Construction Supply Chain Management: Trends & Strategies

What is Supply Chain Management?

Supply Chain Management, as its name suggests, is the management process which includes designing, planning, execution, control and supply-chain activity monitoring. This process is designed to tackle supply with demand, measuring performance and creating net value.

In other words, SCM(Supply Chain Management) deals with supplying raw materials with facilities of storage to create a product, then helping the finished product to arrive to the consumer at another end. Simplifying the process further, if we break down the name of the topic further Supply, Chain and Management and understand the meaning. “Supply” is satisfying the demand of resources which can be anything from skill, labour, information to raw material or end product.

Chain, is the network between organisation to organisation or organisations to people and links in the organisation and also between the organisation or people. Lastly, management is a systematic handling of the goods and people with targets and designing effective processes or resources.

Talking about the history of SCM(Supply Chain Management), the term itself was introduced by a consultant at Booz Allen Hamilton named Keith Oliver in an interview(1982). Supply chain management was more relevant and worked in armoury activities in the 19th century.

Supply Chain in Construction and its effects

There are various demands in the construction sector that are to be supplied through SCM and the construction supply chain management can be complex. The complexity comes from the number of site materials used and parties involved in it and the complexity also increases as the number of first and second tier suppliers increase. Supply chains in construction are carefully planned, organised and collaborated among the partners of the supply chain. To give a rough idea of the complexity of supply chain in construction, a construction company may interact with thousands of sub-contractors and suppliers whilst on a project.

In the construction industry all the supply chain management is the play between contractors and suppliers and Supply Chain Management helps immensely in saving time, increasing profit and improving quality systematically. This benefit has led the UK construction sector to partially adapt the SCM. The benefits of supply chain management are uncompromisable like the high profit by low cost, lower margins in equipment maintenance, repeated pairing with progressive clients, project coordination and planning for the long term etc.

Material suppliers, architects, engineers, subcontractors, prime contractors etc are some of the parts of the supply chain in construction. Nowadays, integrated supply chain is the approach in supply chain management which helps aligning objectives to add value to the client. The benefits of integrated supply chain management in construction are risk reduction and more accurate estimation, both waste and cost reduction, long-term planning and at last repeated or ongoing business.

The Significance of SCM in Construction

Efficient supply chain management is pivotal in construction due to its direct influence on project timelines, costs, and quality. A well-organized SCM ensures that materials arrive on time, reducing delays and potential disruptions. It also enables better resource allocation, minimizes waste, and enhances collaboration between various stakeholders involved in a construction project.

Key Challenges Faced in SCM for Construction

1. Logistical Complexities: Coordinating the movement of materials, especially in large-scale projects, can lead to logistical challenges, potentially causing delays and increased costs.
2. Demand Variability: The construction industry often experiences fluctuations in demand for materials, making it challenging to forecast and plan effectively.
3. Supplier Relationships: Maintaining strong relationships with suppliers is essential, as disruptions in the supply chain can arise from issues such as material shortages or unforeseen circumstances.

Strategies to Enhance SCM Efficiency

1. Effective Communication: Clear and open communication among all stakeholders helps prevent misunderstandings, reduces errors, and ensures timely deliveries.
2. Demand Forecasting: Implementing advanced demand forecasting techniques can aid in predicting material needs and preventing shortages or excess inventory.
3. Supplier Collaboration: Collaborative partnerships with suppliers can lead to better negotiation terms, improved reliability, and quicker problem resolution.

Technology’s Role in Modern SCM

Modern technology has revolutionized SCM in construction. The use of Building Information Modeling (BIM) helps visualize and plan projects effectively, while IoT (Internet of Things) devices enable real-time tracking of materials and equipment, reducing the risk of loss and theft.

What is the Green Supply Chain?

The supply chain is the same thing that means the flow of resources to cater the demand of material, skill, information, labour etc and providing the finished goods to the end user that is the consumer. But the affiliation of green with the supply chain means the consideration of environmental issues in supply chain management. Green supply chain ensures that the whole process of the supply chain management doesn’t affect the environment in a negative way.

Construction is the oldest surviving industry in the world and is also considered to be the biggest waste generating industry in the world. That’s why it is very important to reduce waste and carbon emissions through better selection of construction materials and using effective techniques in construction.

Management Techniques in Supply Chain

There are several techniques for the improvement in Supply Chain Management as follows:

1. Recruiting & training of Professionals: The Supply Chain Staff should be well trained and highly qualified.
2. Supply Chain Team Alignment: We need to align the dinstinctly working entities in Supply Chain to work effectively to avoid problems like slow communication etc.
3. Incorporating the Softwares & Technology: Technology is high in demand in every industry for the accuracy, effectivity, and cost reduction it provideprovide so incorporating the softwares to keep the data structured and organised is suggested.
4. Avoid delays by diversifying supplier relationship
5. Volume purchasing for cost reduction of supplies:It is one of the best practices to control and reduce the building costs in construction.
6. Demand forecast improvement: Calculating the existing stock and predicting the demand is very benefitting skill to have forecasting the demand that should be worked upon.
7. Centralization of document management
8. Visibility in supply chain
9. Inventory Management optimisation
10. Alliance with Suppliers: Developing strong partnership is highly suggested with suppliers.

Supply Chain Issues in Construction

Some of the major issues or problems in construction supply chain management are delayed supply, legal claims, counter claims, budget overrun, low margin in profit etc. The problem like waste is caused by the myopic control of the construction supply chain in the industry. One of the major causes of the problems in supply chain management is the supply and demand because low & discontinuous demands, inappropriate selection criteria, changes(frequent) in specification and inappropriate allocation of risk are some contributing factors.

1. Low & Discontinuous Demand: Low financial capability affects the continuous demand in public investment.
2. Repeated changes in specifications: This affects the completion date, plan and costs due to changes in project while already under construction.
3. Inappropriate selection criteria: This problem is associated with rewarding the contract to lowest bidding contractor that can affect the quality of construction.
4. Risk allotment inappropriate: This is between the client and the contractor.
5. Poor work force: Till date the construction industry has not succeeded in attracting the experienced and qualified individuals in construction because of the uncertain, dangerous, unhealthy and low job security in construction.
6. Poor Management: This can be a great cause for supply chain at the site level.
7. Lack of Research & Development: There is a lot less R&D(Research & Development) work in the construction industry which is why there are very minimal innovations compared to other industries.

Future Trends in Construction Supply Chain Management

1. Blockchain Integration: Blockchain technology offers transparent and secure transactions, streamlining payment processes and ensuring the authenticity of materials.
2. AI and Machine Learning: These technologies can analyze historical data to make accurate demand forecasts, optimize routes, and predict potential disruptions.
3. Circular Economy: Embracing a circular economy model encourages recycling, reusing, and refurbishing materials, reducing the need for constant procurement.

Conclusion

In conclusion, supply chain management plays a pivotal role in the construction industry by ensuring the seamless flow of materials, resources, and information. Effective SCM leads to timely project completion, cost savings, and enhanced collaboration among stakeholders. As technology continues to evolve and sustainable practices gain prominence, the future of construction SCM holds promising innovations that will shape the industry for years to come.

FAQs (Frequently Asked Questions)

1. What is supply chain management in construction? Supply chain management in construction refers to the efficient coordination of processes involved in sourcing, transporting, and distributing materials for construction projects.
2. Why is SCM important in construction? Efficient SCM reduces delays, improves project quality, and optimizes resource allocation, contributing to successful construction projects.
3. How does technology impact construction SCM? Technology, such as BIM, IoT, AI, and blockchain, enhances visibility, tracking, and decision-making in SCM, leading to improved efficiency.
4. What are some sustainable practices in construction SCM? Sustainable SCM involves using eco-friendly materials, minimizing waste, optimizing transportation, and embracing circular economy principles.
5. What does the future hold for construction supply chain management? The future of construction SCM includes trends like blockchain integration, AI-driven forecasting, and a shift toward circular economy practices.