The challenge of Digitization in the AEC industry

Since the past 40 years, Engineering and construction (E&C) has never seen a significant revolution, in contrast to other industries, and has been hesitant to accept new technologies. As a result, productivity has remained constant or, in some circumstances, even decreased.

Large projects across all asset classes often take 20% more time than expected and cost up to 80% more than expected. Since the 1990s, construction productivity has decreased in several areas. Financial returns for contractors are frequently poor and unstable.

For instance, project planning is frequently done on paper and is not coordinated between the office and the site. Contracts lack incentives for innovation and risk sharing, performance monitoring is inadequate, and supply-chain procedures are still unsophisticated. Even while new digital technologies require upfront investment and have tremendous long-term advantages, the industry has not yet accepted them. Less than 1% of revenue is spent on R&D in the construction sector, compared to 3.5 to 4.5 percent in the car and aerospace sectors. This is also true for IT expenditures, which represent less than 1% of construction revenue even though several new and useful software programs have been created for the sector.

According to McKinsey & Company, the world would need to invest $57 trillion in infrastructure by 2030 to keep up with the expansion of the global GDP. Players in the construction sector have a strong motivation to find ways to enhance productivity and project delivery using new technology and better procedures.

The key is digitalization. A growing number of construction projects now include digital sensor systems, intelligent machinery, mobile devices, and innovative software applications. This trend has set a pace due to the worldwide COVID-19 outbreak. Several participants in the construction industry were pushed to digitize and employ technology to increase worker safety and efficiency. This trend is only expected to intensify.

Strategies for adopting construction technology in the AEC industry

Construction trends are gaining momentum. Although most E&C organizations have previously implemented construction technology software products for various use cases, many do not fully realize their potential. Even when a business successfully tests a new tool on a small scale, widespread adoption may be challenging or lose momentum rapidly. In other instances, technological attempts fall short of generating appreciable gains in important key metrics.

To get past these challenges, the company must follow strategies that incorporate the following elements viz. focusing on the customer’s experience, utilizing the full suite of tools, new management systems, cultural transformation, etc.

Advantages of integrating technology with the construction industry

Case Studies:

1. Company: Grimard

Challenge:

• Needed a strategy to efficiently communicate information to stakeholders, share project details, receive feedback and digitize the manual process.
• Needed to develop a system and also to accurately estimate a project cost.

Solution:

• Procore developed a way effectively communicate with stakeholders and provide complete transparency on project expenses and planning.
• Developed a tool that allowed Grimard to use past information to improve project estimates. Grimard was able to simplify its bidding procedure, which increased its appeal to potential customers and aided in the growth of the business.

Results:

• Fast Results
• Data Visibility
• More Accuracy

2. Company: Tata Steel

Challenge:

• Manual methods and experience were used to run the processes. This resulted in getting 65% efficiency

Solution:

• Build an optimization model that would examine the real-time operations and increase efficiency.
• Used data analysis and data science to develop a tool that would help them improve performance.
• A model was created using sensors to collect data, raising the efficiency to 90%.?

Results:

• Increased productivity
• The model produced an annual cost saving of $4 million.
• The efforts gave $70 to $80 million of value and 2-3% points of EBITDA uplift

Key Takeaways

Digitalization in the construction sector has several potential advantages. Today, digitalization catalyzes transformation. Construction is one business that is significantly lagging while nearly every other sector transitions to digitalization for better growth. Although BIM, Machine Learning, 3D printing, and robotics are being integrated into the workflows of the construction industry, it is still seen to be the least digitalized sector.

Strategies need to be developed to facilitate the AEC industry to adopt digital practices by establishing a culture that is open to adopting new trends, investing in talents and skill building, exploring opportunities in start-ups and mergers & acquisitions, focusing on the end users’ requirements and adapts with the technological changes and establishing scenarios of success for through piloting.

There are numerous benefits of adopting construction technology and their purpose is to make processes easy, access information faster, improve customer experience, increase productivity, lower operational costs, improve decision making, improve information security, higher mobility, automation of business processes, agility, and disaster recovery.

These benefits are seen in terms of project delivery and enhancing productivity across different projects and construction companies are also intensifying the momentum of adopting technology to optimize the processes. Manual & conventional processes are becoming redundant day by day and the AEC industry is shifting towards reaping the benefits of technology in transforming the organization.

References

1.????https://www.bcg.com/publications/2016/how-technology-is-revolutionizing-construction

2.????https://www.mckinsey.com/capabilities/operations/our-insights/the-new-age-of-engineering-and-construction-technology

3.????https://www.mckinsey.com/capabilities/operations/our-insights/seizing-opportunity-in-todays-construction-technology-ecosystem

4.????https://www.procore.com/casestudies/grimard

5.????https://www.bimandco.com/en/companies/244-hitech-cadd-services/297-the-rise-of-pre-fabrication-and-formwork-in-aec-industry#:~:text=The%20rise%20of%20Pre-fabrication%20and%20formwork%20in%20AEC,a%20whopping%20%24155%20million%20by%20the%20year%202023.

6.????https://www.pwc.com/us/en/industries/industrial-products/library/next-in-engineering-construction-trends.html