Prediction #1: The number of construction companies that deliver service and maintenance to increase to 50% by 2025.
Fast and friendly service is more commonly attributed to a waiter in your favourite restaurant than a worker on a construction site. However, an increasing number of asset owners are seeking to outsource service and maintenance contracts for their assets putting contractors who focus on the entire asset lifecycle at a significant advantage.
A survey of current IFS construction customers shows that 25% now include service, maintenance and facilities management as part of their offering, and this is expected to increase to 50% by 2025.
Typically, these contracts are usually awarded to asset management specialists, however given the contract value for service and maintenance can typically be 120% - 200% greater than value of the actual construction contract alone; if service and maintenance is also secured by the same contractor this can not only increase their revenue margins but also provide a more predictable and reliable revenue stream – which provides a platform for growth, innovation and long-term success.
This trend is more commonly called Asset Lifecycle Servitization: The New Business Revenue Model For The Construction Sector - It’s an opportunity for constructors and manufacturers to gain visibility into their future performance and as such significantly grow their business, so it’s no coincidence a recent report by McKinsey estimates that construction sector disrupters could share the industries $265 billion annual profit pool.
However, winning these coveted service and maintenance contracts and delivering the full asset lifecycle, requires construction companies to become more customer centric and change their outlook. This starts with a desire to increase build quality and remain focused on delivering the final asset on time and most importantly on budget.
The operating model also makes construction companies design the asset from a total asset lifecycle cost and performance perspective - changing their mindset to think more about what outcome the asset delivers. For many this is a significant change and will require them to support a much wider set of business processes than they have been used to in the past which could include an opportunity to bring in new skilled labor. In short, the next generation of construction contractor will have to see themselves as a Total Asset Lifecycle Service Provider.
Prediction 2: Modern Methods of Construction techniques to be used in 85% ofprojects by end of 2022.
As construction methods continue to evolve, so is the reliance on modern methods of construction. With practices like offsite and modular construction continuing to become a method of choice due to their ability to reduce the construction time and improve quality – all whilst helping to lower costs, and reduce the ECO footprint, it makes sense then that this trend will continue to be a differentiating factor for many.
There is a common misconception, though, that modern methods of construction are only about moving some of the work into a manufacturing facility. This is certainly part of the story but, it’s much greater than that – with the main aim being to do more with less. It is about rethinking the whole project process, for example, designing the asset with a view to it being built using modular and offsite principles Construction companies must think about standardisation of materials and components (Lego and configuration principles. They must consider logistics, shipping and storage requirements when designing the asset to make sure it is practical, low cost and ECO friendly. And as part of this respect best practice material and inventory management principles. Finally, constructors need to have a more structured approach to managing and executing construction work packages for erection, installation and construction tasks moving towards a final assembly mindset.
A long-term outlook will eventually result in 80% of the work being done offsite and 20% onsite so the winners will be the companies who can optimise this new way of working. Approximately 85% of all construction projects are predicted to use modern methods of construction in some capacity by the end of 2022. It’s therefore vital that construction companies ensure their business system architecture can support this trend. With many legacy systems unable to support modern methods, advancing construction techniques, logistics and shipping and engineer to order manufacturing processes – a radical rethink is required. In short, the next generation contractor will be a hybrid business – contractor and logistics company and sometimes a manufacturer as well.
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