Can Project Management Software Help Construction Industry Avoid Stagflation?

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Ever heard of stagflation?

Moody’s Investor Service recently reported that the United States economy could face long-term stagflation. A portmanteau of ‘stagnant’ and ‘inflation,’ stagflation refers to an unusual period when the economy is slowing (demand isn’t strong, fewer sales, lower income) but prices of commodities keep rising due to supply disruptions.

The US economy only ever experienced stagflation once, in the 1970s. But it’s a phenomenon that could last several years. If stagflation occurs, businesses will have a tough time making a profit since their costs keep rising while customers are pulling back from purchases as they, too, are deterred by price increases.

Impact of Stagflation on the Construction Industry

Construction industry stagflation could spell more expensive building materials and higher costs of construction projects.  Higher costs can turn away customers as they’re unwilling to accept bids at higher prices. This means less cash flow and revenue for businesses in the construction industry.

Moreover, global supply chain problems brought about by the pandemic and exacerbated by the war in Ukraine are also stirring concerns of stagflation. The pandemic stalled economic growth but is now pushing inflation as demand bounced back, with countries lifting restrictions. The global supply chain was not ready for this sudden surge in demand.

Worse, Russia invaded Ukraine, which is causing even more difficulties in the supply chain with higher energy and oil prices. Delays in shipping mean construction companies cannot get materials on time, which then delays their projects and contributes to low output. Meanwhile, higher costs of fuel make it more expensive to transport building materials to the construction site and operate heavy equipment such as bulldozers, backhoes, and cranes.

While there are no easy solutions for how to beat stagflation, economists suggest approaches that could help businesses survive during this period. These include increasing productivity, reducing costs, reducing debt, raising prices, and making acquisitions.

Using Project Management Software to Increase Productivity

Amid economic challenges, construction statistics show that the global construction industry is still one of the biggest in the world. Analysts project that the global construction market will grow to $8 trillion by 2030.

However, based on a McKinsey study, the construction industry also lags behind other industries when it comes to productivity. The report cited reasons such as regulations and compliance issues, contract mismatches, and fragmented processes as factors that result in poor project management and execution. Using project management software features such as collaboration, resource management, and automation are just a few of the ways how to improve productivity in construction projects.

Real-time Collaboration

Based on project management software trends, teams are becoming more hybrid—a mix of office-based and remote workers. Some members also need to work on the job site, which requires tools that provide more flexibility.

Project management software products include real-time communication and collaboration tools. These tools can make planning and coordination easier in each construction project. Contractors can streamline communication in one platform by connecting not just internal employees but also suppliers and other key decision-makers in the project. Effective communication can lead to increased efficiency and getting more things done on time.

Resource Management

Because supply disruptions are prevalent during stagflation, contractors could have an even harder time managing resources. Orders should be aligned with budgets and materials regularly monitored to avoid overstock and waste. This can be done by using project management software to track procurement and get real-time visibility into materials availability and delivery. Managers can also check whether the usage of resources/materials matches the original project estimates.

Automation

One of the best ways to improve productivity is to spend less time on manual processes. Project management software allows users to automate processes and reduce the time and resources used in completing a task. For example, contractors can automate certain accounting/finance tasks like billing. This ensures that billing is sent out on time to speed up collection and maintain cash flow.

Preparing for the Worst of Worlds

The construction industry’s most significant challenges are often connected to economic conditions and workflow inefficiencies that hamper progress in a project. To address these challenges, contractors should consider adopting project management software for construction to improve visibility into their operations.

And as the industry braces itself for economic stagflation, project management software could prove instrumental in staving off the effects of what economists say is the worst of all worlds.