Contractors have been contending with labor shortages for several years. Unfortunately, it doesn’t look like this will materially improve any time soon. Two trends indicate that contractors and their supply-chain partners will need to get even more creative to successfully navigate these challenges.
The first challenge is the aging workforce—especially for electrical contractors. According to the National Electrical Contractors Association, the average electrical contractor is approximately 60 years old, and more than two thirds are55 or older. Over the next decade, the industry will need to replace tens of thousands of openings per year as this aging workforce moves towards retirement.
The second challenge is the influx of megaprojects, such as data centers, battery and chip manufacturing facilities, industrial reshoring, etc. The scope and scale of these projects is exponentially larger and more complex and will require even more skilled workers than the average previous project.
Combined, these two trends are putting increased pressure on contractors to find new labor pools and optimize growth and project execution. Teaming agreements between multiple electrical contractors is becoming more common as the bonding, risk and labor requirements are growing. And even when enough labor is available, optimizing labor is always a key to project execution and project profitability. According to the FMI Corporation’s 2023 Construction Labor Productivity Study, 45% of survey respondents saw a decrease in labor productivity in 2022.
INNOVATE AND STRATEGIZE
Contractors are in the labor-management business. Labor shortages, combined with the size and number of large-scale opportunities, will limit the number of projects that contractors can both bid on and execute. Most are grappling with the two ideas that throttle growth plans: risk and resource planning. However, there are strategies and initiatives that businesses can implement to help manage labor shortfalls and capitalize on operationalizing growth:
Properly utilize skilled labor: Skilled workers are contractors’ lifeblood. Those with experience and pragmatic know-how will make or break a project. Segmenting labor so your skilled workers are utilized for their strengths will help maximize profitability and scalability by shifting routine tasks like kitting, assembling, sorting and loading/unloading upstream to your distribution partners as well as lower-skilled workers. Non-productive labor continues to hover around 30% of a project according to NECA, highlighting the opportunity to reduce nonproductive labor by leveraging supply-chain partners to provide value add services while trade contractors focus on those areas in which they are trained to do.
To underscore the breadth of this issue, consider that, according to FMI, contractors likely forfeited $30 to $40 billion to labor inefficiencies in 2022. By leveraging distribution partnerships, lower-skilled or lower-cost labor to perform repetitive tasks offsite, contractors can help minimize variable costs and level schedules, so more time is spent constructing, ultimately resulting in increased efficiencies and overall profitability
Consider prefab solutions: Most think the main reason to use prefabraction is to build faster. In reality, prefab helps with risk mitigation, labor utilization and adds a higher predictability of cost and profits. Prefab is most effective on larger-scale projects such as hotels, multifamily homes and solar installs, which often have repetitive elements. For solar projects, prefabricated combiner boxes can be especially helpful. By being built offsite, they limit the onsite challenges of logistics, material coordination and weather in the field.
Think outside the box: Innovative productivity solutions can help contractors manage operating costs by increasing efficiency and minimizing installation time and waste. Many wire and cable solutions exist that enable cable to be pre-cut to length. Multiple legs can then be pre-loaded on a single, multi-chambered reel with pulling eyes installed. This kind of solution minimizes setup time, reduces material waste and doesn’t require specialized labor. These innovative solutions require fewer workers while simultaneously cutting risk and cost.
Leverage technology: Businesses can utilize various technologies to cut back on time-consuming manual processes. For example, some software solutions aim to simplify estimating, project management and logistics. Some allow businesses to directly integrate with suppliers to source pricing, estimates and inventory electronically, eliminating the need to make phone calls or rely on spreadsheets. Streamlining these processes allows construction businesses to save a significant amount of time on back-office tasks, empowering them to instead focus on project execution.
EMERGING TECH
In addition to the strategies and solutions mentioned above, new technologies like virtual reality and artificial intelligence present opportunities to help enhance labor efficiency. While current utilization rates might be low, forward-thinking contractors may consider use cases for AI and VR to complement workers by automating and streamlining certain functions.
There are already tools that allow workers to interact with someone at the jobsite via virtual immersive software or visualize and interact with 3D data onsite from any angle at true-to-life scale—think VR combined with BIM.
Some examples of innovative solutions powered by VR, AI and other technologies include:
1. Software platforms that streamline the design process by integrating with trade-specific systems. This sharing, communicating and collectively interacting in real-time with easy-to-understand visualizations could help save labor hours on the back end by ensuring that electricians and other trade workers all work from the same design drawing. This can help avoid potential configuration conflicts. Other platforms can automate the documentation process, saving even more time.
2. VR tools let workers design, map or lay out a project without needing to physically be onsite. This can help companies reduce costs or optimize specialized labor, especially for projects that are spread out over a large geographic footprint. They can also allow workers to prepare for potentially hazardous situations while training in a safe environment.
3. Businesses can save time by using drones to map the layout of a jobsite. Instead of having multiple workers physically walk through the site, one worker can capture that information in a fraction of the time.
Although any new technology comes with an upfront cost and learning curve, contractors that adopt them will have a powerful tool for recruiting younger workers who grew up with immersive technology. The next generation of skilled laborers will be more tech savvy and interested in working for organizations that leverage progressive technology to enhance their business. Given the competition for top talent, incorporating these tools could give contractors a leg up on their competitors. Ultimately, this can help win more business and improve profitability.
MAXIMIZE AND EXECUTE
As labor challenges continue and as projects grow in size, scale and complexity, effectively managing labor will become even more critical. Businesses that understand how to efficiently utilize labor, skilled or otherwise, will be able to capitalize on opportunities and prosper.
