Construction firms rely on metrics to monitor business and project activity and performance. Metrics can be used to document successes or challenges and can direct decision-making in improving processes. The best way to access and analyze your data is by employing the use of construction management software, like employee resource planning (ERP), that gives you instant access to metrics from cash flow and profit/loss to scheduling and budgeting. ERP solutions are also beneficial for construction project management and improved decision-making through access to real-time information and data.
But, when it comes to data, sometimes there can be too much of a good thing — information overload. Are you measuring the right data? Is it giving you the full picture of your business and your projects? Is it helping stakeholders and project managers make accurate decisions? So what metrics should you be looking at? We’ve got the top key performance indicators (KPIs) your ERP software can provide. Also, take a look at ways you can unlock the power of your ERP system.
Essential KPIs of Construction ERP Software
Construction companies must understand which indicators they should be measuring to make the most of their data. Those important KPIs are essential for monitoring the overall health of your construction business. It would be easy to assume that a top KPI would be financials, but looking at the budget alone won’t give proper actionable insights into ways to increase efficiency and productivity, which leads to enhanced profitability. So, what should construction firms be monitoring? Let’s take a look at some essential KPIs and the construction management software you need to make the most of your metrics.
1. Inventory Turnovers
The inventory turnover metric measures how many times products are sold and replaced or turned over in a specific period. It helps measure the efficiency of your business overall, with a higher turnover generally meaning greater efficiency. Inventory turnover helps construction firms avoid losses due to overstocking and better predict demand based on market behaviour.
A successfully implemented ERP solution will monitor inventory turnover progress and provide insight into inventory processes and how it can move products more quickly for improved efficiency.
2. Project Margins
Construction is a project-based industry, which relies on project margins to measure how much the company makes after deducting expenses for materials, labour and overhead. You must track the number of metrics like cost estimates, budgets, project expenses and the revenue your project generates. Your ERP solutions can help you improve those margins by automating processes, reducing labour costs, making budgeting easier and improving the use of your resources.
3. Demand Forecasting
Demand forecasting is an excellent inventory management KPI where the accuracy reflects the variation in real or actual demand and what is estimated. This KPI shows how reliably a construction firm predicts future demand for its products and services.
With accurate demand forecasts, you’re able to better manage your inventory and be less likely to order beyond market demand. A successfully implemented ERP solution provides you with a high level of forecast accuracy, which helps you better predict demand based on a mix of historical data and current indicators, and economic trends like a supply chain shortage.
4. Customer Experience
Customer experience (CX) KPIs are important metrics for every type of business, including the construction industry. While customers in construction may be vastly different than those in retail, the CX is vital, especially if you’re growing your construction business. Any improvement you make to a process or function affects, in some way, your customers. If they have a positive experience, you’re more likely to see growth and longevity. ERP systems can help you pinpoint potential pain points that may negatively impact the overall CX.
Scheduling KPIs help you track the overall health and efficiency of your planning and scheduling processes. Scheduling KPIs let construction companies track production speeds against their production schedules, helping to ensure that projects don’t fall behind or crucial milestones are missed. Having the right ERP system helps simplify scheduling by showing a clear picture of how production is tracking against deadlines and insights into potential disruptions, which allows project managers to adjust proactively.
Productivity is a common measure of business performance — for a good reason. There are many causes for a lack of productivity, such as equipment failure, supply chain issues, process inefficiencies and reduced labour output. But those inefficiencies can lead to cost overruns, which can hurt your profitability. An ERP system, however, can track those trends, allowing you to analyze what may be affecting productivity and make better, and more informed decisions on how to improve them.
7. IT Spending
With construction firms turning to construction-specific software solutions for everything from accounting and human resources to project management and estimation, it requires keeping tabs on your IT spending. IT spending metrics help you get the most determine if you’re getting the most from your technology investments at minimal costs. ERP solutions can track metrics related to hardware, software and cloud-based solutions at a company or per-user level. This lets you know where you can consolidate and optimize your systems to cut costs without sacrificing performance.
Revenue metrics show how much money your construction firm has made from its services for a specific period and how that trends over longer periods, such as quarter-over-quarter and year-over-year. Common metrics in revenue include average profit per item sold, operating margin and average order value. Using ERP and the right KPIs, you can better identify your biggest revenue growth opportunities while also earning insight into areas where you can boost efficiency to cut operating costs — leading to better profit margins.
Measuring Construction ERP Implementation Success
There are many ERP systems to choose from. But if the system doesn’t meet your unique needs and isn’t successfully implemented, then it’s not very beneficial in providing you with the data and tools you need. RedSky’s ERP software is a cloud-based solution that gives you real-time access to crucial KPIs you need to better run your construction business. It’s not only fully integrated but also user-friendly, which makes for successful implementation and employment across the company.
When you’re looking for the right ERP solution to help you track those important KPIs and for construction project management success, we can help. Learn more about how RedSky’s construction ERP solution can improve your profitability by requesting a demo. You can also get in touch through our contact form or by giving us a call at +44 020 3002 8600.