Construction is a key industry in countries across the world, but one that has struggled to evolve its approaches as other industries, and one whose productivity has suffered as a result.
Even while other sectors from retail to manufacturing have transformed their efficiency, boosted their productivity, and embraced the digital age, construction appears to be stuck in a time warp.
In the United States since 1945, productivity in manufacturing, retail, and agriculture has grown by as much as 1,500 percent. Yet, productivity in construction has barely increased at all.
A McKinsey study found that 98 percent of large projects incur cost overruns or delays.
Large projects across asset classes typically take 20 percent longer to finish than scheduled and are up to 80 percent over budget.
Cost and schedule overruns spread so much that have become a norm in the construction sector.
Construction productivity has declined in some markets since the 1990s; financial returns for contractors are often relatively low.
Studies made on this issue show that to increase productivity, five following industry 4.0 ideas seem to make the most impact:
Rhyton EPC Management focuses on the third idea; Digital Collaboration and Mobility.
Process digitization means moving away from paper and toward online, real-time sharing of information to ensure transparency and collaboration, timely progress, risk assessment, quality control, and, eventually, better and more reliable outcomes.
One reason for the industry’s poor productivity record is that it still relies mainly on paper to manage its processes and deliverables such as documents, design drawings, procurement and supply-chain orders, equipment logs, daily progress reports, and punch lists. Due to the lack of digitization, information sharing is delayed and may not be universal.
Owners and contractors, therefore, often work from different versions of reality. The use of paper makes it challenging to capture and analyze data; that matters because in procurement and contracting, historical performance analytics can lead to better outcomes and risk management.
Mismanaged paper trails also routinely spur disagreements between owners and contractors on such matters as construction progress, change orders, and claims management. Finally, paper trails simply take more time.
The positive effect increases when the project size increases; In small projects using such systems may make the works harder and increases the total cost of installation. In contrast, in medium and large projects, using such systems creates a tangible effect on performance.
It means by increasing the number of stakeholders and resources and, as a result, increasing control points, expanding communications, and undeniable growth of data volume makes using a system inevitable.
Through an internet search, you can find several examples and studies of how using software affected the project. In fact, regarding our experience in Rhyton on medium, large and mega projects, using Rhyton EPC Management affects the following factors:
- Decreasing overall human errors between eight to fifteen percent;
- Integrating engineering, procurement, and construction and subsequently the outcome on operation and maintenance;
- Reducing engineering costs by 12 percent by reducing human errors, controlling change effects, and decreasing human resources.
- Reducing material costs by 11 percent through placing on-time orders, avoiding duplicate, missing or incorrect purchases, and controlling purchases against the latest design versions;
- Cutting construction costs by 8 percent through providing collaboration, better control on the ongoing work, proving construction work-fronts, reducing supervision personnel, and automating ITPs and procedures;
- Helping managers to make decisions considering the live and overall status of the work,
Measuring and communicating how Rhyton EPC Management will improve construction through the positive effects on cost, schedule, and risk optimization is the surest way to build a compelling case for adoption.
What we experienced using Rhyton EPC Management, considering the above factors in medium, large, and megaproject, is a minimum 5 percent project cost reduction.
This means a 50 million euro reduction in a one billion euro project.
While calculating ROI for a software investment, there are several cost items that should be considered to calculate the cost of investment. Although the cost items may differ from project to project regarding the conditions, some of the cost items are as below:
- The software license fee for the project duration and number of users,
- Hardware, infrastructure or hosting costs for the project duration,
- Related software licenses (e.g., database license)
- Implementation cost,
- Direct human resources cost to run the software (e.g., system administrator),
- Annual support and maintenance fee.
As a result, in case the total installation and operation cost of Rhyton EPC Management is 5 million euros, the Return on Investment rate will be 1000 percent.
Resources:
REINVENTING CONSTRUCTION: A ROUTE TO HIGHER PRODUCTIVITY
McKinsey, 2017
By Filipe Barbosa, Jonathan Woetzel, Jan Mischke, Maria João Ribeirinho, Mukund Sridhar, Matthew Parsons, Nick Bertram, and Stephanie Brown
DECODING DIGITAL TRANSFORMATION IN CONSTRUCTION
McKinsey, 2019
By Jan Koeleman, Maria João Ribeirinho, David Rockhill, Erik Sjödin, and Gernot Strube
IMAGINING CONSTRUCTION’S DIGITAL FUTURE
McKinsey, 2016
By Rajat Agarwal, Shankar Chandrasekaran, and Mukund Sridhar
MAXIMIZING ROI IN INFORMATION SYSTEMS INVESTMENT DECISIONS
Universidade Nova de Lisboa, 2016,
By Babatunde Adelabu
