Employing Technology to Manage the Supply Chain (From CFMA)
Originally published in CFMA's July/August Building Profits magazine. You can find the original article here.
Construction financial executives are increasingly using deep analytics to find new opportunities, evolve their strategies, and develop their company cultures. The most forward-thinking leaders see new narratives forming from this analysis and have found ways to incorporate them into their team management.
Companies that embrace data as a source of decision-making will outlive those that do not. This article will demonstrate how data technology can help to better manage materials, labor, and supply chain issues, as well as give contractors a clearer picture of what is going well (or poorly) in their projects.
Managing material costs and labor efficiency relies on financial transparency, multiple supplier relationships, and sound long-distance supply chain management practices.
Traditionally, these have been managed through long-held relationships, manager and estimator intuition, multiple Excel files, and good negotiation. However, in today’s data-centric economy, contractors have an opportunity to extract even more savings and profitability from their supply chains.
Utilizing Data Technology
Data technologies such as blockchain, robotic accounting, artificial intelligence (AI), and machine learning can help to analyze large amounts of data at scale in a way that no human could replicate. Asa result, estimators can find more savings on materials, controllers can have more accurate predictions of labor hours needed to install it, and CFOs can enjoy a considerable decrease in overhead costs.
Blockchain is not a computer program; like generally accepted accounting principles (GAAP)and Hypertext Transfer Protocol (HTTP) it is simply a protocol or a way to store data in a more secure format. This data format makes it easier to comply with accounting standards and best practices, particularly when there are multiple parties involved. Think of blockchain as a set of rules that apply to how data is stored.
This data technology minimizes the miscommunication in construction by creating an immutable ledger where each block represents a specific event or transaction in the construction process. In doing this, it creates transparency in the materials used and produces a living, breathing digital ledger of every material and action performed in a building.
Robotic Accounting & AI
Once that data exists, it’s important to manage and analyze it. Data about your materials and labor lives in everything –from the manufacturer and supplier of the material to its installation. Robotic accounting, i.e. workflow automation, and AI give contractors the tools to capture all of that information.
Automated workflows accomplishes two major things: First, it removes double data entry.Employees no longer have to spend all of their time ensuring data is entered between multiple systems, particularly when it comes to processing expense reports, payroll, and job initiation workflows. Second, automated workflows begin to build more seamless data pipelines. As contractors move closer to enablingAI in their companies and projects, it is essential to have real time flows of data moving into and out of your systems.
With more data being consumed at scale, it becomes too over whelming for any human to make sense of it. Instead, contractors will be able to start detecting patterns and forming insights using AI. It is then up to leadership to sharing this data at the right time to the right people. At the end of the day, the goal for AI should be to help contractors make better decisions more quickly.
With the combination of blockchain, robotic accounting, and AI, contractors have a living ledger of everything that happens on the project, including anAI-based prediction of how much material will be used on similar future projects. This improves the capacity to locate and share large quantities of data with the many decision-makers and stakeholders involved in the project.
Not only does this predictive power provide value in the project’s construction process, it also provides a robust data log to aid in the management and maintenance cycle. Imagine if the provenance of every material was recorded in a ledger and every installation action was equally noted. With a strong historical record, predicting maintenance cycles and determining asset reliability is much easier. But the data strategy must be implemented early for the full effect to be realized.
Technology in Action
Let’s take a look at one example of how data technology can help to manage materials, labor, and supply chain issues in a project. Australia’s Probuild was awarded the Westside Place and Ritz CarltonHotel in Melbourne, Australia. The high-rise project, valued at $720 millionAUD, housed 1,376 apartments and was one of Melbourne’s largest private developments for a repeat international client. Probuild was prefabricating over 2,000 facade panels in China, but the project often resulted in major delays.
What Went Wrong
Most of the mismanagement occurred in the long and complex supply chain involving various companies, languages, and information centers. Probuild designed the panels, printed spec sheets, uploaded them into e-mail files, and then sent them to be fabricated by a manufacturing facility in China. The Chinese company then translated the documents into Chinese, entered them into an Excel file, placed them on whiteboards, and took pictures of the designs before e-mailing the photos back to Probuild in Australia for approval.
Once approved, the Chinese company programmed their manufacturing machines and made the panels. The completed panels were then shipped to Australia through an outside logistics company. Upon arriving, another logistics company picked them up at the port, brought them through customs, and transported them to a warehouse to be pulled for installation at the job site.
At every point in this multi-party process, information was lost, mistranslated, or incorrectly uploaded. The prefabrication initiative was so slow, inefficient, and unsustainable that the bank responsible for the contractor’s financing asked for $1 million to be put in an account upfront to cover the costs of any and all future mistakes if the project were to continue forward.
Fixing the Problem with Technology
To help consolidate the project information and data flow, Briq, a construction financial technology company, partnered with Ynomia, an internet of things (IoT) device company, to apply IoT devices on each facade in order to track compliance points of manufacture, logistics, and installation of the panels. Sensors were installed on each of the panels as soon as they slid off of a production line in China to provide real-time data to Briq’s platform. From there, the team was able to measure and provide feedback on the panel’s status, including location, temperature, estimated arrival time, and potential damage to the glass.
With continuously updated data, problems and failures were tracked and rectified immediately and, in some cases, were caught before they occurred. The verification system was also used to prompt payment from the financier to the developer, GC, supplier, and install subcontractor.
Then, millions of transactions were used to chronicle the entire process across dozens of fractured systems. This created a map of each panel during its entire life cycle and allowed the building’s data information to be secured in a blockchain system.
The tangible result of this project was a platform for the contractor and logistics firm to plan around real-time data points. All parties involved in the project, including the GC, suppliers, subcontractors, bankers, and insurers all had visibility to this single source of truth and were able to validate construction progress, which saved thousands of dollars in fees for traditional compliance and validation checks. Where are my materials? When will they arrive onsite? Will my project be completed on schedule? These questions were answered in real-time with precision accuracy throughout the life cycle of the project.
All About Decisions
Ultimately, technology should facilitate better decision-making about a project, a team member, or a strategic play. A company might employ the best technology available, but if it doesn’t know how to turn those learnings into actions, what is the value? It’s important to remember the human element that exists in these innovations.
“What improves decision-making is when data is delivered to the right person at the right time,” says Julian Gonzalez, Briq’s Head of Customer Data Science.“That’s what matters most. Traditional projects lose nearly 95% of building construction data at the handover when the build is complete, which severs the end-to-end chronicle of the construction process for owners.”
When preparing documentation for closeout, the highly manual process can often take a month to collect all of the information. Technology can now capture all of those documents by using a data sweep of the entire project, thus creating a secure and complete data source.
Many insurance providers see a day when a project or asset will not be insured without a blockchain ledger tracking all the materials being used in a build. Asset owners might eventually require that their supply chains and materials get added onto the blockchain, especially given the complexity of construction and infrastructure projects in today’s economy. Fortunately for suppliers and manufacturers, the technology available for putting data on the blockchain has improved and, in some cases, only requires a smart device and an internet connection.
While many industries have readily welcomed data analytics, the construction industry has focused more on making incremental improvements to prevent risk and to allow senior project managers(PMs) to continue to manage by instinct.
However, as seasoned PMs age out, much of their deep construction knowledge will be lost. Analytics platforms now give new talent a method to fortify their instincts by allowing judgment checks against real-time, statistically derived information. Additionally, data technologies generate value at all points of a project – project planning, design, construction, operations, and maintenance.
By applying this technology, companies can flag problems with AI that are hard to catch in Excel spreadsheets and alert leaders before it’s too late. Spreadsheets are also unable to account for the wealth of information hidden in the unstructured data like invoices, expense reports, and project documentation in PDFs.
With current industry practices, nearly 95% of building construction data gets lost at the handover when the project is complete.That data is valuable, and with contractors increasingly investing in cloud-based technology, ignoring that data is a waste on investment. Harnessing blockchain and AI creates a single source of truth on projects and creates a data narrative in your business.
In a broader sense, the growing demand for safety regulations, project transparency, and environmentally sensitive construction means that these technologies will become a necessity, not a luxury. Companies that are able to develop this insight into actionable decisions will outperform and outmaneuver their competitors in the years ahead because the risks in construction and infrastructure are too great to not adopt better technology.
ABOUT THE AUTHOR: BASSEM HAMDY is CEO/Co-Founder of Briq, which is located in Santa Barbara, CA. As he is armed with new technology and ideas, Bassem wants to help the industry break those silos down to forge through yet another frontier: AI, machine learning, and predictive analytics. Bassem is a construction industry veteran with over 20 years of experience and is a well-known pioneer in construction technology. He has also played an integral role in establishing an industry for project management software and helping construction companies migrate their systems from paper to software.
To see how Briq's products are eliminating double data entry, preventing fee erosion, and revolutionizing the way construction companies across the U.S. enhance their Fees, book your complimentary demo HERE.
 Tapscot, Don & Vargas, Ricardo Viana. “How Blockchain Will Change Construction.” HarvardBusiness Review. July 26, 2019.