PlanGrid Construction Productivity Blog
rising material costs in construction

4 Strategies to Offset the Rising Material Costs in Construction

How to Better Manage Material Waste and Increase Profits

As the days get sunnier, warmer temperatures create the perfect storm for construction companies. On the one hand, the long days of summer give construction crews more daylight to work with. But an increase in construction projects around the country can equate to a higher demand for materials, which drives up the cost of supplies.

Just to add to the summer peak, let’s not forget that for many regions of the US, summer is hurricane season. According to hurricane scientists at Colorado State University, 2018 hurricane season is expected to be slightly above average. For construction companies, hurricanes can lead to massive destruction of building and facilities. Rebuilding after a storm adds to the supply and demand of materials, further increasing their cost.

While material costs increase seasonally in construction, the industry is facing a year-over-year increase, making project profits ever the slimmer. Understanding how and why material costs in construction are increasing is an important place to begin in order to manage budgets effectively. Below, we’ll discuss the rising costs as well as how companies can offset the increase with smarter material and process management.  

Year-Round Cost Increase for Construction Materials

Material costs in construction have been incrementally increasing year over year. Even in March 2018, pre-summer and hurricane season, the cost of construction materials had risen by 5.8% above what they were last March.

Overall, we can expect to see an increase of 3-4% throughout 2018 according to Oldcastle. The most significant increases will be in gypsum products, lumber, Portland cement, aggregates and ready-mix concrete. In fact, gypsum products will actually see an increase in price by up to 7%. As you know, these are some of the most common materials used in commercial construction during the pre-production process.

Your projects need materials and there might be little you can do to avoid not using these products for your project. That being said, up and coming materials that have yet to gain the popularity of mainstream alternatives might be a wise investment to consider.

Why Material Costs Are Increasing

As mentioned, seasonally material prices can fluctuate due to natural disasters and heightened construction activity. One main reason for the annual rise includes an increase in energy and crude oil costs. For example, crude oil, a key component of asphalt, increased by 12% in 2017 to $50 a barrel. The trade situation involving tariffs on materials including steel and aluminum is also creating uncertainty in the marketplace. Yet construction companies must have materials to complete projects. There is no way around this fact.

4 Ways to Reduce Material Costs in Construction

For the most part, rising material costs are out of your control. The only solution that construction companies have at their disposal is to find smarter ways to manage materials. By tightening the belt on construction waste and inefficiencies, construction managers can better balance the budget for materials. Here are four ways you can cut back on the expense of materials for your company.

Embrace Prefabrication

In order to operate more efficiently and reduce waste, construction companies should consider embracing prefabrication. The use of traditionally sourced construction materials results in a lot of waste. When using a prefabricated component for building, there is no waste as the material is designed offsite by a separate company. Designs are carefully coordinated in advance so you only what is needed is purchased and used.

An added benefit of offsite building is that it also reduces the cost of labor for your company–further offsetting the rising material costs in construction. Generally, it costs far less to transport partial assemblies from a manufacturing company than to hire workers to move raw resources to a construction site. Lower labor costs can help you balance out escalating materials costs. Even as your company increases productivity on projects, the cost associated with labor decrease thanks to prefabricated materials. More importantly, if you are experiencing a labor shortage, the use of prefab items reduces the need for more labor.

Go Lean

According to the Lean Construction Institute, lean design and construction involve planning projects so there are increased levels of productivity and reduced waste of materials. Everyone from architects to suppliers to end users is involved to ensure that projects meet goals while using the least amount of energy–including materials. Lean construction also reduces safety hazards while improving cost savings for all involved parties.

Studies have shown that by using lean construction, companies have the capacity to reduce material waste by approximately 64%. Lean construction also increases employee accountability, resulting in higher quality in the finished project. Improved project satisfaction helps to stimulate employee confidence, as well as attract new clients for future construction projects. While lean construction requires training and professional expertise to get started with, the ultimate rewards far outweigh the initial investment.

Plan with BIM

Building information modeling or BIM is the perfect combination of graphics technology and construction design. However, BIM goes a lot further than computer-aided design (CAD). With BIM technology you gain a more comprehensive visualization of construction projects at every stage in the process. This includes conceptual design, operation, construction logistics, etc. Every step involved with a design can be evaluated using BIM so you know exactly what the end result will be.

For example, with BIM if your customer wants to make a change to a design, the technology automatically updates the amount of materials needed for the redesign. With the right integration, this can also calculate the exact material costs in construction associated with the design change. This improves your ability to estimate exactly how much materials you need to complete a project. As with lean construction, this helps your company streamline the number of materials used in the construction. You can also use BIM to complement prefabrication to enhance both processes. Ultimately, with BIM less material waste saves you money, which is a win for construction companies.

Construction Field Management Software

Technology is everywhere these days including on the jobsites. Finding a way to incorporate field software into your abilities to manage a project is a step in the right direction for your company. There seem to be thousands of varying construction field management software products on the market, so finding the best solution for your company can be challenging.

What you are looking for in software is a solution that works for all applicable parties including general contractors, design teams and property owners. Open access to all parties via cloud-based storage and sharing throughout the project is essential. For example, you want to choose construction field software that lets everyone access shop drawings from the comfort of their home, office or even in the most remote jobsites. This connectivity is the goal of this type of software.

Other features you want your software to include is the ability to support a number of operating systems including Mac OS and Windows 8. That way everyone involved in the project will be able to utilize the benefits of the software. Furthermore, you want to keep things simple. If you go with a complex software solution, will your laborers and owners, who may not have the same experience as designers, be able to use the program? Probably not, which will reduce the usability of the software. Ensure you choose an option that is accessible and easy to use–for everyone on the team.

In regards to reducing material costs in construction, field management software keeps everyone on the same proverbial page. This ensures material waste can be reduced thanks to the ease of communication regarding projects in the completion process. If a construction project manager has a question about the size of a room or the type of materials used in a certain space, all they have to do is access the updated design plan via field software. If the architect and owner have made a last-minute change, this information will be readily available to the site manager.

Without coordination, rework happens all too often, and it’s a huge waste of materials. Another potential benefit of construction field management software is the ability for your laborers to do more in less time. They are not wasting time on the site trying to find the answer to a question that can easily be answered with construction management software. More importantly, laborers are not spending time with rework due to mistakes or changes to a design that were not communicated. In turn, reduced labor costs also offset material costs in construction.

Outlying Benefits of Saving Money on Materials

Keeping an eye on the rising cost of construction materials is essential in this industry. As the increase in construction demand continues to rise, the supply and demand of materials will follow suit. Yet material costs in construction do not have to force your construction company to sacrifice in quality or design. By implementing technologies and design processes including lean construction, BIM and construction field management software, you can increase the efficiencies of your construction crew.

While you cut down on waste and the number of materials you purchase, you are also able to reduce labor costs and improve productivity. The bottom line is that being proactive in finding ways to reduce your construction material costs will have a positive effect on other aspects of your business budget. You are able to balance your expenses while improving the capabilities of your company, which is a win-win for your managers, laborers and clients.

Grace Ellis

As a Content Marketing Manager at PlanGrid, Grace is the managing editor for the PlanGrid Construction Productivity Blog. With over eight years of experience in marketing, communications and PR for technology companies, she is specialized in high-quality content creation across both traditional and digital media platforms.

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