Saving Money on Large-Scale Construction During the Economic Downturn

Cutting costs on large scale construction projects is a good idea in good economic times and bad. But during a stiff economic downturn, saving money can become a critical factor. 

Fortunately, many strategies exist for operating lean in challenging times in the construction sector. It might not be as fun as when you had to come up with a catchy construction company name, but finding smart ways to save on building costs can still be a rewarding experience:

One of the most exciting areas where large construction operations can trim costs significantly is in the procurement process. Procurement, of course, is buying all materials a company needs to get the job done. In case you didn’t know it, the procurement process has been revolutionized in recent years thanks to specialized software that handles it in a remarkably better and efficient way.

Procurement software automates the entire purchasing process while managing all activities related to a builder’s total expenditures. A unified procurement software platform can be customized to any particular kind of industry, including construction companies. Studies show that using procurement software can cut costs for an organization by 15% to 25%.

Closely related to procurement is the choice of materials used for specific building projects. Procurement software can help managers find cheaper substitutes for materials that do the same or better job. For example, one might consider using EPS Geofoam blocks to replace an array of substances, such as soil, rocks or sand. Geofoam blocks can be used as lightweight fill underneath a bridge approach, for embankments, parking lots and more. This substance is also used for insulation applications.

Another powerful way to cut costs is to conduct a formal value assessment for cost reduction. This is a way to identify unnecessary costs for materials, a service or a process — and then eliminate them. This means taking a function-cost approach. The function is first defined, then a creative alternative can be found that will be cheaper without sacrificing quality, safety or even time.

Once again, there are advanced software products available that can handle the value assessment process. Using such software that is customized for construction can trim significant costs for large scale projects.

Just as ordinary shoppers save money by purchasing in bulk at major retailers like Sam’s Club, construction companies can realize significant savings by opting to buy in bulk. This works especially well for firms that operate across large geographical areas and/or are multilocational.

Related to the above is purchasing items with less packaging. This can be achieved by buying concentrates. This saves money in several ways. Requiring less labor time or man-hours for opening and disposing of packaging materials is just one example. Less bulk in packaging saves costs on shipping, as well.

Choosing local vendors that are close to project sites can be an excellent way to cut costs. Close-by vendors mean lower costs for shipping, freight fees, materials handling and more. Local suppliers also help with the organization of inventory which can avoid “dead costs.”

For any company, cutting down on labor is always tempting and very often the first line of defense when times get tough. But a construction company relies heavily on well-trained, competent and trustworthy workers who turn in high-quality results every day and keep potential accidents and worker’s compensation to a minimum.

The fact is, your best workers are the people that will help you get through tough times. That means offering them incentives, good pay and reassuring them that you’re doing everything you can to keep them on the job and that you’re planning for their continued service to your construction company.

Remember that costs can be cut by reducing the unit cost of production or by increasing productivity. Saving money in the construction business is a creative process.

Start a construction business

It's easy with ZenBusiness

START NOW
Get started image

Ready to get started?

Get the expert support you need

Start Now

Related Articles

How To Do Small Business Payroll

by Team ZenBusiness, on September 20, 2022

PPP Loan Forgiveness Status for 2022

By Bill Bauer, on September 08, 2022

Happiness Is Positive Cash Flow

By Bob Adams, on July 20, 2022

Coping with Inflation in Your Small Business

By Janet Attard, on July 26, 2022

The Dangers of Mixing Business and Personal Funds

By Team ZenBusiness, on July 20, 2022

Pricing Strategy: Best Practices & Common Pitfalls

Team ZenBusiness, on July 20, 2022