access Control (RBAC), real-time monitoring, firewalls, and network encryptions come with additional layers of security to restrict access to confidential business data.

Additionally, ERP software have customizable dashboards with integrated data visualization and data analytics features, which are a daily requirement for project managers and become even more necessary during exigent circumstances.

Read More:
Planning, Scheduling in Construction Management
Why is Plan Cost Management Necessary? [PDF]
Preliminary Works in Construction [PDF]
Construction Management Software โ€“ Comparisons, Features and Benefits

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