Construction projects involve multiple processes and impact many people, organizations, and communities. With efficient planning, monitoring and communication, good results can be delivered on time and within budget. However, things don’t always go smoothly. This is where the importance of supply chain management comes in. It seeks to oversee the complex construction process, solve issues that suddenly come up, and ensure that timelines are met.
What is Supply Chain Management in Construction?
Supply chain management pertains to the handling of the entire flow of production of products and services, from sourcing raw materials to the final delivery to clients. It’s an integral part of running a business, affecting long-term success and profitability.
In construction, many organizations work together to complete a project for a client. Raw material suppliers, contractors, architects, and engineers team up for planning and coordination. Much of the project’s success will depend on trust, commitment, and good relationships between the parties involved. If a stakeholder quits in the middle of the job, the supply chain will be disrupted, possibly leading to cost overruns and schedule delays. In addition, communication issues, sudden design changes, inadequate training among workers, poor-quality materials, and inaccurate calculations can also affect the chain and the project’s outcome.
How Supply Chain Management in Construction Works?
Supply chain models vary per company and industry, but the workflow essentially falls into three categories: finances, information, and product. The supply chain, handled by a supply chain manager, covers the planning, sourcing, logistics, and delivery operation stages.
Construction Supply Chain Issues & How To Manage Them
The COVID-19 pandemic, political unrest, and other current events have disrupted supply chains worldwide, testing the resilience of governments and companies as they meet consumer demands. In the construction industry, getting more projects done in this volatile economy means spending more time and money. And many firms couldn’t keep up.
These challenges can be overwhelming for growing businesses, but there’s somethings they can do to minimize these problems and make positive changes that can contribute to their venture’s growth. It all boils down to effective supply chain management.
1. Shortage of Raw Materials
Supplies and equipment that were once so easy to get now take many months to purchase. If immediately available, you’ll most likely be charged a higher price due to the rising transport costs of raw materials from China. The unprecedented increase in transport prices has been causing construction project delays worldwide.
Among the materials facing shortage are steel, copper, lumber, iron plaster, and wood, primarily affecting projects which are only about to start. Without structural components, no other materials can be installed.
Even building projects awaiting completion are stalled due to a shortage of additional materials. Revisiting and building relationships with supplies is only one part of the solution. Since it’s not clear when things will get back to normal, companies must address the present situation by rethinking their supply chains, resorting to alternative materials and coordinating with other suppliers.
2. Labor Shortage
Even before the pandemic started, labor shortage was already a problem. It worsened in 2020, with thousands of construction employees being laid off as projects stopped and slowed. The demand has since improved. The thing is, labor and supply still can’t keep up.
Although the younger generation doesn’t see construction work as a long-term profession, there are ways to entice them to join the workforce. The challenge of builders now is to attract and retain qualified workers through progressive management and stability.
Hazardous chemicals, heavy machinery and sharp tools in a cluttered construction site usually become the starting point of fatal accidents. With a good supply chain comes employment retention, training, and safety. Ethical practices, sound emergency response systems, and a stronger emphasis on safety can encourage more people to join your company.
3. Project Delays and Contract Disputes
Contract disputes may soon stem from a shortage of labor and raw materials, as more and more projects are getting delayed. In addition, failure to transport materials on time may also impact the completion dates and may lead to more expenses.
Problems in distribution, logistics, and production may come up anytime. Whether it’s transport or shipping delays or fallbacks caused by other uncontrollable circumstances, construction contracts should be able to handle these fluctuations without any issue.
Depending on the situation, owners and contractors must decide who will shoulder the delay costs. A force majeure clause can reduce financial costs, protecting you from the liability for delays and other issues beyond your control.
4. Inadequate Planning Risk Management
When a firm decides to take on a project, each aspect is planned and monitored to minimize risks, from budget overruns to environmental conditions. A stable supply chain management program can help determine and manage short-term and long-term risks.
Risk management plans are more important than ever, taking into account the changes in the construction industry because of the pandemic and economic slowdown. Unfortunately, there’s no one-size-fits-all formula when it comes to risk mitigation.
A reliable team must be able to prepare contingency plans and evaluate every detail until the end of the project. Keep optimizing the procedures and framework as you go along, even when you’re halfway through the project.
5. Failure to Adapt Technology
Technology has completely transformed the way we run businesses. As we brave the effects of the pandemic and economic uncertainties, we should depend on technology for faster, more successful progression.
When you embrace technology, you prioritize accuracy, sustainability, and high-speed performance. The best supply chain management program, alongside modern practices, can boost continuous evaluation, optimization, and monitoring. Every employee can get help whenever they need it.
Embracing technology is essential, especially if you’re working towards net zero energy building. For instance, cloud-based solutions can help execute smooth safety measures and recruitment processes. Through technology, data-driven decision-making and day-to-day operations become even more convenient.
Want to improve your supply chain issues?
Proactively Manage Expectations
The biggest gripe that construction clients have is communication and adding supply chain issues to the mix, is a recipe for unhappy customers. The easiest way to handle this is to proactively manage expectations with your customers.
Start by sharing what your company and the industry as a whole is experiencing with the supply chain conditions right now. Set proper expectations and realistic time frames during this conversation. Be sure to share some things that your customers will receive to help them navigate their customer journey with your company.
The could include:
- Weekly updates on their project
- Updated time frames if their are unforeseen supply chain challenges
- Extended warranties
- Extended warranties
- Other services with no additional cost
- Competitive pricing offered nowhere else
Benefits of Supply Chain Management in Construction
1. Improved Project Flow
Construction supply chain management helps stakeholders to prepare for possible setbacks, minimize mistakes and find points for improvement. The earlier quality construction materials are delivered, the better the project flow. Moreover, the faster the work process, the lower the costs will be.
2. Better Communication
Ineffective communication among transport companies, project managers, vendors, suppliers, and contractors is a costly problem that can affect the project’s outcome. Supply chain management in the construction sector promotes good communication and coordination among stakeholders. It allows various departments quick access to essential project details such as reports, forecasts, and real-time information.
3. Better Quality Control
Choose the most suitable resources for your building. There are multiple factors to keep in mind, such as ease of installation and maintenance, budget, availability, durability, and sustainability. Through supply chain management, you’ll have someone in charge from start to end, always ready to coordinate and ensure quality control. The person in charge implements quality assurance plans to ensure that your company’s requirements are met.
4. Better Response to Conflicts
Working on a construction project means dealing with many complex logistical problems requiring innovative solutions. An integrated supply chain management strategy can help prevent and resolve these issues and maintain constant communication. It’s a system that keeps everyone updated, even without being in the same conference room.
5. Risk Mitigation
Risks like weather issues, budget concerns, and safety matters like burns and electrical accidents may emerge at any stage of the construction process. Supply chain management prepares stakeholders for unforeseen circumstances, helping them plan, research, and analyze risk areas.