Overcoming Construction Struggles With Predictive Procurement

In years past, the construction industry lagged behind the pack when it came to predictive procurement and digital transformation. After all, procurement in construction faces many unique challenges and requirements, making it a historically difficult industry to manage effectively.

Fortunately for construction companies, new solutions have emerged to meet their challenges. Today, the right procurement software can streamline procurement processes and help procurement managers level-up their current methods of addressing common problems such as project delays, quality control, sustainability, and risk management. 

In this blog we’ll break down the current construction procurement landscape, give context to common issues procurement managers face, and provide several groundbreaking solutions.

The Accelerated Challenges of Construction Procurement

Since 2020, the world of construction procurement has faced a steady slew of challenges ranging from the typical, such as effectively managing project timelines, to the atypical, such as accounting for unexpected material shortages. Unfortunately, in the wake of the global pandemic, these challenges seem to be construction procurement’s “new normal.” 

For example, today’s construction procurement managers are tasked with juggling increasingly complex tasks, such as battling supply chain problems, accounting for rising costs, and assessing risk. In short? Construction procurement’s problems have been accelerated.

A Supply Chain Crisis
In recent years, material shortages went from rare to commonplace occurrences that, while impossible to predict with certainty, must now be accounted for in nearly every construction project. Otherwise, unexpected costs can hit construction companies where it hurts and leave customers in the lurch.

Coupled with rising inflation and material costs, delays in global supply chains are creating a challenge to keep up with demand. In turn, construction procurement managers are struggling to maintain profitability and production schedules. Effectively managing supply chain delays is a complex problem with no end in sight.

Flexibility Is Key
Because of these supply chain problems, construction companies have to be agile when it comes to procurement if they want to succeed. Indeed, having a variety of options and back-up plans is a necessary strategy to keep customers happy and projects moving forward. These days, flexibility is key when it comes to successful procurement practices.

Accelerated Problems, Accelerated Solutions
Despite all the emerging problems of recent years, the news isn’t all bad. Many technologies are accelerating their solutions to better enable and prepare procurement managers to do their jobs effectively and efficiently.

For example, when it comes to worker safety, emerging safety technologies are positioned to start predicting future hazards and accidents before they even occur. Similarly, agile procurement technologies, such as Arkestro, are able to address ever-shifting supply chain problems with predictive procurement through machine learning. Even sustainability technologies are emerging to help construction companies invest in more renewable sources.

The ROI of AI in Construction
If any construction companies are on the fence about how to mitigate the industry’s current challenges, investment in automation is a great place to start seeing ROI. Automation, through AI and machine learning technologies, can greatly reduce the resources and oversight needed to manage supply chain and other procurement issues.

The impact of investing in AI can be substantial. For example, an EY survey found that companies who invest in automation:

• Reduce processing time by 98%
• Reduce opex costs by 35%
• Remove error rates for 100% accuracy
• Reduce transaction turnaround time by 50%

Machine learning alone can be a powerful tool when applied to construction procurement. Machine learning tools don’t require specific programming, but instead use patterns and inferences to conduct the best work possible. Arkestro applies machine learning to alert, recommend, and help procurement teams make the right decision at the right price and time.

4 Common Construction Procurement Problems

Within the current landscape, the construction industry is facing several hurdles that procurement managers alone have a difficult time addressing. Without a solution that can help them automate processes and inform decisions, procurement professionals are often stuck with these common problems.

Let’s break down four common problems.

1. Project Delays
Delays in construction projects can occur due to various reasons. As we mentioned above, supply chain disruptions can affect materials, which inevitably sets back start times and project phases. Additionally, unforeseen site conditions or weather conditions can affect project timelines.

Any delay can impact the procurement process. As the adage goes, time is money. Additional costs add up over time, if only for addressing the labor costs of lengthening a project longer than it needs to be. Keeping projects on time and on budget is a priority for procurement managers, but very difficult to anticipate when unexpected costs and delays occur.

2. Quality Control
Ensuring that the construction project meets the required quality standards can be a challenge. Whether from regulatory entities or simply to meet client demands, providing quality control measures is key to maintaining a successful construction business.

To avoid any potential issues, procurement professionals must work closely with suppliers and contractors to ensure that the materials and workmanship meet the requisite specifications and standards.

3. Sustainability
Increasingly, construction projects are required to meet sustainability goals. This introduces a new and difficult challenge to procurement since using sustainable materials and practices befalls the procurement professionals charged with finding those materials.

Ensuring that the project meets the required sustainability standards is an emerging concern that procurement managers need to be aware of and plan for.

4. Risk Management
Risk will always be a primary concern for the construction industry. After all, construction projects involve various risks, such as safety risks, financial risks, and legal risks. A recent Oracle survey found that the top five areas of risk concern among leaders in the construction industry included:

• Health and safety
• Supply chain health
• Material availability
• Worker availability
• Cost overruns

Procurement professionals need to identify and manage all of these risks to ensure that the project is delivered on time, within budget, and with minimal disruption.

While these four challenges are common for most procurement professionals, they don’t have to be obstacles.

How Predictive Procurement Helps Construction Companies Thrive

Arkestro is a leading provider of predictive procurement software for construction companies. By applying the power of behavioral science, game theory, and machine learning, Arkestro’s platform greatly reduces the pain points felt by supply chain issues, no matter your current sourcing strategy.

Arkestro helps your construction procurement team in a variety of ways:

• Manage Risk & Project Delays: By leveraging internal purchasing data against external data (such as firmographics, risk, and ESG data), Arkestro can prepare you for upcoming supply chain shortages due to macroeconomic events (like a global pandemic or war).
• Improve Regulatory Compliance, Quality Control, & Sustainability: Arkestro flags supplies with low compliance rankings or low rankings for environmental impact, ensuring you can stay compliant and sustainable.

In addition to experiencing a 2-5x lift on cost savings through everyday purchasing and sourcing cycles, with Arkestro, you can:

• Reduce procurement cycle times
• Improve contract compliance
• Lower costs and increase profitability
• Gain greater visibility into your procurement process
• Streamline supplier management

Construction procurement can be a complex and challenging process that requires effective planning, communication, and collaboration among various stakeholders. Procurement professionals need to be aware of these struggles and work proactively to mitigate them throughout the procurement process. 

Arkestro’s solution can help your construction procurement processes improve. Read how we were able to significantly reduce the lead time on bill of material items for Power Design, Inc., a national design build contractor. Schedule a demo to learn more.