COVID and the new normal

By - , Build 179

An unanticipated aspect of COVID-19’s impact on the engineering, construction and building materials sector is that it will hurry up disruptive changes in the industry that have long been necessary.

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MCKINSEY & COMPANY Capital Projects and Infrastructure Group says that the global construction industry has suffered due to COVID-19 from shuttered building sites, disrupted supply chains and operational restrictions, and swift action is needed to address these issues.

To thrive in the new normal, engineering, construction and building materials (ECB) companies should take as their cue strategies adopted by successful companies after the 2008 financial crisis.

The McKinsey report How construction can emerge stronger after coronavirus says a fast return to business as usual is unlikely, with problems in labour supply, reduced productivity and disrupted supply chains.

Disruption has been coming

It notes that, even before COVID-19, the sector’s performance globally had been below par compared to other industries – dogged with stagnant productivity, low levels of digitisation, the bespoke building approach and getting and keeping workers.

Prior to COVID-19, there were signs of impending disruption due to stringent environmental requirements, rising cost pressures, labour scarcity, new materials and digital tools that are forcing innovation.

Short-term trends indicative of disruptive change to the sector include increased use of building information modelling (BIM). Contractors are using 4D and 5D simulation to replan projects and reoptimise schedules. Integrated digital twins (see Digital twins and vibrating vests) are being developed to be used end to end from project concept to commissioning.

Contractors are also looking online for monitoring employee wellbeing, ordering materials, managing resources and maintaining cash flow.

Trends include off-site construction

Long-term trends include vertical integration with industry players starting to integrate to increase efficiency and as a path to standardisation and control of design and execution.

Another trend is to invest in technology or digitisation and innovation of building systems. The sector faced a shortage of skilled labour globally before COVID-19, and this is likely to become more acute with restrictions on cross-border movements.

The case for digital tools to increase productivity will increase. There will be more spending on developing new standardised building systems that speed up and automate elements of design and construction.

Off-site construction will increase over the long term, particularly as building in controlled environments makes even more sense now that close management of the movement and interaction of the workforce is required.

Another long-term trend is sustainable design, and governments may stimulate the economy with measures to meet carbon reduction targets.

Seven steps to take

Based on these trends, the report lays out seven actions companies should take now to move beyond the current crisis.

Accelerate roll-out and adoption of digitisation

For contractors, this may mean scaling up remote collaboration at production stages using a digital model or site minimal manning. Distributors may need to rethink their fulfilment model with minimal physical interactions, especially as e-commerce enables remote handling of contracts and orders.

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Investment in culture and skills

Balancing performance and health are even more important. Companies should guard against risks around remote work and workforce anxieties about job security and productivity. It is also a good time to upskill people on new tools and technologies such as BIM and operating procedures.

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Monitor resource allocation

With construction prices likely to come under pressure, companies should use their size to avoid getting squeezed. Resource allocation will be a challenge in the coming months.

The allocation of resources should be centrally monitored. Apart from assessing projects affected by COVID-19, there should be real-time transparency on project process, material inventory, subcontractors, services and costs.

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Bolster supply-chain resilience

Companies should look at ways to strengthen their supply chain such as building inventory, identifying back-up distribution channels and recruiting direct labour to replace subcontractors. This could lead to more consolidation and vertical integration of the value chain to minimise risk and drive future productivity.

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Redeploy capital and resources

In many cases, responding to COVID-19 could present opportunities to make long overdue moves including where to best deploy capital, resources and capabilities.

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Identify opportunities to shift work off site

Suppliers and subcontractors should identify parts and subsystems that can be preassembled in a controlled environment. Longer term, companies can look for extra ways to modularise or build off site – for example, frames and volume modules.

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Get closer to customers

Customer preferences are changing towards online retail, remote working and more sustainable communities. It is not yet clear what other shifts might emerge, but whatever they are, they will become engrained and normalised in customer preferences making it important to pay attention.

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For more

Download the McKinsey report from www.mckinsey.com.

Download the PDF

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Articles are correct at the time of publication but may have since become outdated.

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