4 Ways to Avoid Profitability Traps That May Be Costing You
Maintaining profitability on any given project is a challenge that many AEC firms face. It’s no secret that the construction industry has some of the lowest margins out there; data from Camino Financial states that the construction industry has an average net profit margin of just 5%.
For this reason, teams are under immense pressure to meet project budgets. However, doing that can be a major challenge because construction projects face several profitability traps. These traps are present at all stages of a project and come in many forms—including inaccurate forecasting, data silos, lack of accountability, and so much more.
Image from Autodesk University 2021 session “How to Exceed Project Profit Margins by Maximizing Data and Workflows”.
To avoid these pitfalls, teams must centralize their workflows, standardize their practices, and connect project data to critical processes. In doing so, you can improve productivity and reduce delay, which ultimately results in higher profits.
One firm that’s gotten good at avoiding these profitability traps is BL Harbert, a construction firm based in Birmingham, Alabama. BL Harbert brings in about $1 billion in annual revenue and employs 8,000 staff members across the globe.
Dane Pemberton, the firm’s US Group Construction Technology Manager, delivered an very helpful industry at AU 2021 where he discussed how BL Habert improved profitability by maximizing data and workflows
Dane spoke with Esteban Corrales, Manager of Technical Solutions for Construction at Autodesk, and outlined the steps that the company took to streamline its process and maximize profits.
1. Create efficient processes to eliminate bottlenecks
There are plenty of bottlenecks that can slow the progress of construction projects. It could be a case of stakeholders unable to quickly find the info they need. Other times, there’s a lack of alignment between teams.
Whatever the situation, bottlenecks cause delays, which lead to higher costs and lower profits. As Dane puts it, “Bottlenecks affect productivity. And if your productivity is affected, your profit margins are affected as well.”
“Bottlenecks affect productivity. And if your productivity is affected, your profit margins are affected as well.”
—Dane Pemberton, US Group Construction Technology Mgr, BL Habert
One of the best ways to overcome project bottlenecks is to get all stakeholders on the same page using a common data environment (CDE). Avoid using point solutions or disconnected systems, as this will create silos and reduce efficiency. Instead, centralize your data and workflows and ensure that teams can access everything they need from a single platform.
“Centralizing our model and pulling everyone into a common environment was really important to us,” explains Dane. “And so Autodesk Construction Cloud, and the unified platform it provides, has been key in helping us in our centralization effort.”
You can also eliminate bottlenecks through standardization. By making sure that teams follow the same procedures—and those processes are carried out on the same platform—you can keep things moving along more smoothly.
As an example, Dane shares their previous process for handling RFIs, which involved a lot of back-and-forth between various stakeholders.
“We would encounter an issue on the job, and then a superintendent would pick up the phone to tell the project manager. That person would then write the RFI and relay it to the vendor or subcontractor, who’ll use their own system and coordinate with other stakeholders. Then they’ll turn around, and send it back to us.”
The process was quite disconnected and left plenty of room for miscommunication. So, the company adopted digital tools which streamlined the RFI process.
“Now, with Autodesk Build and [Autodesk] Construction Cloud, we have a more concise workflow. We have at least a central source for all the data to live. We have the connected workflows inside of Build that help us take a pen off a sheet, immediately click on that, create an RFI, send that out.”
Dane continues, “And the tracking process is seamless. We send it to users that are already in the system. They get notified via email or notification on their phone. And they can immediately answer or share it with other team members. It has helped create efficiency through connecting all those workflows together, plus centralizing and standardizing what the RFI form looks like, and what the process looks like.”
2. Establish clear accountability across teams
Promoting accountability ensures that project tasks and milestones are met. When everyone knows what they’re responsible for—and they are empowered to fulfill those responsibilities—projects run smoothly and you fall into fewer profitability traps.
One way to achieve better accountability is to improve visibility within your projects. As Esteban points out, “When all teams have visibility into what others are doing and what they need to do to hit their schedule marks and their budget, it creates accountability into a shared project goal.”
So, how do you promote higher visibility for your teams? Dane recommends establishing consistent project inputs and processes.
“All of our projects teams typically have a senior leader or project executive assigned to multiple projects. And so what we found is [that] building consistency across our projects helped tremendously in reducing audit time.”
Dane adds, “Now that they have consistency, they know exactly what they’re looking at. They can go right to the things that make sense. We have common filters and common sorts, and we can leverage the database to give us the information in a consistent manner. And that’s been tremendous.”
When BL Harbert implemented more consistency in its projects, the company achieved better visibility of issues and action items.
According to Dane, “Now any issue or any action item that is generated on a job happens in one central location, and has one very similar look. And we can break those types down—i.e., if they’re a coordination issue, a safety problem, or a quality issue. We have all that at our fingertips.”
3. Digitally connect workflows and data to cost activities
We can’t talk about profitability without discussing cost management. Properly managing project expenses leads to wiser spending, cost savings, and—you guessed it—higher profits.
One of the best things you can do to improve cost management is to do it all from a centralized and connected platform. By connecting workflows and data to cost activities, teams can find important financial data much quicker, thus enabling them to make smarter cost-based decisions.
At BL Harbert, Dane shares that they connected Autodesk Construction Cloud with their ERP system, and this allowed them to unlock massive efficiency gains and profitability.
“It’s extremely important to have consistency, especially when you’re managing cost,” says Dane, who recalls how they used to manage their costs using Excel and other disconnected tools.
“We used to have an Excel spreadsheet to manage projections. We would have calculations off to the side on a sheet of paper. We’d have invoices in a different system, trying to backtrack and figure out where costs went or where something got coded.”
Now, the teams at BL Harbert use Autodesk Construction Cloud. “We built an integration to our ERP system, and we’ve connected all of those aspects together. And just by going through some clicks in the system, and drilling down on certain areas inside the Budget tab of the Cost module, we’re able to drill down to some of those things.”
“We don’t have to print out a dozen reports, and enter in a different job number to then go and pull an Excel file. So it’s been extremely valuable to connect all those workflows together. That one is probably one of the biggest efficiency gains, in and of itself, that we’ve seen.”
4. Analyze data to proactively mitigate risk
A key benefit of connected workflows is better data visibility. Armed with the right data, teams will be able to gain useful insights that they can use to mitigate risk. The teams at BL Harbert use Autodesk’s Insights tools to bring data together in one place, which helps them understand project health and potential risks.
They can, for example, use AI and machine learning to identify RFI risk factors and use those insights in their decision-making.
And according to Dane, this is just the beginning. They intend to double down on data so they can further leverage it to grow the business.
“One of our biggest goals for the future is expansion. We want to continue to grow our technology footprint,” he shares.
“We want to continue to grow our utilization. We want to take advantage of what we know we have inside these systems, and really leverage the analytics to resolve company problems.”
Is Autodesk right for your projects?
Low profits don’t have to be the norm in your construction firm. You can unlock extensive profitability gains by streamlining and connecting your processes, promoting accountability, and leveraging data.
Autodesk Build can help you do all of the above and more. Request a demo today and someone on our team will get in touch. We’ll talk through where you’re at, where you want to go, and how Autodesk Build can help you get there.
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