Improving efficiency in construction - protecting operations and minimising costs

Construction businesses must find ways to effectively align and integrate end-to end processes if they are to improve their customer service, realise challenging efficiency targets and become more outcome-focused. This has never been more important as it is in the current climate, with pressure on margins, shortage of skilled resource and new innovative companies entering the marketplace.

Below are some of the things to consider to make sure your business is optimising its operational and cost efficiencies. 

IR35 – how do you protect your project’s worker supply chain?

Due to the coronavirus pandemic the IR35 reforms were pushed back from 31 July 2020 to April 2021. Even with this additional time construction businesses need to be preparing for IR35 now.

The reforms are set to have a significant impact on the construction sector. Arrangements which would fall under IR35 are extremely common in construction projects due to the reliance on intricate supply chains. To add to the impact, IR35 will interact with the Construction Industry Scheme (CIS). 

Businesses that are end users need to be aware of the potential increase in costs, which could be substantial, and the significant challenge in identifying the existing arrangements that will be caught by the new rules.

Undertaking due diligence on labour supply chains will be essential to protect your labour resource and manage extra administration and costs. Under the new legislation transfer of debt provisions apply in the chain, which transfers PAYE and NICs liabilities up the supply chain if there has been non-compliance in the chain. 

Procurement – no longer a race to the bottom? 

Quality standards in the industry are changing, driven most significantly by the need to mitigate the impact of climate change and digitalisation. The common practice of buying on a cost basis is no longer viable as it’s too often associated with a compromise on quality and sustainability. The reputational impact if projects are not delivered to the expected standard can be hugely damaging to a business. 

A policy of procurement based on high quality standards and sustainability is unavoidably associated with high costs. Almost 50 per cent of firms said they expected green buildings to incur higher costs. However, there are tangible benefits to committing to quality and sustainability. 

Demonstrating a commitment to sustainable construction will boost your organisation’s reputation. Consumer research shows that customers are much more likely to use companies who are associated with ‘good causes’. This could open your business up to new customers and a loyal client base.

Consolidation and divestiture in the market

operational efficienciesLocking in quality and cost assurances is easier when you can control the mitigating factors. Vertical integration is looking more and more appealing for many businesses that want to increase the control over their supply chain and reduce their costs. Collaboration remains key to mitigating upward margin pressures from suppliers. 

Consolidation within the materials and product distribution market has been increasing in the last three years. Companies have looked to combine mitigation of margin pressures with expansion of geographical reach in order to position suppliers close to the point of construction.

On the flip side of this companies wanting to refocus on their core operations will be looking to sell off non-core business units. For cash rich businesses this presents an opportunity for acquisition. 

Setting up a new business arm takes considerable time, effort and investment. Ensuring that the business remains committed to its long-term goals is more crucial than ever. Selling an underperforming channel, to invest in other critical channels in line with the business’s core practice would ensure that the business is playing to its strengths.

Embracing e-commerce 

The coronavirus lockdown has cemented e-commerce in British buying habits and the construction industry is not immune to this shift. However, procurement in construction has been slow to digitalise. In the current climate the benefits of e-commerce are tough to ignore. 

Along with the shift in buying behaviour, understanding your customer and supplier behaviours and anticipated changes is key to a company’s success. Buyer behaviour has changed and that might in part be due to who is doing the buying and selling. 

Much of the workforce of today was born in a computer literate world. They will therefore expect to be able to do their research online and to find the information they need online, including customer reviews, availability and the specifics of the product or service. A company’s carbon footprint and sustainability is now as important as accessibility, quality and costs.

Getting on board with this shift will enable your business to focus on cost and operational efficiencies, keep up-to-date with the evolving expectations of buyers and will prove an effective time efficiency tool. 

 

We can help

RSM can help your construction business optimise its operational and cost efficiencies. Contact Sukhi Johal to find out more.

Contact Sukhi

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