Digital Transformation in the Building Materials Industry
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Digitalization is spreading across many industries, from finance and pharmaceuticals to oil and gas; it’s clear that the world has undergone a major digital transformation. Yet, for reasons we will discuss later, the construction and heavy building materials industry is lagging behind, and not without consequences. A McKinsey Global Institute study revealed that the construction industry is one of the least digitized industries in the world, with many companies still completing business deals with “handshakes and fax machines.”
Digital transformation in the building materials industry has great potential and can bring companies numerous benefits, such as improved productivity and communication, higher accuracy, safer operations, and cost reduction.
In this article, we explain why digital transformation in the building materials and construction industry is so important, and the steps companies can take to start the process.
What Is Digital Transformation and Why Does It Matter?
According to InfoWorld, digital transformation is “the application of digital technologies to fundamentally impact all aspects of business and society.”
Digital transformation across most industries has been evident since the technology boom of the 1990s. During this period of intense change, it became increasingly necessary for companies to adapt to these digital changes or risk becoming obsolete.
Companies that utilized these technological advancements undoubtedly saw greater productivity, increased efficiency, and higher revenue. So, why has the building materials industry not been able to adapt in a similar way?
For years, construction companies have been able to succeed while still relying on paper-based processes and communication, unlike companies in other industries. This grace period, however, is quickly coming to an end.
There is a chronic productivity problem within the construction industry, and companies are simply not performing well enough to keep up with the demand.
According to Global Infrastructure Hub, a G20 initiative, estimates that the world will invest around $79 trillion on infrastructure projects by 2040, although the actual amount needed is $94 trillion. This gap of $15 trillion can be partially credited to the lack of innovation and technological advancements within the industry.
In order to bridge this gap, the building materials and construction industry must eliminate the inefficiencies that result in projects taking longer to finish than scheduled and costing significantly more than budgeted. To achieve this, more money must be invested in information technology.
How Building Materials Companies Can Begin Their Digital Transformation
While so far this might seem quite “doom and gloom,” it’s actually far from it. Innovation is inspiring, profitable, and entirely possible for businesses in this great industry.
Let’s explore the most common pain points and how to overcome them:
Reduce waste from the value chain
Pinpointing areas of waste is the first step in a company's digital transformation. You can begin this process by examining customer complaints, asking employees to submit feedback forms describing productivity obstacles and time-wasting duties, and reviewing equipment and delivery standards.
Companies in the construction industry often waste valuable time and money simply waiting. Waiting for parts, people, and equipment might seem inconsequential, but when added up, you could be facing a huge and unnecessary annual expense. Often, these areas of waste can be reduced by eliminating manual, paper-based processes.
Break down the barriers preventing collaboration and information flow
Too often, the left hand doesn’t know what the right hand is doing. When the teams within a company (sales, logistics, finance, etc.,) are working independently toward their own goals and lack collaboration, significant issues can arise.
Implementing a strategic planning and management system breaks down these silos and aligns your business activities with your vision, improves overall communication, and enables performance monitoring. Companies can also drive alignment by having leaders with cross-functional responsibilities; for example, manufacturing and logistics will both report to a single supervisor.
When it comes to your IT systems, ensure that they are up-to-date and do not require employees to enter duplicate data from one platform to another. This results in fragmented and incomplete information across multiple functional groups and operations. The lack of system integration prevents companies from efficiently evaluating and optimizing their processes.
Connect electronically with trading partners
Once you’ve organized your internal affairs, it’s time to evaluate and enhance your methods of external communication. This includes customers, suppliers, logistics providers, and outside trading partners.
Traditional email is not an effective means of electronic communication if afterward someone is required to manually upload data in a separate step. Utilizing current technologies such as APIs and web services allows companies to integrate digitally on cloud and network-based platforms, effectively eliminating manual data entry.
Embracing modern communication technologies also reduces time spent onboarding trading partners, as mobile devices and applications enable users to easily track and share data. Leading companies in the heavy building materials industry utilize Supply Chain Operating Networks (SCON), which are described as the business equivalent of LinkedIn and Facebook.
SCONs leverage a cloud environment to merge software applications, B2B digital connectivity, and social networking, which enables businesses to collaborate with trading partners in a more efficient and innovative way.
Recognize data as an asset
In many companies, data quality management is a responsibility that is not clearly defined, or it’s assumed that everyone is responsible. But before leaders can delegate this role, they must recognize data as an asset and treat it as such, assigning value to it as they would with real estate, intellectual property, and equipment.
Poor data quality can result in inadequate supply chain visibility, leading to:
- lost revenue due to insufficient stock,
- increased transportation expenses (expedited shipments),
- surplus stock, and
- decreased customer satisfaction.
Treating data like an asset and putting a dollar value on poor data quality not only makes it easier to get upper management support for corrective measures but also helps you prioritize those measures.
Looking Ahead
As technology evolves, construction and heavy building materials companies are coming to a crossroads: will they embrace change and begin their digital transformation, or continue operating as they always have? Digital transformation creates a lot of value for the construction industry and unlocks numerous benefits including:
- Improved productivity and communication,
- Safer operations,
- Fewer production errors, and
- Adaptability.
Daniel Backhaus - Chief Strategy Officer
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Once you decide to take the journey into digitalization, you open yourself up to a world of innovation and ultimately, higher revenue. As you grow more accustomed to these digital changes, you become more adept at analyzing trends and staying ahead of the curve as Easysteel has done. Contact us today for more information about how Salsita 3D Configurator can get you started on your digital transformation.
