This article is part of a blog series on the supply chain in the construction industry, exploring how it can be improved to overcome today's pitfalls.

The impact of Covid on the supply chain, in the construction industry, as well as the war in Ukraine are still very much felt in 2023. Inflation is high, and the industry is experiencing a lack of resources both in terms of labor and material.

A recent survey by Dodge Data & Analytics found that contractors still expect in 2023:

• 93% rising construction costs due to supply chain issues
• 53% of their revenue to increase in the next 12 months
• 45% to see their profit margin increase in the next 12 months.

Can you take action to mitigate the huge variations between demand and supply?

You certainly can. Here are some examples:

• improve your response times
• send the right information to your suppliers
• adjust the requirements, if necessary
• automate the management of your inventory.

In this blog we cover:

• the economic situation in 2023
• how to manage your supply chain
• how to improve your supply chain management
• what technologies you can use.
  

What are the 2023 economic predictions?

Linesight, a global construction consulting firm, has released its Q4 commodity report. The findings for 2023 are that:

• inflation will continue, and wages will increase, which could spark a mild recession
• China’s COVID situation will lead to increased prices
• the construction industry is expected to shrink by 7%
• interest rates will rise
• the rate of unemployment will increase (very low right now)
• shortage of labor will continue
• the industry will experience supply-chain issues
• Governments will invest in infrastructure and housing projects which will mitigate the above risks.

The aluminum, copper, and nickel prices will decrease due to a good ratio of demand/offer. All other commodities (steel, asphalt, limestone, cement, welded mesh, bricks, drywall, diesel, etc.) will increase.

How to manage the construction supply chain?

Construction supply chain management, to move construction materials quickly and cost-effectively, requires:

• process automation
• systems integration
• best practices to optimize the flow of materials on construction sites
• collaboration between all parties within the supply chain (manufacturers, suppliers, contractors, owners, etc.)

Your projects will then meet the owners’ goals in terms of delivery and budget, and your building will be efficiently constructed and maintained.

One single management system

Bring the construction supply chain processes of your projects into one single management system

To manage your supply chain efficiently you need to:

• automate your processes
• integrate all your systems so, they speak to each other seamlessly
• implement best practices to manage your equipment, materials supply, and your various teams.

Managing your supply chain efficiently and productively is demanding but essential for your projects to be delivered on time, on budget, and according to the owner’s requirements. We explore below some ideas you could try to improve your supply chain. Do not let your customers and/or manufacturers down! Apply the following principles to mitigate the risks of a failing supply chain.

Inventory control

To control your inventory, you need to know, in real time, where the goods are, when they will be delivered, when they are assembled, and when the handover will happen. There are many tools you can use, like plannerly.

Make sure systems are in place to provide you with easy:

• real-time collaboration: Access anywhere, anytime team updates and comments in a live online environment.
• advanced online editing: drop in images, tables, videos, and more, and then edit everything in your browser.
• rich media: embed advanced content from many web-based tools like process maps from draw.io, YouTube training videos, surveys from Typeform, slides from Google, 360 photo walkthroughs from Matterport, and even BIM360 models,
• copy and paste: intelligently drop in current standards detecting styles from Microsoft Office allowing you to clean formatting when pasting – helping you to standardize your content across all templates,
• simple approval workflow: “Moving sections from “Work In Progress (WIP) to “Shared” to “Published” lets your team achieve solid and continual agreement on your project.

How to Improve your supply chain management

Align demand and offer

The construction process of an asset uses a wide variety of materials, and many of them are shipped from remote locations.

Some of these materials have volatile prices in the international market.

Construction requires a significant input of man-hours, fuel, and electricity.

Another important element is time. In theory, estimators can break the list of materials down to exact quantities of bolts, nuts, and nails. However, this approach is time-consuming, especially in large projects. Procore, has developed a cost-estimating module critical to the success of 5D BIM which allows you to:

• access the data contained in a 3D model for the take-off process
• multiply your estimator’s productivity by an order of magnitude
• view and make changes to a project throughout the design phase, generating many changes along the way
• compare changed models to each other and automatically flow the cost impacts into revised estimates.

Build in your workflow real-time data across the entire supply channel to:

• visualize demand and supply
• classify and associate products by their volatility
• monitor and provide real-time alerts to handle your volatile stock levels.

Enhance your forecast models

Planning and forecasting appropriately are fundamental when the supply chain is under pressure as it is now.

The supply chain planning system should run, 24 hours, 7 days a week to:

• avoid delays in signal processing
• identify supply chain issues
• quickly resolve them.

You should consider the design phase of a project as an integrated system. The planning starts during the design phase and includes future team members of the construction and maintenance.

The whole team is looking at various alternatives which are desirable from all points of view, eliminating the necessity of extensive revisions and avoiding clashes.

Your tool kit

You should have tools to help you to:

• create BIM contracts by dragging and dropping from the standard BIM templates, and/or from previous projects
• build ISO 19650 standards and guidance in your workflow designing templates in a software framework to simplify the design process on your projects
• share practical tips about each ISO 19650 document type (EIR, AIR, BEP, etc)
• walk through steps to create OIRs, PIRs, AIRs, EIRs, BEPs, Responsibility Matrices, RACI Charts, TIDPs, MIDPs
• use the Level of Information Need approach
• describe how to implement the Information Protocol for BIM contracts
• share online templates to create your own ISO-compliant workflow.

Streamline processes

FMI, the leading provider of consulting and investment banking to the Built Environment, said:

Optimising digital technology is probably just what the construction industry needed. Now in the absence of true face-to-face interactions, these tools have become essential to maintaining schedules and good communication. They have become as ubiquitous as a hammer drill or backhoe on job sites, enabling teams to close the distances and utilize time more effectively

Your management team should set goals to fully implement BIM and make sure that these goals are understood by every team member, planned for, and delivered, to facilitate:

• the use of new rapidly changing technologies to be integrated in your workflows
• the data exchange for the enterprise system to be developed
• the ongoing review of the individual training
• the activities and tasks progress undertaken to achieve the necessary deliverables
• the deliverables and milestones related to the goals and objectives

Find new suppliers

In the current climate, your suppliers may have difficulties responding to the high demand with tight deadlines. Your only solution to satisfy your clients is to find alternate suppliers both locally and internationally.

You will then be able to disseminate the risk over different suppliers. If you rely too much on offshore suppliers, to keep your prices down, you risk having long lead times and increased delays. To mitigate this risk you should optimize your ratio of suppliers with short and long lead times, and different price models.

Try new delivery structures and distribution channels

To succeed in a difficult economic environment, you should embrace change and be open to:

• new opportunities
• use integrated systems in the cloud
• automate your processes
• introduce new technologies in your workflows like Artificial Intelligence (AI) and cloud platforms.

In conclusion

To be successful you should have a slick and well-managed supply chain. The essential principles are:

• control your inventory
• align demand and offer
• use a task planning system that includes visuals
• streamline processes
• enhance your forecast models
• find new suppliers
• try new delivery structures and distribution channels.

Most firms intend to establish their best practices, but work gets in the way and they are never created. £220 million are wasted per year in the UK alone. As a result, there are people solving problems that others have already solved.

Driving Vision's BIM expertise diagnostic looks at how you can eliminate waste (time and material), and improve your margins and the quality of the information provided during the design and construction phases.

A Driving Vision expert will conduct the interviews online and will issue a report and discuss our findings with you. Together we will decide the best way to implement the solutions at your pace and according to your budget.

Implementing BIM can be daunting, but Driving Vision is here to help you at the pace you are comfortable with. Get started by getting in touch now