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Author's profile photo Michael Kastner

Digitalization and Industrialization in Construction

Digitalization and Industrialization of the construction process facilitated by topics like BIM and Lean Construction are supposed to drive the transformation of this industry. The result will be an integrated project delivery network in the construction industry.

It is well known that the construction industry is lagging way behind other industries when it comes to efficiency, productivity, collaboration, and standardization. As a result cost overrun, delays, quality concerns and rework are quite common in the construction industry. E.g. once you compare productivity, the productivity in the manufacturing industry and other industries have improved continuously over the last century while the construction industry’s overall productivity has in the best cases stayed flat or even turned negative in some countries.


Example US Construction Labor Productivity, 1964-2012 based on various deflators vs. Productivity for Nonfarm industries. (Source: Census Bureau, BLS)

As well there is overall an agreement that there is significant room for improvement in this industry, e.g. studies focusing on construction efficiency have documented 25 to 50 percent waste in coordinating labor and in managing, moving, and installing materials (Tulacz and Armistead, 2007); losses of $15.6 billion per year due to the lack of interoperability (NIST, 2004); and transactional costs of $4 billion to $12 billion per year to resolve disputes and claims associated with construction projects (FCC, 2007).

So if the improvement potentials are identified and documented since years, why is it so difficult to change the industry and to improve the situation?

In order to answer this it is worth to take a closer look into a study conducted by the National Research Council of the National Academies on behalf of the National Institute of Standards and Technology (NIST) in 2009. In the report a number of reasons are listed around fragmentation of the industry, lack of interconnectivity and interoperability which are identified as root causes for inefficiencies and productivity issues in the construction industry and which make it difficult to change the industry:

  • High fragmentation of the industry – Compared to other industry’s the number of small companies is huge (over 20 million companies, 81.8% with less than 20 employees; Source: Hoovers), which makes it difficult to apply new technologies, best practices and other innovations across a critical mass in a timely manager
  • Industry segmentation into at least four distinct sectors (residential, commercial, industrial and heavy construction)
  • A diverse and fragmented set of stakeholders: owners, designers, contractors, subcontractors, suppliers, operators, regulators etc.
  • Segmented processes: planning, financing, design, engineering, procurement, construction, operations and maintenance. Each process is typically performed sequentially and each involves different groups of stakeholders, shifting responsibilities and shifting levels of risks which often lead to adversarial relationships, disputes and claims.
  • Variation in the standards and building codes, construction related regulations and permitting processes, construction processes, materials, skills and
    technologies required by different projects and in different countries
  • The one-of-a-kind, build-on-site nature of most construction projects
  • Lack of effective performance measures for construction related tasks and projects.
  • The image of the industry which makes it more difficult to attract and retain skilled workers and graduates.
  • The lack of an industry-wide strategy to improve construction efficiency and an industry-wide research agenda and levels of funding.

However as well in the study five activities are identified and suggested which could result in a breakthrough improvement to advance the competitiveness and efficiency of the industry:

  1. Widespread deployment and use of interoperable technology applications, today as well often associated with the term Building Information Modeling (BIM).
  2. Improved job-site efficiency through more effective interfacing of people, processes, materials, equipment’s and information.
  3. Greater use of prefabrication, pre-assembly, standardization and modularization, and off-site fabrication techniques and processes.
  4. Innovative, widespread use of demonstration installations
  5. Effective performance measurement to drive efficiency and support innovation.

Linking back the results of the study to the topic of Industrialization and Digitalization, the first three activities above are in particular relevant.

As stated above the Industrialization in construction means on a high level the use of state of the art on- and off-site production technologies and the standardization of products, elements and modules used. The industrialization of manufacturing processes has already been implemented in other industries, such as automotive, airlines long ago and to some extend as well more recently in plant engineering. And there is a trend that more and more construction companies are looking at manufacturing industries to see if there are principles, processes or tools that can be applicable for the construction industry. One of these principles is PLM. PLM concepts are highly relevant, of course with other focus, nomenclature and processes. So the ideas around the term Building Information Modeling (BIM) get more and more prominent in the industry.

The idea of BIM is to maintain an integrated repository of all the information relevant to a building or construction project throughout the different phases of the project lifecycle. This repository facilitates storing, integrating, checking and visualizing the entire data emerging throughout the project lifecycle. So with other words we talk about a virtual digital model of the physical building or facility. In the past with regards to BIM often the main focus was on just the 3D geometry and the people directly working with the 3D model. More and more the scope of BIM has evolves from just being 3D visualization models to a concept that can help the industry stakeholders in carrying out 360 degree analysis of construction project even before a single brick is laid on the ground.

BIM will support the industrialization because it provides the required granularity to apply on- and off-site production technologies, allowing better reuse of standardized products, elements and modules and on the same time providing customers one-of-a-kind designs. BIM holds great value for the industrialization of the construction phase itself and facility management in the post construction phase. Having a lifecycle focus where information is reused from early design, through construction into maintenance is where the real improvement lies. 4D project scheduling and 5D cost estimation are prominent process examples in which information from 3D models are populated and combined with additional information to drive improvements and to change the way of working. In the future we will see much more additional processes which will be applied as well like:

  • Virtual job site planning and logistics
  • Safetyplanning / training
  • Model-Driven Sourcing and Procurement
  • Model-Driven Prefabrication
  • Work packaging and on & off-site construction planning
  • Model-Driven Prefabrication
  • Virtual job site planning and logistics
  • Virtual Project Execution
  • Model-Driven Operation and maintenance
  • Improve Building Performance Through BIM Optimized Facilities Management

So facilitated by the idea of building information modeling the industry moves into an end to end digitalization in construction. This will help to overcome one
of the major problems currently facing project delivery like securing a coordinated, reliable and ongoing flow of information between all parties. The coordination work involved is considerable, given the fragmented approach to delivering projects caused by numerous independent parties involved in the project who all use different computer and information systems. Reuse of data and increased cooperation and collaboration between (all) actors in the value chain are seen as key drivers towards the goal of increased productivity in the sector.

The result will be that such a digital technology innovation will change the way the built environment is designed, constructed and operated around the world and taking the fragmentation and segmentation of the industry into account software as a service approach will play a key role for a faster transition of the industry.

SAP is here in an interesting position with its technologies and solutions like SAP HANA, Cloud Solutions, Business Networks, SAP solutions for the Internet of Things, SAP for Business Applications and Analytics. By combining this along the lifecycle with SAPs Visual Enterprise Technology SAP would be able to support the transition of the industry.


Tulacz, G., and T. Armistead. 2007. Large corporations are attempting to meet the industry halfway on issues of staff shortages and risk. Engineering News Record, November 26.

FFC. 2007. Reducing Construction Costs: Uses of Best Dispute Resolution Practices by Project Owners. Proceedings Report. Federal Facilities Council Technical Report No. 149. Washington, D.C.: The National Academies Press.

NIST (National Institute of Standards and Technology). 2004. Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry. NIST GCR 04-867. Gaithersburg, Md.: NIST.

Advancing the Competitiveness and Efficiency of the U.S. Construction Industry; Committee on Advancing the Productivity and Competiveness of the U.S. Industry Workshop Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences; National Research Council;

Industrialization in building construction. production technology or management concept? Gerhard Girmscheid. VTT Technical Research Centre of Finland and RILUniversity of West Indies (2005).

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