How to Mitigate Rising Construction Materials Costs

Construction costs are increasing rapidly. Some developers have said that total construction costs are up 30% over last year. A lot is contributing to the rising construction price tag, but a labor shortage and rising materials prices are among the biggest drivers. Now, trade tariffs on steel and lumber are putting more pressure on construction costs. While there is little developers can do to curb these increases, implementing materials management technology is one way to offset it.

“The biggest problem is uncertainty. Some projects are done at a fixed price, so you may be bidding on a project today but there is a multiple-months delay to construction,” Mika Majapuro, director of product management and strategy at Teletrac Navman, tells GlobeSt.com. “That is a risk window where you will not know what is going to happen to the materials price. There are currently a lot of upward pressures on materials cost. If you combine other trends like labor shortages and rising wages, there are a lot of pressures on development margins, which are already thin to begin with.”

Teletrac Navman is focused on using technology to create efficiencies in materials management. “There are a lot of inefficiencies not only from employee productivity but also in materials management,” adds Majapuro. For example, materials might not be delivered, get lost on a large job site or run out earlier than expected, causing inefficiencies that can have a huge impact on the bottom line. “When you receive a material, you can use barcodes to tag materials so that you know where the material is received and where it is placed,” explains Majapuro. “As you are using the material, you can use software applications to track the amount used. Then, you can hook it up into a purchasing system so that when the material reaches a certain level, more will automatically be ordered. These are the kind o efficiencies that technologies can create.”

The best part about materials tracking systems is that they are easily implemented and relatively inexpensive to implement. The systems can also be built up as needed, meaning that developers can add to the technology as needed. “To simply start using material tracking, you can get going with fairly easy solutions and it doesn’t need to be more than a mobile app that you use in the field and a web dashboard that allows you to get the overall picture,” says Majapuro. “The more you start to integrate the program into your ERP systems, then it can become more complex. We try to make our solutions easy to use, and we work with our customers during implementation and adoption so that they can get great gains from the technology.”

There isn’t a hard number on the savings that developers can expect to save, but Majapuro assures that the number is meaningful. “The end number varies on the customer type and size, but often times these technologies deliver meaningful savings,” he explains. “Meaningful in a way that the cost of the technology is paid back quickly.”