Challenges are mounting within the construction industry: growing material prices, a shortage of skilled labour, and sophisticated project efforts. Thus, construction companies should stay abreast of ways to enhance effectiveness, reduce costs, and increase productivity in a competitive market. One of the most relevant technology systems today for construction leaders is Cloud Enterprise Resource Planning (ERP) Systems.
Listed below are differences between cloud ERP and on-premise ERP systems, and reasons why cloud ERP is relevant to the construction industry today. The discussion includes increased mobility, scalability, and cost reduction offered by cloud ERP systems, explaining reasons your construction company should be looking into adopting cloud ERP in 2024.
What is Cloud ERP and the Difference Between Cloud ERP and On-Premise ERP Systems?
Cloud ERP is a software delivery model whereby the core ERP applications are run on remote servers, accessed by users through the Internet. This eliminates the need for on-premise hardware, software installations, and huge IT infrastructures. There is no longer a need to purchase and maintain physical servers; the firm just subscribes to a cloud ERP service and pays the recurring fee for using the software and related services.
In contrast, on-premise ERP systems involve installation and running on a company’s own hardware and servers. The traditional model requires enormous up-front investment in hardware, software licenses, and IT personnel for installation, maintenance, and support. The entire responsibility of managing the ERP system, such as updates, security, and backup of data, lies with the organization.
The Relevance of Cloud ERP in Construction
Particularly pertinent in construction, where works are complex, have many influencers who are distributed across sites and locations, and take place to dynamic schedules—hence demanding extremely effective management. These are also relevant when a strong necessity of communication and the exchange of data arises because the data is needed to allow proper management of remote work, the number of which is rapidly growing because of the COVID-19 pandemic (26.4% of U.S. employees were teleworking in July 2020). Cloud ERP copes with this by offering centralized platforms for project management, resource allocation, and financial oversight. Effective maintenance, proper tracking, and utilization of equipment help optimize costs. Additionally, cloud ERP will be able to manage financials burdened by such complexity and challenges such as poor cash flow, over-budgeting, and tax compliance.
Benefits of Cloud ERP for Construction Companies
Project Management and Planning
Cloud ERP systems offer sophisticated project management tools that enable construction companies to undertake planning, execution, and monitoring of projects with unprecedented levels of accuracy. These types of platforms help in keeping real-time information on a project, thus allowing managers to promptly identify and fix problems before they get out of hand. For instance, Oracle’s module on project management assists in task scheduling at detailed levels, resource allocation, and progress tracking of many projects at a go.
Financial Management and Reporting
With the thin profit margins in the construction industry and project costs that are almost impossible to predict, sound financial management becomes one of the critical success factors. State-of-the-art cloud ERP delivers comprehensive and end-to-end financial tools to have real-time visibility into project costs, revenue, and profitability. Automation in invoicing, expense management, and financial forecasting are part of Oracle’s suite of financial management. Advanced tools such as these will keep a tight rein on finance and help construction firms make better decisions to improve cash flow management.
Supply Chain Management and Procurement
Construction is one industry where supply chain management can literally be the difference between success and failure—on-time delivery of materials can make all the difference. Cloud ERP systems can enhance the efficiency of procurement procedures and offer better supply chain visibility. They give better functionality around things like procurement automation, supplier performance, and inventory management. For instance, Oracle SCM (Supply Chain Management Cloud) uses advanced analytics to optimize inventory levels for reduced waste and to enable cost savings in the procurement process.
Resource Allocation and Utilization
Construction necessitates meticulous planning with respect to labour, equipment, and materials. One area in which cloud ERP really excels is in the provision of tools for optimal resource allocation. They let companies trace equipment use and maintenance schedules, assigning people by skills and availability. This depth of resource management helps ensure that there is a maximization of productivity, reduction of downtime, and proper utilization of resources on all projects.
Collaboration and Communication
Communication is one of the most critical factors in construction, wherein multiple stakeholders are often involved and geographically spread across the site. In fact, According to Dodge Construction Network, 91% of contractors and owners believe that enhanced collaboration lowers risk on construction projects. Cloud ERP facilitates the smooth functioning of different operations through a single platform for sharing information. Document management, real-time chat, and mobile access provide access to updated information on the project to all those members who are part of the building process, from anywhere.
Why Cloud ERP is Crucial for Construction Companies in 2024
Economic Volatility
Even though COVID-19 no longer holds the tag of a global emergency, construction companies still have to bear the economic brunt in 2024. Indeed, project delays, funding uncertainties, and supply chain disruptions are still present and continue to worsen as they are compounded by inflation and political instability. Cloud ERP can provide real-time financial and forecast data to help businesses in a fluid market respond at an accelerating pace while maintaining cash flows and driving business decisions.
AI and ML
The AI in the construction market, which was $530.2 million in 2023, is expected to reach $7,637.9 million by 2032. According to McKinsey, if real-time data analysis is used, construction companies can gain an increase in productivity of around 50-60%. AI and ML cloud-based ERP systems take project data and predict the final results, achieve optimum schedules, and find out risks to almost completely improve bidding accuracy, reduce waste, and improve project performance overall.
Supply Chain Disruptions
Ongoing material shortages and logistical complications burden construction firms. Cloud ERP systems are key to this visibility in inventory levels, supplier performance, and material availability. This type of platform allows for agile procurement strategies and, in turn, quick identification of alternative suppliers with inventory optimization for the firm as it seeks to navigate persistent supply chain vulnerabilities and minimize project delays.
Labour Shortages
The construction industry is looking at a huge deficit of 501,000 more workers in 2024, with 89% of firms saying they have trouble finding workers, and 61% of those reporting project delays. Cloud ERP mitigates the effects by better resource management and workforce planning. Such systems would enable companies to maximize productivity with their limited human resources by finding the optimum worker allocation, detecting skill gaps, and automating administrative tasks.
Sustainability Focus
By 2050, 68% of the world’s population will live in cities—bringing a sharper focus to the construction industry’s high carbon footprint and large resource demand. With 74% of AEC (Architecture, Engineering, and Construction) companies already investing in technology for sustainability, cloud ERP systems are critical. They track resource use and monitor emissions; provide support for sustainable procurement methods; and enable firms to hit environmental goals while appealing to eco-conscious stakeholders in a rapidly urbanizing world.
Conclusion
The crises that the construction industry faces in 2024 are ones of economic uncertainty, supply chain disruption, labour scarcity, and demanding sustainability. Cloud ERP is one such key solution that saves the day. Cloud ERP provides real-time data and AI-driven insights on resource optimization, thereby enabling construction firms to thrive and succeed.
Ready to see how best-in-class cloud technologies can transform your construction business? SHAHGARON is an Oracle Partner and deals in Cloud ERP solutions specifically engineered for the Engineering & Construction industry. Our expertise in using Oracle’s scalable, safe, and flexible ERP Cloud platform can help your business to grow, adapt, and thrive in today’s challenging environment. Be it project management, financial operations, resource allocation, or sustainability, our solutions are ideal for any construction company aiming to step ahead in the market. Let’s connect to kick-start your journey in digital transformation and build efficiency, profitability, and sustainability for your construction business in the future.