Labor is the largest and least understood cost on construction projects, typically making up at least 50% of the budget. The industry thinks about labor as a fixed cost, one that you don’t have much control over. But if you look more closely at what makes up your labor budget, you’ll find many soft costs which CAN be optimized (by going paperless and using digital timecards, for example), allowing for more production time—which means higher profits.
As an example, let’s look a company using paper time cards/field documents and other methods for manual field collection. In this example we will use a 50-week project involving 200 craft workers:
Craft Workforce Costs
Total= $200,000 per year for Foremen to complete paper time cards/field documents
Field Supervision and Field Non-Manual Costs
Total= $150,000 per year for supervision to review paper time cards/field documents
Total= $56,000 per year for administrators to complete data entry
Summary of costs associated with paper-based timekeeping on a 50 week project with 200 workers:
|Craft Workforce||$ 200,000|
|Annual Total||$ 406,000|
If you combine all the costs associated with paper time cards/field documents over the course of a year, you’re looking at just under half a million dollars, which amounts to roughly $34,000 per month!
When you do the math, the cost of these manual processes doesn’t feel so soft anymore. We’re talking about a massive amount of money spent each year to sustain this one-dimensional legacy and manual process.
Up until a few years ago, construction-specific technology wasn’t available to solve for the challenge of manual field data collection. The few companies that took steps to innovate either did it in-house, and carried all the costs of development and upkeep, or used the mobile module provided by their existing ERP systems.
These modules were initially seen as a convenient way to keep all things under one roof. That approach, however, failed to take into account the variations in projects and the complexities inherent in different workflows. These add-on mobile modules were inflexible, difficult to use, and unintuitive. As a result, the adoption of these mobile tools was not only low, but also created hesitancy and distrust in the construction industry when it came to technology solutions.
A Better Way
Fast-forward to today’s availability of sophisticated and intuitive technology tools. With the Rhumbix field reporting app, our customers are reaping the benefits of managing their soft costs and seeing significant impact to their overall labor budget. And they’re doing it using a tool that was built specific to the needs of construction teams, built by veterans of the industry.
Let’s get back to our cost breakdown above to see how this all shakes out. Based on early customer data, it is reasonable to assume a 35% cost savings associated with paper-based field reporting. For our project with 200 craft workers, that’s over $100,000 added to the bottom line.
For first time users, we like to factor in a generous ramp-up* time for full testing and deployment, so let’s assume a cost of $20,000, just to be safe. And to be clear, this is just the cost of time to ramp-up. There are no implementation costs for Rhumbix.
*We consider the ramp-up cost to be an estimate of the “opportunity cost” that goes into getting a team trained and using our software. We have a dedicated account team that oversees this.
Now, factor in the cost of using Rhumbix: $6 per worker/per month for our 200 person craft workforce, totaling $14,400 annually.
Here’s how it unfolds…
|$ 406,000||Original Cost|
|$ 263,900||New Overhead Cost reduced by 35%|
|$ 142,100|| Potential Gross Savings
(decreased manual administration and re-processing time)
|($ 20,000)||Ramp-Up Costs|
|($ 14,400)||Annual Rhumbix Software Cost|
|= $ 107,700||Potential Annual Cost Savings|
Beyond Cost Savings
The benefits of using Rhumbix don’t stop with reduced labor costs. There is far more to be gained when you consider the compounding value of having a higher degree of data quality, available in real-time, to share with your crew so tomorrow’s production is much more efficient.
Rhumbix has also partnered with Procore, Viewpoint, Sage and Quickbooks, offering direct integrations to streamline sharing of data from the field to the office. In addition, our labor productivity module offers automated insights into daily P&L statistics, enabling Project Managers, Engineers and Project Executives to make proactive decisions that directly impact profitability.
Innovate to Build Confidence
In the construction industry today, there’s an undeniable amount of momentum to capitalize on technological advancements. Margins are razor thin, the competition is only increasing, and the generational shift happening in the workforce means more and more technology natives are on your jobsites.
But the technology is just part of the story. The biggest value you can get out of any new solution will always come back to your workforce. Is the technology equipping them to do their best work? Is it giving them the confidence to make smart decisions, to master a new way of doing things? At Rhumbix, we’re committed to creating solutions that empower the craft workforce to do their best work…and digitizing field reporting is just the beginning.
We have found almost every construction related business is unique, along with the projects they work on. To get a free customize analysis of your own, contact our Sales Team.