The construction industry is under a lot of strain due to labour shortages and sharp price rises for building supplies. This is backed by a recent market sentiment study from Arcadis and the Australian Constructors Association. Over the past year, several contractors have reported a rise in supplier costs of up to 70%. Industry leaders worry that these problems are yet to end and will continue to affect operations across Victoria, Queensland, Western Australia, and New South Wales.
Understanding the Cause of the Problem
The onset of the COVID pandemic has impacted the construction materials supply chain, raising lead times and material costs. As a result, it caused severe delays and inconveniences to numerous infrastructure projects in Australia. To top it all off, Russia and Ukraine conflict led to oil prices skyrocketing along with the cost of materials. With the predicted pipeline of projects over the next few years, manpower shortages and contractor availability are going to become much more obvious, which will further drive demand and result in higher construction prices
As the world slowly adjusted to the pandemic, several behavioural changes increased the demand for more and bigger dwellings. For example, the e-commerce boom has increased the need for data and fulfilment centres. These have made an additional workforce in the construction industry necessary.
However, the influx of new workers into the construction industry is not as strong as it once was. After being suspended due to pandemic-related safety concerns, training programs have been hesitant to resume operations. The international labour force, which has been a crucial source of talent for engineering, design, and contracting operations, is becoming harder for the sector to draw in.
Additionally, the workforce is getting older, and the construction sector doesn’t appeal much to the younger generation. Most young people don’t find the idea of a rigorous work environment appealing, and without them, the construction industry has had difficulty keeping up with productivity demand increases. The challenges the sector is currently facing are partly due to the industry’s inability to attract young, motivated, and diverse personnel on a broad scale.
The effect of labour shortages does not only affect productivity. Higher hourly rates, premiums and incentives, and overtime pay all contributed to overall labour costs in project execution that were up to twice pre-epidemic levels. Project delays connected to problems with the quality and productivity of on-site work were being reported by certain owners as a result of their inability to find qualified and experienced workers.
Industry trade associations are aware of the issue and have increased training programs to draw in younger people. Companies in the sector should also consider their options now to prevent being left behind and unable to adjust to rising costs, declining productivity, and growing project delays.
In an article, McKinsey & Company provided a few measures the builder industry can take to address its current challenges. Here are ways construction contractors can pull through labour shortages and material cost increases in Australia.
Strategies like task elimination, task reduction, task redesign, or task frequency reduction can all result in productivity benefits. But the more profound the idea, the longer it may take to implement the plan. Therefore, be aware that while implementing this method may not immediately impact your labour shortage, it should have a significant, long-lasting influence.
Moreover, the company can also reap benefits from small changes. For example, productivity may be significantly increased by removing one step from a routine operation. Managers can also relocate equipment closer to the location of the work to cut down travel time. Saving a few minutes might not seem like much, but when it happens thousands of times per day in every operation throughout the entire company, savings will start to build up.
Digital technologies and analytics techniques may help project managers make better and quicker decisions. With the building industry software, they can sustain productivity and keep projects on track. Real-time data gathering, for instance, provides them with earlier and more detailed insights regarding project progress.
Accelerate Recruitment and Onboarding
Companies in the construction sector can enhance retention by reconsidering what employees desire beyond compensation. Understanding what employees value beyond their pay will be crucial for maintaining current employees and luring new talent. Employees now consider a wider range of benefits and workplace qualities when deciding where to work. Because of the pandemic, employees are prioritising autonomy, flexibility, assistance, and upward mobility.
Organisations can also speed up the onboarding of new hires and invest more in building their pipelines of future employees to secure access to the talents they need. Additionally, employers can broaden their search for candidates by considering those who have pursued alternate educational courses, such as technical degrees or practical experience.
Invest in Technology
Although the construction business has a history of lagging behind other industries in adopting technology and digitalisation, the pandemic has sped up the industry’s transition. With the current shifts in construction demands, companies are starting to see the need for tech-enabled programs and solutions that may help supplement the skill gap and aid in adjusting to cost increases.
Project managers can use construction project management software to transform outdated processes and manage the effects of rising construction costs. Construction software can help project managers respond to changes in project scope, which is very common in the industry, especially today. It can also help them identify inefficient areas within the project.
With the right tool, they can adjust their budgets, plan new strategies, and communicate changes to the rest of the team in real-time. This allows construction projects to remain flexible and quickly respond to project changes—while reducing unnecessary rework.
The nation’s infrastructure is ready to be upgraded, replaced, and expanded, thanks to the construction industry. Done effectively, it will fuel inclusive growth and position the economy for success in the twenty-first century.
But to do so, the sector must solve its labour difficulties and deal with the increasing material prices. This necessitates using diverse tools and approaches to create better jobs, get the most out of its people, optimise agility and collaboration throughout the value chain, and manage its project finances effectively.
Modern digital solutions can help builders improve cost efficiency and productivity amidst industry and market challenges. By adopting construction management software Australia, the business can save costs and get the most value possible from its technology investment.
BizPrac is an Australian-owned and operated construction management system designed specifically to support the Australian construction industry. It is a fully integrated and constantly developing software system that offers comprehensive features like estimating, accounting, job costing, accounting, single-touch payroll, purchasing, builder retentions, etc. Bizprac is designed to ensure users make the maximum profit on each project. It is also backed by an industry-leading Australian-based support team that knows the industry inside and out.
Request a free trial today or contact us at email@example.com to get in touch with one of our team members.