ERP Application to Address Challenges in the Construction Industry

The construction industry is inherently complex and diverse, which makes its challenges and difficulties equally varied and unpredictable, especially when implementing ERP systems. The following article provides insights into some of the key difficulties commonly encountered in the construction industry during operations, as well as the technologies applied in ERP implementation. This analysis is based on information and data from a construction company where FPT IS has deployed ERP solutions.

Challenges in the Construction Industry

1.1. Shortage of Skilled Labor

• Recruitment Difficulties: The construction industry is facing a severe labor shortage due to the challenge of hiring quality workers for various tasks. Finding, training, and retaining highly skilled labor is becoming increasingly difficult, leading to a significant workforce gap. This directly affects the progress and quality of construction projects. Recruiting, training, and retaining skilled employees is a major challenge for construction businesses looking to meet growing demand.

• Training: Developing a highly skilled workforce is a crucial factor in the growth of the construction industry, especially amid the current labor shortage. However, most training programs lack practicality and fail to equip workers with the necessary skills for construction jobs. To attract skilled labor, continuous investment in training is required to keep up with new technologies and technical advancements. However, this creates financial pressure, particularly for small and medium-sized construction companies.

1.2. Cost and Financial Management

• Budget Overruns: Many construction projects exceed their initial budget estimates due to rising material costs, labor expenses, and unforeseen external factors. This puts significant pressure on financial management, making it harder to balance cash flow and maintain project efficiency. Construction businesses need strict cost-control strategies to manage risks and sustain profitability.

• Delayed Payments: When payments from project owners are delayed, construction companies face serious cash flow challenges, impacting their ability to pay workers, purchase materials, and cover other expenses. This can lead to a shortage of working capital, causing construction delays and increasing financial risks. Effective cash flow management and ensuring timely payments are critical for business stability.

1.3. Project and Schedule Management

• Delays in Project Timelines: Project delays can occur due to various reasons, including labor shortages, material supply issues, adverse weather conditions, or poor coordination between stakeholders. When a project falls behind schedule, it leads to higher costs, contract penalties, and loss of client trust. Project managers must closely monitor progress and implement timely solutions to ensure on-time project completion.

• Coordination Issues: A construction project involves multiple parties such as contractors, suppliers, supervisors, and investors. Poor coordination among these stakeholders can lead to miscommunication, conflicts, delays, and errors, severely impacting project timelines and quality. To prevent coordination issues, project managers should conduct regular meetings, establish clear communication systems, and foster strong collaborative relationships.

1.4. Occupational Safety

• Workplace Accidents: Every year, thousands of construction workers suffer injuries or fatalities due to accidents such as equipment failures, structural collapses, falling objects, electrical shocks, and other hazards. Serious accidents not only harm workers but also significantly impact project timelines, medical costs, and compensation expenses. To minimize these risks, construction companies must implement comprehensive safety measures, enhance training programs, and strictly comply with occupational safety regulations.

• Safety Training: Many workers lack awareness and knowledge about workplace hazards and proper safety procedures, leading to a high risk of accidents. Safety training is often overlooked or inadequately conducted due to a lack of resources, time, or expertise. As a result, errors and non-compliance with safety regulations can lead to severe accidents. To improve workplace safety, companies need to invest in frequent, well-structured, and practical safety training programs for their workers.

1.5. Compliance with Regulations and Laws

• Legal Challenges: The construction industry operates within a complex legal environment, requiring compliance with numerous laws, standards, and technical regulations related to environmental protection, workplace safety, and licensing. Staying updated on and correctly implementing new regulations is a challenging task. Failure to comply can result in fines, penalties, or even business suspension. Therefore, legal compliance is a critical aspect of construction operations.

• Licensing and Procedures: Obtaining construction permits is often a complicated, costly, and time-consuming process, involving multiple approval stages from different regulatory bodies. Additionally, the documentation requirements are strict and rigorous. A lack of understanding or failure to follow proper procedures can lead to permit denials or penalties. Therefore, ensuring full compliance with licensing requirements is essential in the construction industry.

1.6. Fluctuations in Material Prices

• Price Volatility: The prices of key construction materials such as steel, cement, bricks, sand, and stone frequently fluctuate due to factors like market demand, energy costs, and inflation. Rising prices can significantly increase construction costs, directly impacting project profitability. Conversely, if prices drop sharply, contractors who signed fixed-price contracts may suffer financial losses. To mitigate risks, businesses must develop effective price management strategies and closely monitor market trends to adjust accordingly.

• Supply Chain Disruptions: Shortages or interruptions in the supply of materials like cement, sand, stone, and steel—caused by natural disasters, mining issues, or logistics challenges—can increase price pressures. When supply is scarce, manufacturers often raise prices to meet high demand, directly affecting construction costs. Conversely, an oversupply may lead to price drops, negatively impacting contractors with pre-agreed pricing contracts. To reduce risks, construction firms should closely monitor supply chain trends and establish appropriate inventory plans.

1.7. Technology Adoption

• Slow Adoption of New Technologies: Many construction companies are slow to implement modern technologies such as Building Information Modeling (BIM), drones, and smart construction solutions, which can enhance efficiency and accuracy.

• Investment in Technology: Advanced construction technologies like BIM, 3D printing, and robotics require significant capital investment in equipment, software, and workforce training. Many small and medium-sized construction firms struggle to secure the financial resources needed for such investments. The lack of funding limits access to innovative solutions, affecting competitiveness and operational efficiency. To accelerate technology adoption, businesses require financial support and government incentives.

1.8. Environmental Sustainability

• Environmental Impact: Construction activities often contribute to air pollution, noise pollution, construction waste, and other environmental issues. Without proper management, these impacts can harm ecosystems and public health. Additionally, the use of non-sustainable materials threatens long-term environmental sustainability. To address these concerns, companies must invest in eco-friendly construction methods, energy-efficient solutions, and waste reduction strategies.

• Environmental Regulations: Construction projects are subject to strict regulations on waste management, air pollution control, noise reduction, water resource protection, and biodiversity conservation. Compliance with these regulations requires advanced technical solutions, investments in green technologies, and financial resources. Failure to meet these requirements can result in severe penalties. The challenge lies in balancing regulatory compliance with cost-effectiveness. The best approach is to adopt environmentally friendly construction practices and continuously improve sustainability efforts.

Case Study: Successful Application of Technology in the Construction Industry

These challenges require the construction industry to adopt effective management strategies, technological innovation, and continuous training to enhance productivity and project quality.

One of the leading construction companies in Vietnam has successfully implemented various advanced technologies to improve efficiency, quality, and project management processes. Below are some of the technologies the company has adopted:

2.1. BIM (Building Information Modeling)

Applying BIM technology helps businesses address challenges related to project management in the construction industry.

• Information Management: The company has implemented BIM (Building Information Modeling) technology to efficiently manage information in construction projects. With BIM, all data related to design, materials, and costs are integrated into a single 3D model. This allows stakeholders to access, share, and update information quickly and accurately. As a result, issues such as design conflicts and material waste are detected and resolved early, saving time and costs. BIM enables the company to manage projects professionally, improving work efficiency and team coordination.

• Better Coordination: Thanks to a fully integrated 3D model, stakeholders can easily connect and share data. This facilitates close coordination between design, construction, and supply teams, ensuring smooth and timely execution. Design conflicts and redundancies are detected and addressed early in the design phase, preventing errors and waste during construction. The BIM model allows investors, architects, engineers, and subcontractors to work more closely, minimizing conflicts and mistakes.

• Risk Forecasting and Management: With its ability to simulate construction phases in detail, BIM allows for early identification of potential issues and impact assessments. Preventive measures and alternative solutions can be thoroughly considered to mitigate risks related to project timeline, cost, and worker safety. BIM also supports analysis and planning for adverse scenarios, helping the company prepare for and promptly resolve risks during construction.

BIM provides the ability to predict potential problems, manage risks, and optimize construction processes.

2.2. Drone Technology

• Construction Monitoring: The company uses drones to monitor construction progress, inspect project quality from above, and collect field data quickly. Equipped with modern unmanned aerial vehicles (UAVs), the drone teams capture high-quality images and videos from various angles. This enables continuous and detailed monitoring of the construction site. Issues and errors can be identified and corrected immediately. Using drones saves time and manpower compared to traditional monitoring methods while enhancing project management and quality control.

• 3D Mapping: Drones create detailed 3D maps that provide an overview of the construction site and facilitate better planning. By combining hundreds of images taken from different angles, image processing software can generate high-resolution 3D digital terrain models. These 3D maps provide valuable spatial information about the terrain and existing structures, allowing project managers to have a comprehensive and realistic view. They support accurate progress tracking and significantly reduce survey costs compared to traditional methods.

2.3. Smart Construction Management System

• Project Management Software: The company utilizes advanced project management software to track progress, manage resources, and optimize workflows. The software integrates modern features such as scheduling, workforce management, and material tracking based on digitalization and cloud computing. This ensures that all construction data is updated and monitored in real time, allowing managers to have an overall view and maintain strict control over project execution. The software also supports planning and resource allocation, optimizing labor and machinery usage.

• IoT (Internet of Things): IoT systems integrate multiple internet-connected devices to collect and transmit data on construction equipment and machinery. Real-time monitoring of parameters such as location, operational status, and fuel consumption allows for optimized resource utilization, timely maintenance, and extended equipment lifespan. IoT technology also enhances construction progress tracking, ensuring that projects are executed efficiently according to planned schedules.

2.4. Virtual Reality (VR) and Augmented Reality (AR) Technology

• Virtual Experience: With VR, customers can experience building spaces from the design phase by wearing VR headsets. This gives them the feeling of standing inside the building and observing details of the design and living spaces. AR technology allows users to interact with 3D building models by overlaying virtual details onto real spaces. This helps architects and investors visualize designs more clearly and make adjustments before construction begins. Using VR and AR enables customers to experience the project before construction, improving design quality and better meeting customer needs.

• Training and Guidance: VR allows employees to experience virtual construction site environments and undergo training on safety skills and work procedures in a controlled environment. AR can overlay instructional images and videos onto real-world settings for better visualization. Virtual training reduces costs, ensures safety, and provides a more realistic experience compared to traditional training methods. VR and AR are used for worker training and construction guidance, enhancing skills and ensuring workplace safety.

2.5. Advanced Construction Techniques

• Prefabrication: Prefabrication significantly shortens construction time, minimizes waste, and reduces labor costs on-site while ensuring higher project quality through modern manufacturing processes. The application of advanced construction methods has provided the company with a competitive advantage. Using prefabrication methods reduces on-site construction time and enhances project quality.

• Smart Structures: By utilizing smart materials and structural designs, the company optimizes construction durability. These smart components can self-monitor and update data on deformation, stress, and temperature, transmitting this information to a monitoring center. This enables precise structural assessments, early detection of potential risks, and timely interventions to ensure project safety and longevity.

2.6. Sustainable and Green Development

• Eco-Friendly Materials: The company uses recycled concrete and green cement as alternatives to traditional cement, reducing carbon emissions. Additionally, soundproofing and thermal insulation materials made from recycled materials are prioritized to improve energy efficiency. Waste management and water recycling solutions are also implemented to minimize environmental impact. Using green materials not only benefits the environment but also reduces costs and enhances project sustainability, aligning with the company’s long-term development strategy.

• Sustainable Design: The company applies energy-efficient design principles that maximize natural light, improve ventilation, and incorporate renewable energy solutions. Sustainable design efforts have led to international green certifications such as LEED and EDGE for many of its projects. These initiatives help conserve energy and water while creating sustainable and efficient buildings.

2.7. Smart Safety Systems

• Safety Monitoring: The company has successfully implemented a Smart Safety System combining sensors, AI cameras, and data analysis software to continuously monitor construction activities. This system has significantly reduced workplace accidents and increased worker safety awareness.

• Continuous Training: The system not only monitors but also analyzes unsafe behaviors and accident risk factors. Based on this data, the company develops targeted training programs that address common safety violations. Regular training sessions enhance worker awareness and safety skills, reducing workplace accidents and associated costs.

Success Story of ERP (Enterprise Resource Planning) Application in the Construction Industry at a Leading Construction Company

By applying advanced technologies such as BIM, drone, IoT, VR/AR and smart construction solutions, the company has improved construction efficiency, optimized project management, and enhanced project quality. These efforts not only help the company maintain its leading position in the construction industry in Vietnam but also contribute to a more sustainable and safer development for the construction industry. ERP is a prominent highlight in the process of enterprise management not only in the construction industry but also in many other industries.

Typical in the application of ERP in the construction industry is the company’s case study. In 2020, when the Covid epidemic occurred, outdoor activities at the construction site were stalled, which was when the company fell into crisis and realized the important thing was to carry out a corporate restructuring to optimize costs in difficult times, in addition, the implementation of the ERP (Enterprise Resource Planning) system was one of the important steps to help the company improve management efficiency and optimize operating processes. Here are the aspects that the company focused on when implementing ERP:

3.1. Existing Problems and Solutions from ERP

• In Information Integration: the company has implemented an ERP (Enterprise Resource Planning) system to integrate and centrally manage information across all business operation processes. With ERP, data from departments such as accounting, finance, human resources, supply chain, and projects are connected and stored centrally on a single platform. This helps eliminate the situation of scattered data, ensuring consistency and retrieval of information when needed. Thanks to information integration, the decision-making process of the board of directors becomes faster and more accurate based on actual data. Departments also easily coordinate, share information, and increase teamwork efficiency. ERP helps the company integrate all business activities into a single system, including finance, human resources, project management, supply, and customers.

• The Problem of Effective Management: With ERP, core business processes such as human resource management, finance, materials, and projects are automated and optimized. This helps save time, manpower and minimizes the risk of manual errors. Detailed, continuously updated data also helps the leadership track, monitor and make timely management decisions based on actual data. In addition, the system also supports analysis, making summary reports easily, enhancing transparency and accountability of departments. Thanks to ERP, the company has significantly improved productivity, reduced operating costs, and strengthened competitiveness.

• Process Optimization: With the ability to integrate data and automate work steps, ERP helps eliminate manual, cumbersome working procedures and saves time for employees. Processes are redesigned according to standards, streamlined and more efficient, minimizing waste and unnecessary effort. The system also supports monitoring and controlling processes closely, ensuring compliance with regulations and laws. Thanks to process optimization, the company has improved labor productivity, enhanced synchronization and efficiency of production and business activities.

3.2. Achievements After Applying the ERP System at the Company

• Enhanced Project Management Efficiency: ERP helps track progress, manage budgets, and coordinate resources effectively.

• Accurate Financial Management: The ERP system provides detailed and accurate financial reports, supporting budget management and financial planning. Transparency of activities related to revenue/expenditure at the construction site

• Effective Supply Chain Management: Tracking and managing the supply chain from suppliers to construction sites, ensuring that materials are supplied at the right time and optimal cost. There is a timely response to price fluctuations at each time to help minimize risks for the construction process

• Standardizing the Company’s Current Work to International Standards to Gradually Make the Company One of the World-Class Companies in the Long-Term Direction

• Improved Customer Service: ERP helps track and manage customer information, improve service quality and strengthen relationships with contractors.

3.3. Challenges When Implementing ERP

Like other businesses in the construction industry, the company also encountered some obstacles when applying ERP implementation for management as follows:

• High Costs: ERP implementation requires large initial investment costs, including software, hardware, and training. Costs include hardware, software, consulting, personnel training, and maintenance purchases. Exceeding the budget due to many phát sinh factors during implementation can cause difficulties for businesses. Therefore, careful financial planning and contingency planning for potential risks are needed to ensure success.

• Changing Corporate Culture: Changes in processes and technology require changes in corporate culture and acceptance from employees. Employees must adapt to new ways of working, share information and coordinate more effectively. This change may encounter resistance from employees due to habits, concerns and lack of skills. Therefore, leaders need to communicate the vision, create motivation and support training so that employees can quickly get acquainted and embrace the change.

• Data Management: Converting and managing data from old systems to new ERP systems can be difficult and risky. Businesses need to integrate and standardize data from many different sources to ensure consistency and accuracy. Cleaning and converting old data into new systems can take a lot of time and effort. At the same time, it is necessary to build a process to maintain and update data regularly.

However, with the determination of the leadership as well as employees, the implementation of the ERP system has helped the company improve management efficiency, optimize working processes and improve service quality. Despite facing many challenges, but with investment and commitment from the leadership, the company has succeeded in applying ERP, creating a solid foundation for sustainable development and competition in the construction industry.

Conclusion

It can be seen that there are still many challenges remaining in the construction industry, causing difficult-to-solve pressures for small and medium-sized businesses and long-standing companies in the industry. However, the application of technologies accompanied by the ERP system accompanied by the development of current technology can support businesses to handle many problems from management to especially ensuring safety during construction for workers in the construction industry.