Going Digital in the construction industry to reap $1.6 trillion in potential savings

An article in Fortune (October 2018) titled “Building with Bits and Bytes” reports that the construction industry is replacing paper with digital drawings, enabling collaboration with architects and reducing the 33 percent reported waste, totaling $1.6 trillion. The construction industry’s productivity improvement is estimated as 1 percent, vs 2.8 percent for the overall economy. Will competition across builders mean lower construction costs as a result of digitization? Will maintenance costs decrease as a result of better designs? Will construction firms devise their own proprietary software to optimize designs and construction costs?

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17 Responses to Going Digital in the construction industry to reap $1.6 trillion in potential savings

  1. Tyler Le Roy says:

    When a company sees efficiency improvements, they have the opportunity to generate higher profit margins until the competition “catches up”. Once the competition “catches up”, the new equilibrium price is reduced and the efficiency improvements are passed to the customers through lower prices AND better designs.

    With the new economics equilibrium has been established, construction firms will be looking for ways to have that competitive advantage. They will invest in their own proprietary software to further optimize their designs and reduce construction costs. All with the intention of increasing their profit margins. This competitive cycle is what creates innovation within an industry and advances our civilization.

  2. Neha Purohit says:

    The product and raw material remain the same in the construction business; every construction project differs which changes the supply chain. The delivery method and information sharing to prevent litigation methods are challenging to manage.
    Collaboration technology will determine from the construction schedule development to design work, communicate to enable new opportunities and better outcome. Integrations of the project will simplify the supply chain; technology companies are mining the data for real-time information about the project. The number of days to deliver, the number of contractors, usage of raw materials and design timing(Autodesk, 3-D printers) can be governed and correctly forecast in advanced which will lower construction and maintenance costs.
    The construction business can have cloud-based business or IOT which will help contractors to perform expertly with collaboration, streamlined opportunities and less litigation-focused manner. The integrated technology including supply chain can offer significant ROI.

  3. Tony Merlie says:

    Theoretically digital drawings should help the processing times of plans. Just the time to print detailed drawings alone should result in system improvements between the designers and architects that will make firms more competitive. Anything that speeds up the process from design stage to building stage is good for business and should result in competitive pricing.

    Can constructions firms develop their own proprietary software? I would be interested to see if that can happen as I would expect that takes a large amount of resources…more likely I would see them modifying the widely available software that is out there.

  4. Michael Morad says:

    Although there will be competition across builders this doesn’t mean that there will be substantial lower construction costs as a result of digitization. The reason for this is that digitization can reduce costs of printing and reprinting drawings. It also means that architects can make changes much faster and easier which will translate to savings. However, I don’t see it reducing actual construction costs. The savings will come from saved time. Faster designs and drawings will then lead to faster approvals and then construction. Maintenance costs could decrease as a result of better designs; however I don’t imagine there will be a huge delta in costs. By bench marking designs and implementing best practices there will definitely be better product, however how much this will drive down maintenance costs remains to be seen.

    Although digitization is exciting and the way of the future I can’t imagine construction companies designing and implementing their own proprietary software. Software is highly specialized and designing, building and validating software would be a complete spin off of construction. For this reason I imagine companies will use an off-the-shelf software and customize or configure it for their business with the assistance of the software developer. Besides optimizing designs such software could track man hours and materials costs (including scrap) to form a better understanding of each job. This data would then be analyzed to improve worker performance, reduce scrap and other waste as well as help builders better estimate the cost of a project.

  5. Jennie Killian says:

    We are currently in the process of building a house-so we are experiencing the inefficiencies of the construction process first hand! Thus far, the least of our problems have been with the drawings/designs of the project. I agree that a decrease in paper would be fantastic-but I don’t feel that is where they are losing money. I fear that if the subcontractors can’t accurately perform their parts of the project with a paper drawing, it could be even harder with digital technology. It would require 100% participation from all of the subcontractors-and I think that integration would take time. As well, working with multiple subs could lead to even more problems. Plus- you would have to train the eyes/minds to be able to read these drawings. So many people value the ability to lay it out on the table and talk it out-mark it up and then integrate the changes.

    It would be interesting to see how digitizing the process could lead into proper supply amounts and orders. This area could definitely decrease waste-we are constantly awed at the amount of wasted materials that go in the dumpster on a daily basis. If you could hone in and not waste all of the lumber and other supplies-that’s where a significant savings could occur. This could definitely lead to a competitive advantage.

    It would make sense for there to be a uniform software available on the market-potentially it could be developed in conjunction with the suppliers who would have more capital and an understanding of how to streamline the ordering process.

  6. Sean Michael says:

    As innovative as this new process is as it seeks to improves efficiency, I doubt there would be a reduction in construction cost to the customer. Building companies will most likely use those net changes to reinvest in expanding capacity and throughput. However, maintenance costs could see a decrease as a result of better designs. A big part of that improved design would need to also include more maintenance friendly materials as well to help reduce the costs. As construction companies seek to stay relevant, they will more than likely implement their own designs following the same concept. Once the benefits within the industry become more widespread, there will most likely be a huge shift towards digital drawings.

  7. Brian Long says:

    In the long run yes, lower construction costs at least in the design phase will come down and already appear that they have. There have been a few front runners that have jumped out to a head start but I’m not sure that is any advantage at this point or has yet to bring prices down across the entire industry. Maybe the savings are being reinvested to have a more eye-catching design at this point. There is a learning curve for all and others that are new to the game are building risk into the first few projects until they understand how it all works. I can see that overall construction cost will drop because it is becoming more and more likely contractors work off digital prints and not a paper print that could be old and revised, causing rework in the field.

    Maintenance cost will also become lower on a typical office building. As buildings become smarter and “talk” to us via IOT and building automation systems the data is computed in the cloud. Analytics and things like Fault Detection and Diagnostics (FDD) reduce preventive maintenance and downtime as well as material cost.

    I think that construction firms will and have already developed their own proprietary software to optimize and get a competitive advantage. But, whatever the software it would be wise to make sure it can export or interact with collaboration software that the industry is trending towards. One that I see becoming more and more popular is BIM 360. It’s a cloud-based workshare that lets contractors virtually design/install on a 3D module for the most part. Much more powerful than that but you get the idea, real time data and project collaboration by all major trades.

  8. Maya Devakiamma says:

    Competition across builders doesn’t indicate lower construction costs. Whoever takes time as a true resource for competitive advantage will leapfrog the game. Technological innovation and its application is something every industry is capitalizing on. Technological innovations in digitalized designs would improve overall quality, reduce cycle time, speed to delivery, along with possibly lower maintenance and monitoring costs.

    Better/quality designs along with IoT devices would improve safety, increase monitoring, lower the overall maintenance costs with reduced manual inspection overheads/errors. Digital media helps construction teams to collaborative and validate from start to finish which helps firms to be more competitive. Speeding up the process from design to delivery helps a firm to lower their overall cost.

    Wouldn’t recommend construction firms to devise their own proprietary software, rather focus on using available “software tools” to optimize their work. Construction firms would certainly take advantage in partnering with software firms to collaborate and create an ecosystem to add value.

  9. Brett Damisch says:

    I believe that the digitalization of construction prints will cause the costs of construction to decrease in an indirect way. With digital prints, more contractors are able to bid on projects. As more contractors bid, the market becomes more competitive. Maintenance costs ought to decrease immensely. With digital prints, one will be capable of strategizing efficient plans across multiple projects.

    I do not think that proprietary software would be a smart move. With a software that is universal, they will be able to let multiple companies access the market. A proprietary access website would be the smart way to access the drawings. This would not allow people to access drawings that you would not want to access them.

  10. Jason Meridew says:

    Digitization will certainly decrease design cost in construction. It will also likely improve quality by reducing errors. Digital prints also improve collaboration between different specialties and allow changes and decisions to made remotely thereby improving design lead times. This will likely drive down some construction costs however this cost savings will likely be offset with additional construction design request. Additional features will be requested and provided.

    Proprietary design software is not useful. Designs must be reviewed by many different people requiring the use of proprietary software will reduce this efficiency. In my industry models/prints and distributed in a standardized format that can upload into various software packages. The software can be specialized or standard but must output and input a standard format that is used by everyone.

  11. Andrew Tigulis says:

    Digital technologies are disrupting the industry, providing new opportunities to address the challenges of poor profitability/productivity, project performance, skilled labor shortages, and sustainability concerns. Digitization of the construction industry is not a question of if or when—the changes are happening now.
    The industrialization of construction and the application of proven manufacturing technology and best practices will help companies drive reliable outcomes and improve margins. Digitization will increase productivity, eliminate waste, and mitigate the adverse impact of on-site surprises.
    Digitization will change most everything, including the competitors and the barriers to entry. The end result: a more productive and profitable industry that builds more sustainable assets. Construction companies must take steps now to join the digital future and stay ahead of the competition—or risk being left behind.

  12. Vinutha Ram says:

    Construction projects are complex to manage due to the sheer amount of planning and coordination required at each step. Add to this supply chain uncertainties with materials and it seems like a wonder that any construction project is completed in a timely manner! Digitization helps builders by providing a visible platform for all parties involved (contractors and suppliers), reducing chances of miscommunication and potential for mismanagement. If used effectively, it can lead to reduced errors and therefore reduction in costs. Having no ambiguity in the details of the design can also mean less rework and lesser maintenance costs.

    While construction projects differ in complexity and duration, the foundation of each project and the guidelines for project management are quite standardized in the industry. I believe construction firms would be better served by using standardized software with customizations rather than creating proprietary software.

  13. Vish Thottingal says:

    Paper waste is reduced by digitizing, but have we completely eliminated paper. I spend few years as design engineer in the initial part of my career and digital design had saved time and resource when we go through multiple iteration internally and externally (for city approval), however during implementation the field engineers preferred paper for ease of use and reluctance to adopt technology. Over the last decade there has been multiple innovations in the construction material and machinery. Construction industry is probably one of the oldest sectors and is in the mature to consolidation phase of the industry cycle. Competition does lower the construction cost through innovation and productivity gains. High tech products do increase the durability of the product and thereby reducing the maintenance cost. The biggest enemy to construction industry is time and the over run it incurs due to delays.
    I am not in favor of construction firms focusing on building their own proprietary software, this should be left to the software companies. The best approach in my view is to partner with any leading software company and build a platform best suiting their needs. Construction companies core R&D investment must be on construction engineering

  14. Allan McNear says:

    Digitization is a great means to reduce waste streams for construction companies, improve work efficiency, and potentially lower construction costs. Construction costs continue to increase based on the increased pricing of building materials. I don’t believe digitization alone will be enough to reduce construction costs.

    The opportunity for reduced maintenance is very likely with improved designs. The construction teams can promote their product requires less unscheduled maintenance over time than their competitors.

    I believe the construction firms should leave the software to the experts and continue focusing on their core business.

  15. Digitization in Construction industry is inevitable, digital construction plans have allowed architects and engineers to develop better designs by simulating different situations. Satellite imagery is used to identify geographical conditions which prevail therefore digital tools would definitely improve designs and sustainability. Big Data makes it possible to scourge through mountains of data efficiently and find the best solutions
    It is easier for construction companies to look at multiple digital city plans and understand the best designs thus saving many man hours.
    As has been highlighted above wastage can be reduced and supply chains can be improved using digital tools
    I have not really seen any cost competitiveness due to the digital tools because in general construction costs keep going higher and the marginal benefits of these tools do not get passed over to clients. Infact, construction companies may charge higher margins for data analytics in the new world
    However i have seen improvements in accountability. A few years ago we were developing a tool that gave buyers a lot of control over construction companies as buyer would only pay out to an escrow account and only when certain preset milestones were achieved money was released to builders. There were penalties on faulty work and delays. builders could not charge for rework on something that was incorrectly built. Thus both quality and accountability of builders increased

  16. Dan Halverstadt says:

    I work in the utility service industry and we face these challenges every day. While the technology to move forward is there, many times the capital to afford it and the computer skills of individuals can be a barrier to implementation. One of the biggest issues you have bring technology to the field is wireless connectivity and how durable devices are. To find devices that can withstand the heat or cool you have to move into a ruggedized device, in many cases makes the device 10x more expensive. In many cases you can get cellular data, but due to the quality of the prints this uses a lot of data, again increasing the cost. I do believe we are at a place this is possible, but the cost currently is still prohibitive for most.

  17. Ken Kibler says:

    We were told years ago we would move to a paperless society one day. I have yet to see much progress towards the end result of this accomplishment. I feel this process described in the article could make tremendous improvements with efficiency. I can see a new age coming with decisions like this to help advance and stream line drawings to a digital age.
    I believe that it will certainly help with maintenance cost if companies are able to start sharing more information in a digital format. This will eliminate a great deal of incorrect drawings with information lost from the field back to engineers’ desk and simplify the process for real time improvement.
    I think some companies will certainly move towards their own design for competitive advantage. Once companies start to understand how they can use this to their benefit.

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