Supply chain management in construction: Your complete guide
The construction industry relies on a complex network of suppliers, manufacturers, and distributors to deliver projects on time and within budget. Effective supply chain management in construction is crucial for navigating this and making sure the materials, equipment, and information flow smoothly. This guide explores the key aspects, from planning and sourcing to distribution and risk management. We’ll delve into the challenges facing the industry, and explore the benefits of and how to optimise your construction supply chain for success. Whether you’re a seasoned professional or new to the field, this guide provides valuable insights into the world of supply chain management.
Why review your supply chain process?
Building a smooth supply chain management system means that the quality of products and materials that contractors need to carry out the work are delivered at the right time and within budget. Having a solid supply chain for your construction projects will ensure efficiency and have the potential to have massive savings. See below for examples of how supply chains have been used in construction.
The four roles of supply chain management in construction
Effective supply chain management in construction is crucial for project success. It ensures the smooth flow of materials, equipment, and information from origin to site, contributing significantly to project timelines and budgets. Understanding the core roles within supply chain management construction is essential for all stakeholders. These roles can be broadly categorised into four key areas:
Planning
Good planning is the foundation of successful construction supply chain management. It involves forecasting demand, determining material requirements, and developing a comprehensive procurement strategy. A well-defined plan considers project specifications, schedules, and budgets, ensuring the right materials are available at the right time and in the right quantities. This stage also includes identifying potential risks and developing contingency plans to reduce disruptions. For robust construction supply chain management, planning should also involve detailed analysis of the construction supply chain to identify potential bottlenecks and optimise logistics.
Sourcing
Sourcing focuses on identifying and selecting reliable suppliers who can provide the necessary materials and equipment. This involves evaluating potential vendors based on factors like quality, price, delivery capabilities, and reputation. Effective sourcing also involves negotiating contracts and establishing clear terms of engagement. Building strong relationships with key suppliers is vital for long-term success in supply chain management construction. A good sourcing strategy within the construction supply chain means a consistent and reliable supply of resources.
Manufacturing
While not always directly involved in manufacturing, supply chain management in construction often includes the coordination and oversight of the manufacturing processes for bespoke or specialised materials. This involves working closely with manufacturers to make sure that products meet project specifications and are delivered on time. Effective communication and collaboration are essential to manage this aspect of the construction supply chain effectively. Understanding the manufacturing process is crucial for effective construction supply chain management and making sure that the final product meets the required standards.
Distribution
Distribution focuses on the efficient movement of materials and equipment from suppliers to the construction site. This involves transportation, warehousing, and logistics management. Optimising distribution processes will help minimise delays and make sure that materials are available when and where they are needed. This effective distribution in the construction supply chain can significantly support project timelines and costs. Modern supply chain management in construction often leverages technology to track shipments, manage inventory, and optimise delivery routes.
Benefits of supply chain management in construction
We understand what it is and how it can benefit businesses on a surface level, but let’s dive deeper into what improvements construction businesses can see from effective supply chain management.
Win more tenders
Building a reputable business that people trust is invaluable. And if you’re able to manage a supply chain that can execute excellent and efficient projects, you’ll inevitably win more work, because they’ll want to partner with you again. It’s so much easier for clients to stick with you for other projects if they think you performed well.
Save on costs
You’ll save money by reducing areas of waste. Effective supply chain management in the construction industry helps your business avoid overspending, by only spending on what’s needed. You’ll benefit from being able to identify areas you could potentially save on costs, meaning you’re more likely to stick to the budget, and ultimately boost profits. All from optimising your supply chains!
Creates a more organised team
The transparency of fantastic supply chain management is what keeps contractors and other third-parties in the know. As long as the correct systems are in place, you’ll be able to track products and supplies along the supply chain, so you’ll know exactly when things have been delivered and installed.
It also helps to allocate staff resources effectively for when the construction materials are delivered, so they can get to it right away. The proactivity on a project can be the difference between a speedy installation and a delayed one.
For example: In shipping ports it’s customary to be given a time slot to unload all the materials and products from your container. Not doing so will incur overtime fines so managing staff in your supply chain is crucial to avoid time-based penalties like this.
Reduce supply chain risks
Continuing on the topic of proactivity, construction supply chain management can help reduce supply chain risks by developing a plan B. Knowing the potential risks allows you to prepare for a situation where a part of the supply chain might be unable to fulfil its responsibilities. So then you can respond and keep the project moving forward!
Take a look at the rest of the benefits of supply chain management.
What are potential supply chain risks in the construction industry?
Potential risks for construction supply chains can include:
Materials shortages
Most recently in 2022 and 2023, the construction industry had a crisis in the supply chains. Materials shortages are a significant challenge facing the construction industry. These shortages can lead to project delays, increased costs, and even project cancellation. Several factors can contribute to material shortages, including global supply chain disruptions, increased demand, natural disasters, and geopolitical instability.
Building strong relationships with key suppliers is also essential, as it can provide access to scarce resources and preferential treatment during times of shortage.
Labour shortages
In the construction industry there’s only a limited number of skilled workers, due to the high–risk nature of some projects and complexity. Businesses are struggling to hire candidates with relevant skills. In a survey by ONS in November 2022, the percentage of businesses experiencing a shortage of skilled workers was between 12.9% and 15.4% since October 2021, with the exception of August 2022, when 16.8% of businesses reported a shortage.
The industries with the highest percentage of businesses experiencing worker shortages in November 2022 were accommodation and food services (35.5%) and construction (20.7%).
Sustainability
Sustainability is increasingly important in supply chain management in construction. This involves considering the environmental impact of materials, processes, and logistics. It includes sourcing materials from sustainable suppliers, minimising waste, and reducing carbon emissions. A sustainable construction supply chain not only benefits the environment but can also lead to cost savings and improved reputation. Modern supply chain management construction practices often incorporate lifecycle assessments to evaluate the environmental impact of materials and processes. Thinking about sustainability within the supply chain in the construction industry is now a key factor for many businesses. Good construction supply chain management will consider sustainability at every stage.
Managing regulation changes
The construction industry is subject to a complex and ever-evolving regulatory landscape. You must be adaptable and responsive to these changes. This involves staying informed about new regulations, updating procurement processes, and ensuring compliance throughout the construction supply chain. Effective communication and collaboration with legal experts and industry bodies are essential for keeping up to date with regulatory changes. Understanding the implications of these changes is a critical aspect of supply chain management and its effective implementation. For successful construction supply chain management, being able to adapt to changes in regulation is a vital skill.
Deliver efficient projects with Smas
We hope this helps you better understand supply chain management in construction. If you’re looking to increase the efficiency of your projects, consider our Supply Chain Management service. We’re an SSIP registered member!
Want to further improve safety on your projects? Book your Site Supervisor Safety Training Scheme (SSSTS) course today, and take your business to the next level. Our courses are completely online and are delivered by a CITB qualified instructor.
Our SSIP certification has tens of thousands of contractors signed up, and your business could be next. Become a Smas Worksafe consultant and help transform the Health & Safety of your business with our WorkSafe PQQ packages. We have a range of SSIP packages tailored to suit your industry’s Health & Safety needs. Your organisation can also get PAS 91 certified with Smas Worksafe.
Contact us today and speak to one of our experts to find out more. Let Smas Worksafe ensure your business is compliant and secure more tenders.