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Supply Chain Management in the construction industry
While other industries already implemented a sophisticated SCM the AEC industry is just starting to think about supply chain. management into the construction industry . Here's why this is important.
Supply Chain Management (SCM) originated in armoury practices of the late 19th century, and was later used in the production methods of Henry Ford in the 1920s. It describes the management of a supply flow over multiple chains. Supplies can range from materials to labour or information. Chains describe the link between different parties, companies or people involved in the delivery or distribution. In other words, Supply Chain Management tries to understand and improve the complete process of all resources needed to deliver a product. Therefore, people dealing with the topic need to have a holistic perspective, way beyond their organisational boundaries, and a deep understanding of the dependencies between different players of the supply chain.
While other industries already implemented a sophisticated SCM, the AEC industry is just picking up speed towards a completely monitored construction supply chain. The reason for this is that the industry is traditionally working in an extremely project driven manner.
Additionally, each project is said to be a unique prototype which will never be done in the same way again. While we at Sablono think that might not be completely true when it comes to work processes (best practises and standardized workflows also exist in the AEC industry), we must agree when talking about project teams.
Complicated bidding processes, a mixture of healthy competition and potential job specialisation ensure that in most construction projects companies are collaborating which have never worked together before and might not work together again afterwards. This fact is what makes SCM in construction so difficult. While in other industries, partners and suppliers are working together for years – giving all involved parties the time to not only implement but also benefit from a SCM – in construction relationships are usually short-termed. The steep hierarchies of General
Contractors, Sub-Contractors, Sub-Sub-Contractors, etc. also make it hard to overcome initial biases. In our experience, companies down the construction supply chain are often not willing to share the kind of information needed for proper SCM with their superiors because they are worried about what transparency might do to their business.
Rui Pinto analysed in his blog post four potential ways to tackle Supply Chain Management in construction, each one leading to a different outcome. To quickly summarize:
- You may focus on making sure that dependable material and labour is available when needed. The goal of this would be to reduce durations and therefore costs of activities performed on-site. And to achieve this, you should improve the relationship and processes between direct suppliers and site companies.
- You may try to reduce costs related to logistics, lead-time and inventory by focusing on the construction supply chain itself.
- You may transfer site activities to earlier stages of the supply chain, e.g., working with prefabricated components. This makes sense since site conditions which can’t be controlled (like the weather or technical dependencies) might be avoided. Keep in mind that other dependencies will arise which you need to think through before implementing your changes.
- You may focus on the holistic view of an integrated management of your supply chain as well as the construction site. The separation between supply chain and site would be lost, since both parts are needed to deliver the building. For this process to work, it would require everybody involved in the project to work together and feed information into one single source of information.
In my personal opinion, it doesn’t matter which way you try to implement SCM in construction. What matters is that you start doing it. If you compare the AEC to, for example, the automotive industry, you must realize the enormous potential a sophisticated SCM offers: It could not only save time and money but also heavily increase reliability.
By doing this, it will make delivering projects that much easier and even more fun, since you know when to expect delays and how to deal with them. If, for example, you need to bring in another supplier you would be sure that he will be able to deliver on his promises beforehand, since you have tracked their performance in a previous project. This is true for even the most complex projects.
As we know, the industry won’t change just like that from one day to the next, but working at Sablono and observing our customers use our Lean Construction platform, including projects spread over different parts of the world, to track their processes from fabrication, to delivery and installation on site gives me hope for a better, more productive future in the long term.
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