What is Construction ERP?
Written by: Kelsey Hainley and John Meibers
The construction industry is one of the world's largest and most complex industries, with a wide variety of products and services delivered to customers. The construction process involves many stakeholders, including architects, engineers, contractors, subcontractors, suppliers and others, who must work together efficiently to deliver projects on schedule and within budget.
Construction enterprise resource planning (ERP) is software that is developed specifically for construction companies. It is a comprehensive solution designed to help the company manage all the processes related to building, such as project planning, project management, production scheduling, materials procurement, inventory control and accounting.
The focus of construction ERP is to automate the entire construction business process. For example, it allows the company to track all the activities related to a particular project—all project information is stored in one place.
The Market Need for Construction ERP
According to the 2022 Global Construction Management Software Management Software Research Report, the "Global Construction Management Software market size is projected to reach USD 6520.8 million by 2028, from USD 2146.2 million in 2021, at a CAGR of 17.0% during 2022-2028." Similarly, the global ERP software market was valued at $71.41 billion in 2023 and is predicted to grow from $81.15 billion in 2024 to $238.79 billion in 2032 with a CAGR of 14.4%.
The construction sector is one of the most complex industries in accounting and finance, so the targeted Construction ERP market is expected to grow at a similar pace.
The complexity of this sector makes it difficult for companies to manage their finances efficiently. This complexity is why many construction firms are considering integrated ERP software solutions. However, organizations in the construction industry need to navigate a multifaceted and complex business environment that traditional ERP platforms do not wholly serve.
Partnering with an industry-focused ERP gives your company a purposeful, integrative, secure and scalable platform for growth. A cloud-based ERP system lets you connect every aspect of your business, from budget planning to project tracking, purchase orders, inventory, field services and sales.
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Addressing Key Issues for Construction and Engineering Companies
Construction companies face many challenges, including managing risk, compliance, quality control and regulatory requirements. They must do all this while still meeting deadlines and budget constraints. Additionally, small businesses are impacted by the pressures of inflation, rising costs, looming recessions and labor shortages.
Therefore, to address these issues, small construction firms often use a combination of manual processes and spreadsheets to manage their operations. However, these methods don't scale well, are prone to errors and can make it challenging to identify and respond to problems quickly to improve bottom-line growth.
Engineering firms face similar challenges. In fact, according to Gartner, 75% of engineering firms say managing risk is one of their biggest challenges.
To solve these problems, construction and engineering firms must adopt modern technology solutions that automate critical functions such as monitoring and reporting. These technologies enable businesses to manage risk effectively, comply with regulations, improve productivity and meet customer expectations.
Key Features of ERP Construction Software
Construction companies are facing many challenges today. From rising labor costs to increased regulations and prices, there are plenty of reasons why it pays to invest in an enterprise resource planning solution. For example, construction companies must discover opportunities to improve efficiency and reduce costs.
According to Gartner, over 90% of large businesses use ERP systems today. However, many small businesses don't realize how much they could benefit from one.
Understanding what an ERP system can offer and how to apply it to your construction business is critical. Here are the most common characteristics of ERP for the construction industry:
1. Accounting
It would be best to understand what accounting support an ERP solution offers. For example, do you need to integrate with spreadsheets? Industry-focused construction accounting software can track, record and analyze your construction company's financial data, including cash flow, inventory, sales and expenses. It can also help manage taxes, purchase orders and auditing. A sound accounting system will streamline tasks and reduce the time to complete more accurate monthly financial reporting.
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2. Financial Management
Most ERPs offer essential financial functions such as accounts payable, receivable, cash flow and general ledger. However, an industry-specific and full-featured finance module can help you better forecast sales, expenses and project costs. For example, ERP software for construction firms should include budgeting and forecasting tools, allowing you to plan future projects and prepare budgets based on historical data.
3. Integration
ERP systems can combine with various other applications to create an integrated solution for every aspect of a company's operations. These include accounting, CRM, supply chain management, manufacturing, inventory control, human resources, customer service, marketing, sales, purchasing, shipping and more.
An ERP system will bring data across these disparate functions and centralize it within a central database, providing visibility into financial and business operations. These technologies will drive a platform for smarter strategic business decisions to improve productivity.
4. Automation
Successful enterprise resource planning systems should additionally streamline different processes within your construction firm. Automated repetitive business functions such as payroll, inventory management, customer service and accounting no longer require manual data input. By automating these processes, project managers can spend more time with high-value activities.
5. Payroll
Construction payroll systems must provide a seamless way to manage labor and material costs at the job sites. Additionally, companies need to be able to connect job-site data with the back office for efficient payroll management. Construction and contractor businesses need the tools to manage payroll, be it certified, union or non-union and ensure employees are paid on time.
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6. Human Resources
Construction companies are facing a significant challenge—they need to attract, engage and retain talented people to keep pace with change in our industry and address the labor shortages. Through HCM solutions, construction can attract and retain talent, engage employees and retrain talented workers. At a minimum, HR departments need to access employee information and update documents online through integrated ERP and HR solutions.
7. Customer Relationship Management (CRM)
With integrated ERP, CRM and commerce solutions, companies gain complete visibility into their clients' buying histories, allowing them to develop better marketing campaigns and sales pitches. Marketing organizations can build multi-channel and personalized campaigns. Businesses can also track customer fulfillment and receive notifications to intervene at various points in the customer lifecycle.
8. Business Intelligence And Data Analytics
Construction ERP software needs to analyze the project's performance and generate reports on its financial status. Give your project managers the ability to access the data to make crucial decisions on the job. Additionally, the financial model must be auditable and available for further investigation and analysis to help construction companies and clients manage their finances.
Impacts of Using Construction ERP
Construction ERP systems provide transformative impacts that resonate throughout the entire project lifecycle. Here, we delve into the impacts of integrating ERP into your construction operations.
- Streamlined Project Management: One of the most significant impacts of using ERP is streamlining project management processes. These systems serve as a centralized hub, bringing together real-time data, timelines and tasks. This consolidation eliminates data silos, promotes collaboration among project stakeholders and ensures that everyone involved is aligned with project goals. The result is heightened project efficiency and reduced risk of delays or miscommunication.
- Optimal Resource Allocation and Management: Construction ERP systems excel in optimizing the allocation of crucial resources such as labor, equipment and materials. By providing a comprehensive view of resource availability and requirements, these systems empower project managers to make informed decisions. This, in turn, leads to cost-effective resource allocation, improved productivity and the timely completion of construction projects.
- Efficient Financial Control and Reporting: Construction projects involve intricate financial processes that demand precision and real-time insights. ERP systems automate financial tasks such as budgeting, invoicing and expense tracking. The result is a more streamlined financial management process, with the added benefit of real-time reporting. Stakeholders can make informed decisions, ensuring that projects stay within budget and financial goals are met, contributing to the overall financial health of the construction business.
- Centralized Document Management: The construction industry is notorious for the vast amounts of documents associated with each project. ERP software addresses this challenge by providing a centralized platform for document management. From project plans to contracts and permits, these systems facilitate easy storage, retrieval and sharing of critical project documents. This not only enhances collaboration but also reduces the risk of errors and delays associated with manual document handling.
- Compliance And Risk Management: Construction projects are subject to various regulations and compliance standards. Construction ERP systems incorporate features to track and ensure compliance with industry regulations. Moreover, they provide tools for risk assessment and management, allowing for proactive measures to mitigate potential challenges. This contributes to a more resilient and legally compliant construction process, reducing the risk of costly disputes or legal issues.
- Improved Efficiency Through Automation: Automation is a cornerstone of ERP. It automates routine tasks, minimizes manual data entry and reduces the risk of human error. This enhances efficiency and allows project teams to focus on more value-added tasks, fostering a culture of continuous improvement within the organization.
- Enhanced Communication: Effective communication is critical in construction projects where multiple stakeholders are involved. Construction ERP acts as a catalyst for improved communication by providing real-time updates, centralized communication channels and collaborative features. This ensures that everyone, from project managers to subcontractors, is well-informed, fostering a collaborative environment and reducing the likelihood of miscommunication.
- Substantial Cost Savings: One of the most compelling impacts of using Construction ERP is realizing substantial cost savings. By optimizing resource allocation, reducing the risk of errors and providing insights into project expenses, these systems enable contractors to identify areas for improvement and make data-driven decisions to control costs effectively. Over time, these cost-saving benefits contribute to the overall financial sustainability and success of construction businesses.
What is the Best ERP for Construction Companies?
Construction businesses are unique because they require specialized software tailored to their industry. With the industry constantly changing, growing and evolving, finding a single ERP solution that works for every type of organization is difficult. However, some key features will set generic and industry-specific ERPs apart.
Much like Deltek's Project-ERP, solutions need to offer construction companies a comprehensive set of features to streamline operations and improve efficiency throughout a project's lifecycle. A robust financial management solution designed specifically for construction enterprises gives business units everything they need to run their businesses efficiently.
Additionally, deploying these solutions in the cloud helps construction companies track and report on job-site activities and inventory. Any Construction ERP system needs to enable you to:
- Optimize planning
- Streamline project management
- Simplify the exchange of information
- Improve the decision-making process
- Increase ROI
Case Study: ERP For Construction Industry
Shelby Erectors is an industry-leading bridge rebar contractor that connects communities throughout Florida that recently received the 2022 Project of the Year for Miscellaneous Metals, Class II, Craft Training Excellence and Safety Excellence Award from the Steel Erectors Association of America.
As a growth-minded company, Shelby Erectors focuses on adopting new back-office solutions to enhance company culture and help the firm overcome industry challenges.
By implementing labor-saving technology, Shelby Erectors has used Deltek ComputerEase for over 15 years to manage their construction accounting needs. This industry-specific solution manages data and systems within a single solution. By reducing the use of multiple spreadsheets, they have eliminated human error and driven their paperless journey through crucial aspects of the business. Their ERP solution has helped their company overcome inflationary pressures and remain committed to a profitable bottom line.
How Deltek Supports The Construction Industry
Deltek ComputerEase is the leading construction software for job cost accounting, project management and payroll services. It delivers solutions that help customers connect and automate the project lifecycle that fuels their business. Deltek's dedicated team is committed to providing service excellence and product innovation and adapting to evolving construction compliance requirements.
Request Your DemoWritten By:
Kelsey Hainley, Construction Industry Marketing Manager
Kelsey is a seasoned content marketer with a wealth of experience in the construction and engineering industries. Kelsey joined Deltek in 2022 and has honed a deep understanding of construction industry trends, driving impactful content strategies and enhancing brand visibility.
John Meibers, VP & GM of Deltek ComputerEase
John Meibers is the Vice President & General Manager of Deltek ComputerEase, the leading provider of accounting, project management and field-to-office software for the construction industry. Prior to joining ComputerEase more than 20 years ago, John spent a decade working for a large mechanical contractor.