Read the article in Construction Outlook magazine - October, 2017
Driving Profitability
With a Field-centric Approach to Cost Management
By: Greg Norris, B2W Software
Utility construction costs occur in the field. That’s where collaboration and insight can help contractors control them. The problem is, many contractors continue to rely primarily on financial or ERP systems to tell them how they are performing versus plan. Now, operational software and mobile capabilities are paving the way for a more effective field-centric approach.
As margins get tighter, and projects get larger and more complex, status-quo cost management methods can no longer cut it when it comes to staying on budget and on schedule. Lag time in viewing daily data on labor, productivity, materials and equipment utilization prevents managers and executives from making timely, data-driven decisions to adjust operations in the field and protect profitability. Accounting systems are also limited when it comes to giving teams responsible for managing projects in the field a clear understanding of the overall performance expectations or an accurate picture of where they stand versus the plan/budget on a day-to-day basis.
Disconnected operational processes based on paper, whiteboards, phone calls or software applications that don’t talk to each other compound the challenges. They prevent the field, maintenance and scheduling/dispatching teams from working cohesively to deploy crews, equipment and materials in the most cost-effective manner.
A Field-centric Alternative
A software platform for estimating and operations doesn’t replace financial accounting or ERP systems – it complements them. These are the most critical ingredients for effective field-centric cost management:
Seamless data transfer between the bid and the field log
Unified software applications for estimating and performance tracking allow bid data to be translated and transferred directly to the field log. Eliminating the need to manually interpret and re-key the data eliminates ambiguity and errors. As they are setting up and planning a new job, superintendents, project managers and foremen know exactly what the scheduling and budget expectations are. Conversely, contractors benefit when data on actual costs incurred in the field travels back to the estimating workflow automatically to improve the accuracy of future estimating, budgeting, planning and scheduling.
Collaboration across workflows
The three operational workflows with the biggest impact on job costs in the field are scheduling/dispatching, performance tracking and equipment management. When specialized software applications used to manage these workflows are unified and use a single, shared operational database, data flows freely. Employees can collaborate and work more efficiently to keep projects on schedule and on budget.
Daily field performance tracking
Many heavy construction contractors rely on a performance tracking process involving field logs and time cards (usually paper) compiled weekly and delivered to the office. That data on labor, equipment and material costs is then be re-keyed manually into an accounting system in order to produce reports. The problem is, those reports reflect what happened one to two weeks ago. By then, it may be too late to correct or recover from factors pushing a project off schedule or over budget.
Alternatively, electronic field logs and performance tracking software allow management to take a field-centric rather than an accounting-centric approach. Data entered into the electronic log is visible in real time. Managers can generate reports and evaluate costs on a daily basis, allowing them to react faster and make informed adjustments to field operations. Bypassing the accounting system and communicating progress daily also provides practical and motivational advantages for the field team. They know where they stand versus the budget and what they need to do on a day-to-day basis to keep projects on target.
Mobile technology to empower the field team
Mobile technology continues to revolutionize heavy construction and it’s pivotal to field-centric cost management. Step one is the electronic field log. Equipped with tablets, employees can capture field performance data where and when it happens and communicate it in real time. That increases the accuracy, quality and timeliness of the data. Mobile devices can also provide the field team with easier access to vital information. Everything they need to work more efficiently and make better, data-driven decisions – from the latest forms and documents to business intelligence reports and dashboards – is literally at their fingertips.
Financial accounting and ERP systems are great for their designated purposes. Frustration for contractors stems from the fact that these solutions are not built with the field in mind. They fall short for tracking and controlling costs at the operational level – the critical point where insight into project progress and can enable data-driven adjustments to drive profitability.
The promise of an all-in-one solution for accounting, estimating and operations also remains unfulfilled. One system simply can’t do it all and still deliver the logic, features and functionality needed by financial executives in the office and employees in the field.
