Benefits of the Integrated Use of Supply Chain and Cost Management Software in the Construction Sector

It is known that the construction industry, one of the oldest industries in the world, is among the least adaptable to digital transformation. McKinsey’s current research also confirms this information. (The Future of Our Business – Turkey’s Talent Transformation in the Digital Age / January 2020) According to the survey; production, mining, and agriculture sectors are shown among the sectors with the highest automation potential. The intensity of physical activities envisaged as the reason for these sectors to stand out is shown. The construction sector can also be considered as a sector with intense physical activity, but the fact that these activities are usually unpredictable makes the automation potential low. The scattered and remote location structure of construction projects, environmental conditions, working with subcontractors, project-specific one-off cost items can be summarized as the reasons for digitalization to lag behind other sectors.

Companies in the construction industry generally; It is divided into two categories as large companies undertaking multi-million dollar projects worldwide and small & medium size family companies. Reasons such as the desire of the companies in the second category to be competitive with the companies in the first category, the need to control the stocks arising in the projects, to follow the budget overruns and delays, working remotely, decreasing profit margins; Despite all the difficulties in the sector, it forces companies to find the most suitable digital solution for them and the number of companies taking steps in this direction is increasing day by day. At this point, supply chain and cost management software developed especially considering the sectoral characteristics is advantageous. Due to the unique nature of construction projects, the exact adaptation of supply chain and cost management practices applied in other sectors will not provide the desired benefit.

The supply chain in the construction industry generally consists of the following steps:

  • Quantity survey of materials
  • Preparing a request for the supply of necessary materials
  • Transmission of the request information to the relevant purchasing department
  • Identifying the vendors from which materials can be procured
  • Receiving quotation from vendors
  • Technical and commercial comparison of quotations received
  • Vendor selection
  • Purchase order process
  • Monitoring the material delivery process
  • Material distribution

The cost control process in the construction industry generally consists of the following steps:

  • Defining cost code hierarchy
  • Creating the planned budget based on cost codes
  • Realization of project expenses (material purchases, service purchases, personnel costs, machinery & equipment costs, etc.)
  • Updating the planned budget regularly
  • Monitoring and reporting the cost control process in real-time

So, what are the benefits of a digital solution that we can manage the supply chain and cost control processes in construction projects?

 

Bring Under Control to Budget Exceeding

In traditional methods, where data flow is provided from systems where project accounting records are kept, if the time when the purchase order is passed to the vendor and the time of invoicing is different from each other, the accounting record occurs late and the actual costs cannot be monitored instantly. In systems where two processes can be built fully integrated, it becomes possible to follow the budget instantly from the material/service request. Thus, the risk of out-of-control costs that always exist in construction projects can be minimized.

 

Material Distribution Can Be Tracked and Project-Based Cost Can Be Created

Especially for companies that carry out projects in different locations around the world and make central purchases, the distribution of materials to the relevant projects is as important as the supply of materials. Delay of material supply in construction projects does not only disrupt the project plan but also prevents the operator and the construction machine from working. Thanks to the digital solution we will prefer, we can manage the bulk-purchasing process of materials ranging from bulgur used in the kitchen to expensive construction equipment to be used in multiple projects and follow the distribution process. It is ensured that the costs of the materials after the distribution of the relevant projects are formed in the correct cost codes on a project basis.

 

 

Provide to Coordination Between Departments and Stakeholders

All construction projects, small and large, are generally multi-stakeholder projects involving different stakeholders such as employers, vendors, contractors, subcontractors, designers, and consultants. Thanks to digital solutions, where supply chain and cost control processes can be monitored in an integrated manner, coordinated work of different stakeholders / different departments is ensured. In an ideal purchasing process; In the project, a material request is created by the needer. The project warehouse manager checks the project warehouse and determines whether the need can be met from the stock.

The project manager approves the request, taking into account the project budget. The purchasing unit determines the vendors who can receive offers. Vendors transmit their offers digitally through an interactive platform. The engineering department analyzes materials that require technical evaluation. By collecting the commercial conditions and technical evaluations, the purchasing unit chooses the vendor, and the purchase order is created. Material is accepted to the central warehouse by the warehouse manager and distributed to the project warehouse. The supplier invoice is recorded by the accounting unit based on the relevant purchase order, and the invoice is paid by the finance unit. Managing this flow by software provides coordination between departments and stakeholders; Traceability is provided from the moment the material is requested to the moment the payment is made.

 

In addition to these, integrated supply chain management and cost control systems provide benefits such as advanced reporting, creating a transparent and auditable structure, multi-company, multi-project coordination, and know-how transfer to similar projects.

Using software specially developed for the sector with the contribution of ENKA İnşaat’s knowledge of more than 60 years in the sector and its experience in the field, you can manage your procurement and cost control processes in your projects with EGFS – Global Finance System and EGPS – Global Procurement System