Can Construction Software be Used For Contractors that Also Manufacture?
Nowadays, it is fairly common to find contractors who manufacture the products they install for customers. Some examples include structural steel, custom cabinetry and furniture, and various kinds of low voltage products. Prospective buyers of software with this profile will often have fabrication and assembly job shops that design the products to the customer’s specifications and then have an installation department to install it at the customer’s site. Providing professional design services and providing estimates and quotes are something that contractors and manufacturers often have in common.
Unfortunately, finding a piece of construction software that covers both sides of the business is not as easily done as it is said. Although both sides of the business deal with job cost, there are several issues that arise when trying to integrate the two sides with one piece of software.
First of all, there are different sets of constraints when it comes to scheduling jobs. Manufacturing companies (or parts of companies) deal with machines and individuals in job shops. These shops often have to rush jobs in the cue that arise unexpectedly but nonetheless need to be completed as soon as possible. As such, it is necessary to have software with the ability to reflect how these rush jobs impact other jobs. Construction, on the other hand, rarely deals with sudden changes and although lead times are often much longer, a new challenge arises in dealing with numerous other variables, such as subcontracting.
Second the cost accounting is different. Manufacturing job costs include direct labor, direct materials, and some kind of overhead allocation. In manufacturing, work in process costs should be accumulated as the job moves from one work center to another. These costs are assets on the balance sheet until the job is completed and shipped. As a result, the cost of inventory constantly changes as the job progresses. Furthermore, manufacturers need to know job progress and be able to project a promise date to the customer.
On the other hand, costs and revenue are recognized on a percentage basis in construction. Most contractors do not record costs until they are actually billed for them, regardless of whether or not the labor has been completed. They are concerned with the cost to date of a project in relation to the estimated budget for the project and use this information to calculate whether or not the project is targeted to complete over or under budget. This kind of cost break down simply does not work in a manufacturing environment.
Capturing costs in real-time is only possible with the right construction accounting software and the right supporting processes. A good software package will give users the ability to track jobs in a linear fashion as the job moves along.
Project management issues such as change orders are frequent on the construction side of a business and are not relevant for manufacturing. It may also record retainage for jobs and do progress billing, which manufacturers don’t do.
Finally, construction jobs generally do not require quotes involving bills of materials while manufacturing jobs do. Manufacturers like to use software to keep track of things such as change orders, revision histories, and drawings that are not covered by construction software.
The bottom line is that, although some companies are both contractors and manufacturers, one piece of software is not going to be able to be used for both sides of the business. As nice as it would be, the two operations differ so dramatically in terms of “relevant information” that even if software existed capable of serving both sides of a business, chances are it would be far too arduous to use. As a result, you will need to invest in separate manufacturing and construction software packages. Consult construction software reviews to get a good idea of what kind of solutions might be best for your company.
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