If you could know what the future held for you, would you want to know? In our personal lives, this question usually requires a great deal of thought as surprises provide plenty of spice for life. In business, the answer is simple: Most leaders want to know everything they conceivably can about the future so they can anticipate and protect against construction risk that is on the horizon.
In today’s era of data-driven enterprise operations, construction firms can get more insights and projects than they could in the past. Enterprise resource planning systems provide visibility into operations that would have been unrealistic to obtain in the past, giving you a personal crystal ball that lets you engage in meaningful construction risk mitigation.
Using data to handle risk
A Construction Executive report explained that the amount of data generated within building projects is increasing quickly. As a result, organizations often run into significant overhead in trying to manage and communicate that data over different parts of the business. However, the companies that do get data to the right people at the right time are able to reduce risks by gaining greater visibility into operations.
When your data silos disappear, your various leaders can get a clear picture of what is happening in your business and minimize the risk associated with any decision that may be made.
This sounds great, but the benefits don’t just exist on a project-by-project basis. They also extend to big-picture business issues.
Getting ahead of risk
A successful project begins well before you break ground. You need to begin managing construction risk before you even commit to a build.
Picture this: You have a sales team developing a bid. They have access to annual reports on revenues, an accountant in place to provide insights into current fiscal capabilities and a project manager who knows your construction team there to ensure you have the skills to handle the demands of the project. However, the data this team is using to make a bid is spread over a bunch of spreadsheets, paper files and other sources of organizational knowledge.
As the team is preparing its bid, it becomes clear that you are dealing with a highly variable opportunity cost. On one hand, the revenue potential is significant because you know the customer will have more properties to build once they find a builder they can trust. However, you have a few projects scheduled for a similar time frame as the initiative you’re bidding on and aren’t sure you’ll have the available capital or human resources to handle the demands.
What do you do?
- If you decide that you lack the resources to make a competitive bid on the project, you risk missing out on significant future opportunities.
- If you bid even though resources will be tight, you’re left with little margin for error and risk having the project go poorly, tarnishing your reputation with the developer and costing you heavily as problems emerge on the project.
Solution: Getting better at using historic data alongside existing project information and near-future projections can empower organizations to quickly evaluate the opportunity costs of sales decisions.
Furthermore, this type of visibility remains valuable throughout a project as stakeholders work to respond to problems as they arise and make the best decision possible based on available data.
Taking full advantage of forecasting
Within this conversation on anticipating future resource availability to mitigate risk, it is important to keep the full scope of projects in mind. It isn’t enough to have a deep understanding of raw material availability, for example, while underestimating the staffing requirements of a project. You need to bring together data from across every part of your business if you want to forecast effectively, and enterprise resource planning solutions are especially important in these situations.
An ERP system will bring together data from the entire organization, letting you blend project-specific information with big-picture company data to help you identify potential risk in advance to prepare contingencies and avoid potential pitfalls.
Ultimately, effective project and financial planning begins with understanding and mitigating risk, and an ERP system gives you the combination of data visibility and accessibility needed to make better decisions across every phase of a project, from opportunity management out to constructing your bid, gathering resources and actual building.