AI for the Trades: How AI Is Shaping the Future of Materials Management for Specialty Contractors

The construction industry is at the beginning of a transformative era of innovation. With rapid strides in large language models (LLMs), the possibilities for revolutionizing how we construct the built environment are limitless. Specialty contractors nationwide are now wondering: how can we harness these innovations to reshape how we build?

But don’t take our word for it. Take James Barrett, chief innovation officer for Turner Construction’s word for it: “Artificial intelligence will transform our industry in the next 10 years more than any other technology in the past 100 years,” he recently told Construction Dive.

Part of the reason for all the excitement: AI adoption will increase profit margins. A recent Deloitte survey published by Autodesk found that what they defined as construction “data leaders” (i.e., organizations with centralized data, advanced analytical tools, and data proficient talent) are seven times more likely to deploy AI and machine learning solutions — and can expect a 50% average profit growth rate each year compared with beginners (i.e., organizations with decentralized data, minimal data analysis, and inexperienced talent in regards to data management).

Realizing this potential will depend on how well the trades can integrate these technologies into their workflows. But where to begin? To help you start, we have written about the power of these technologies and the areas in materials management where we see the most valuable application.

AI-enabled Workflows

The industry’s recent IT shift – from physical to digital information – gives us model for how AI will impact trade contractors. For trade contractors, a large bulk of business data pertains to materials. This includes information regarding their procurement, warehousing, and accounts payable. In the past, that data was stored in physical files. The overall process might require multiple steps, people, and piles of paperwork just to make a decision. Getting work done in this paradigm looked (and might still look for some) a little like this:

The past decade or so has brought digitization to most growing contractors. In this model, many of those same physical files are now housed online and are located through a specialized interface like Kojo. That interface can display the information a user is looking for quickly and then leave them to decide the next step they might take through the application’s user interface. Getting work done in this “digitization” model often looks something like this:

AI will allow us to build on this digitization model and take this process one step further. Not only will your files like POs, invoices, and requests all be housed digitally, but the same interface that displays the information will also be able to understand that information and present actions for the user to take. Or even take them on behalf of the user. How work gets done will look something like this:

In the near future, tedious tasks in procurement and AP processes will be expedited and automated. With all your key business processes streamlined, you can do more with less and save money in the process.

A very simple procurement example: Take PO creation. At Kojo, we’ve found that before the digitized model, the average processing cost of a single PO from end-to-end is at least $68. Now multiply that by the thousands of POs your purchasing teams make yearly, and you’ll see what a huge expense this is. With Kojo, we bring that cost down to $17 per PO - a 75% reduction! However, we believe that with AI, we can move that even further, down to sub $5 per PO. As the number of POs increases, your purchasing managers won’t get stuck with tedious tasks and instead can focus on the bigger picture.

Even given this tremendous upside, it’s important to note that we don’t believe AI will replace humans in materials management. There will still be a need for human employees to maintain supplier relationships, make the final buying decisions, train the labor force, and maintain jobsite safety, among many other duties.

Still, the potential benefits are clear.  To achieve them, you will first need to digitize your materials management data through a platform like Kojo.

Procurement Use Cases for Specialty Trade Contractors of AI

There are plenty of use cases for AI in construction, from pre-construction, to build, to service.

For example, in pre-construction, AI forecasts project timelines. AI-driven tools also assist in automating design processes, generating accurate 3D models, and identifying constructibility issues before they arise. 

At Kojo, we are focusing on how trade contractors can use AI to improve procurement operations. Some ideal scenarios for AI are:

• Scanning invoices to eliminate manual data entry
• Sourcing pricing and availability
• Tracking inventory
• Monitoring maintenance records
• Catching invoice mistakes
• Estimating costs and budgeting
• Material forecasting

When used correctly, AI can help increase your margins in three areas: materials pricing, risk assessment, and workflow automation.

Material Pricing

AI will analyze historical data and market trends to improve material pricing and predict price fluctuations and material availability, allowing firms to make more strategic purchasing decisions. This capability will help trade contractors secure the best prices for materials faster, without needing to send tons of RFQs and wait for responses.

With all your material purchasing data already digitized, software can structure it into a more digestible format for your teams. You’ll also be able to use LLMs to ask questions about your procurement records and get accurate answers instantly.

Risk Assessment

To assist in risk assessment, we will build AI-powered co-pilots to help you identify hidden risks. Your co-pilot will help identify risks with delivery schedules or flag orders likely to cause delays and suggest alternatives.

Workflow Automation

AI also has the potential to eliminate many repeated tasks, such as purchase order creation and invoice matching. The tedium of the thousands of POs your purchasing managers create, and the thousands of invoices your finance team reconciles will be taken care of, freeing your team to focus on higher-value work.

In summary, we believe AI will help you increase your margins by:

• Finding you opportunities to spend less on materials
• Helping your office team do more with less
• Improving decision-making on vendor selection with visibility and analytics
• Catching errors and reducing risk without increasing overhead

Your Current Tech Partners Should Help Drive AI Adoption

We think AI adoption is inevitable for every business, even for brick-and-mortar industries like construction. Soon, AI will cease to be a novelty but a norm. Your business can either get ahead of the AI curve or get left behind. The sooner you can adopt AI, the better.

You aren't alone in this transformation. You can lean on your business's technology partners to help navigate. Specifically, the software platforms your company relies on that have helped bring the era of “digitization” to your business can be the best partners in AI transformation. They already understand you as a user, likely have the relevant data, and understand the industry to drive the best impact. Successful digitization through these software systems is the perfect on-ramp to AI.

At Kojo, we are investing significantly in AI to help bring trade contractors into the future. With the advancements we are makign, we’ll be able to help you make better decisions related to material pricing, risk assessment, and workflow automation. All of this will happen in an interface your team is already accustomed to.

We’re in the initial phase of redesigning Kojo’s underlying software structure to support these capabilities. Stay tuned for Part 2, where we’ll discuss how we’ve incorporated AI seamlessly into your Kojo workflows and how we plan to build more AI functionality in the future.