Re-thinking e-Commerce In The Construction Industry
It has been well documented in both the UK and US that there has been a growing need for the construction industry to adopt innovative ideas and methodologies in its operations for many years. And even with new housing construction starting to increase in the US market, now is not a time to turn our backs on controlling costs and improving business best practices.
One of the more often overlooked opportunities for cost containment in construction is information technology – and more specifically e-Commerce. Historically, objections come in the form of initial set up costs, the fragmented nature of the industry, loss of personal contact, and the cost and time of retraining as well as the one-off nature of the product. But with benefits of reduction in AP and AR overhead from faster transaction processing, fewer errors, and less paperwork, e-Commerce improvement is one of the lowest hanging fruits of cost containment available to this industry.
The Need to Improve
The global economic climate has had an obvious impact on the sluggish recovery of the US construction industry, but with the light at the end of the tunnel becoming brighter it is even more important that construction companies put in the foundation for cost controls that prepare them for economic ups and downs. The US construction industry represents about 5% of the US GDP and therefore it is critical that stagnation is prevented through effective use of revolutionary technologies that include e-Commerce to support the day-to-day working methods of the industry.
The use of e-Commerce in the construction industry has been limited compared to manufacturing, automotive, aerospace, and of course retail where eTrading hubs or B2B exchanges are commonplace and mandates on suppliers to be EDI compliant are the norm. Construction however is arguably more complex than grocery or CPG – firstly the product itself is a one-off, requested by the client (homeowner, community, hospital chain, government, etc), then the architect, structural designer or engineering team and of course the contractor themselves. But also consider there is material spend along with subcontractor spend (the guy that pours the concrete or lays the wiring). It’s a massive team effort where every component of the project must be moved to the construction site (its like building a manufacturing plant every time you build new product).
And the information flow between all of these business entities still remains largely manual and hence can be very slow.
E-Commerce has evolved over the past decade and has contributed to the transformation of many industries. Automotive manufacturers and retailers boast > 90% supplier EDI enabled communities achieved through mandates and supplier enablement programs designed to help suppliers achieve the IT infrastructure requirements in order to be approved as a supplier.
Technology must be adopted by this industry and those construction companies that move the fastest and collaborate with e-Commerce partners to deliver the specific solution they need with come out on top byrecognizing benefits such as:
- Elimination of costly paper based processes
- No re-keying of information
- Auto-matching of invoices and orders
- Reduced number of invoice queries
- Elimination of rogue spending
- Automation of the procurement process to achieve bottom line savings
The Way Forward
Until now the attempts to harness electronic data integration for the entire construction sector have been very difficult to realize, with the majority of buyers and supply chain partners still unable to make the move to integrated e-commerce. The way forward for the construction industry is to harness the power of hosted B2B e-business services designed specifically for the construction industry. E-Trading Hubs or B2B exchanges are what will enable any size business partner to fully realize the benefits of electronic trading – these Hubs should be “open to all” and provide fast track rollout methodologies to help both suppliers and buyers get up and running within 24-hours.
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