BCG has observed a significant increase in prefabrication and modular construction within the U.S. construction industry. Owners now expect contractors to perform a certain amount of work in-plant rather than in-place, primarily for safety and quality reasons, but also for potential schedule and cost benefits. Added to this are the needs of some data center owners, who are having modular units and racks built and delivered for their facilities. All of this has led to shop space and resources increasing at a significant rate. Contractors once managed this resource well enough (though not great) when the shop served mainly as an adjunct resource to support jobs. However, their systems and processes remained somewhat informal. In fact, I used to see most shops relying heavily on Excel, whiteboards, and Smartsheet to manage their operations.
On a related note, two recent statistics caught my attention. A Dodge Construction Network post suggested that data center construction spending grew 45%, which is a substantial figure in construction, where growth is normally in the single digits. This growth is also regional, with some areas having much more activity than others. At the same time, an article in The Economist (August 28) discussed NVIDIA and the power consumption of their chips and data centers in general. With all these new data centers coming online, they projected new power demand in the US to increase by 25 GW, which is almost all of the new power capacity generated each year. Coupled with the fragile nature of our grid, this calls into question whether there may be a constraint on how fast data centers can continue to grow, even if demand is there.
BCG is closely evaluating the MRP solution market right now for a number of clients who are trying to automate their shop floor, inventory control, and procurement functions. As you probably know, most of the legacy ERP systems contractors have used over the past 20 years lack MRP or shop floor capabilities. This leaves two options: either switch to an ERP class that includes MRP or implement a stand-alone MRP product that can tie to the existing ERP. There are some interesting new start-ups emerging in this space and some of the older products are maturing nicely. Quality-assurance demands are increasing too for ensuring compliance, which is another function these solutions must bring to provide.
Whether the growth continues at the current rate or not, there will be continued growth. Contractors that fabricate or do modular off-site are going to have to get systems and processes in place to meet this new challenge. Stay tuned for more on this fascinating field in construction and technology.