The construction process involves approval, designing, and construction stages, which involve construction workers, project managers, architects, contractors, and material suppliers for the materials. Construction supply management consists of the relationship between the contractors and suppliers contributing to the project. But is it essential to have supply chain management in construction?
The benefits of supply chain management in construction are lowered margins for equipment maintenance, high profitability through low real costs, long-term project planning and coordination, enhanced tolerance from delivery facilities, and repeat pairing with progressive clients.
However, supply chain management in construction is complex and involves a lot of aspects. Read on to learn more about what construction supply management is all about, some of its toles, and the benefits of implementing supply chain management in construction.
What Is Supply Chain Management in Construction?
Supply chain management in construction refers to the organization of supply flow over several chains. The supplies can be information, labor, or materials. Construction supply chain management seeks to understand and improve the complex process of gathering resources to deliver a project.
SCM in construction involves the actual how and when the procurement process happened. That affects the construction project’s functionality, success, profitability, and success.
An ordinary supply chain for a construction project includes engineers, architects, prime contractors, material suppliers, and specialty subcontractors who come together to work on a single project for an owner. The complex chain consists of short-term adversarial relationships motivated by a competitive bidding process.
Once all the stakeholders understand the logistics, resources, and people involved, that ensures the construction project is delivered within budget and on time.
How Supply Chain Management in Construction Works
SCM model works because all products/services reach the intended users due to third-parties collaborating and working together to form a viable supply chain. Although each supply chain is different based on the company, there are specific components within the supply chain that include:
- The initial supply chain plan
- Looking for raw materials or services
- Construction of the project
- Delivery operations and logistics
- Reverse logistics for defective or unwanted items
The supply chain manager is responsible for each stage to ensure quality is met.
How You Can Apply Supply Chain Management in Construction
For you to apply supply chain management in construction, you need to take specific steps, and we list them below.
Identify The Partners Involved in the Chain
The first step involves deciding who you will work with on the construction project. That will help you analyze the work situation of everyone. Some of the partners may include engineers, architects, prime contractors, material suppliers, and specialty subcontractors.
Going through this process will help you decide if they meet the set requirements to satisfy the needs of the construction project. Going through the analysis process also enables you to choose whether to increase the number of people required to get closer ties between the parties involved.
Integrate the Teams
Construction involves dealing with people from different sectors. You will be handling operations planning, supplies, finance, and other departments. Integrating all these teams will simplify the exchange of communication. You will need to have a system that reduces unforeseen situations, eliminates human errors, and adds speed to the processes.
Remember that a supply chain management system should give you a detailed view of the construction process.
Define Your Objectives
A supply chain management system in construction is meant to ensure that all parties have one vision by sharing updates and information. You need to define the objectives to make sure everyone is on board, improving results and operations.
Optimize Information Flow
It is also essential to identify the people who are part of the construction project, determine where they are, and understand how they interact with the construction supply chain. Having these details will help with the flow of information between all the parties present.
The idea is to have every person communicate, share their ideas, and recommend possible solutions to ensure that the project is successful.
Below we cover some of the advantages of implementing supply chain management in construction:
Cost Cutting and Improved Financial Practices
While having an adequate flow of information is essential, failure to plan your finances can be a costly mistake. Cash flow is a critical aspect of construction, and supply chain management has accounting features that can help you streamline the finances.
Once you have all the tasks automated, you can save money on the floor and the accounts. Supply chain management in construction also helps to identify unnecessary spending areas. For example, SCM can help identify areas with high logistics costs. That will help you switch to another product provider offering similar products at a low price.
SCM also improves your inventory system as you no longer have to keep up with what products are missing. The system notes the items you will need to order and those already available for use.
Working with reliable suppliers not only reduces disruptions in construction projects, but it also improves cash flow by eliminating wasteful spending. Effective supply chain management in construction supports the flow of information and services from the procurement to the project’s final delivery.
What’s more, implementing construction supply chain management allows you to evaluate the current process, determine weak links, and develop solutions to fix any problems you may encounter.
Incorporating supply chains, project innovation strategies, and integrated logistics in your construction project can help you determine possible shortcomings and act accordingly. That is because construction projects have a lot of uncertainties. You may have to deal with increased product costs, shortage of labor, and other emergencies.
Applying supply chain management in your construction allows you to plan for these unexpected costs, that will improve your efficiency rate and ensure that you do not go over the budget or go past the set project timeline.
Supply chain management gives you real-time data on any construction delays and availability of construction materials. That will allow you to develop a backup plan, like sourcing construction materials from a different supplier, which will prevent further delays.
Another significant benefit of construction supply management is that it promotes effective communication.
Construction projects are complex and have a lot of details involved. You need the contractors, suppliers, product vendors, transport companies, and project managers all communicating regularly. Fragmented or ineffective communication can lead to poor customer service, costly problems like skipping on the design, and damaged vendor and supplier relationships.
Supply chain management enhances communication, which leads to the collaboration and coordination of everyone involved. The communication between the different departments will enable you to have quick access to reports, forecasts, quotations, and the project’s real-time status. The result is increased output and a successful construction project.
Effective communication also means you will not be dealing with delays in processes. Everyone involved in the project will be aware of what they need to do and what others are doing. That will reduce logistical errors in the distribution channels, ensure no late shipment from product vendors, and lower any production lines’ hold-ups.
Repairing or replacing an item in a construction project can lead to high costs for you as a project owner. Implementing supply chain management and having someone in charge ensures you choose contractors and suppliers to meet the set requirements.
SCM also involves process guidelines that help both the contractors and suppliers comply with your company’s quality requirements. With this, you can partner with performing suppliers and contractors to maintain quality control.
Excellent Vendor Relationships
Supply chain management promotes excellent supplier relationships. Once you have enhanced vendor relationships, you no longer have to worry about a shortage of construction materials, and you can relax and enjoy the consistency of getting quality construction products delivered on time and budget.
Another advantage of having everyone on board is that it helps with waste reduction. That is because the contractors and engineers are not implementing redundant processes or redoubling each other’s efforts. Having them under one chain uncovers any areas of redundancy and waste.
Construction supply chain management enhances data visibility. That means everyone involved in the construction project has access to a centralized cache of accessible information. Data centralization also promotes advanced analytics that can help establish areas of inefficiency within your operations.
The data allows you to find ways to improve the efficiency of the project and find the best responses to future disruptions or events.
A successful construction project needs everyone involved to be in constant communication level. When contractors and suppliers have no idea of what is going on, that can derail the whole project.Construction supply chain management comes in to solve this problem. Using technology, you can have everyone communicate without having to be in the same space. An adequate communication flow on your construction projects gives you access to the project status, forecasts, reports, and other plans in real-time.
Improved Project Flow
Of the most critical indicators of the project, flow efficiency is an aspect known as the time to consider. The less time it takes the suppliers to have the construction materials delivered, the more efficient the construction project flow will be.
Nonetheless, you need to consider the quality of the materials delivered. Effective construction supply chain management allows all the parties involved to find areas they can improve on and check the inventory to ensure everything is running smoothly.
Furthermore, supply chain management allows you to use methods like Just in Time and Lean Manufacturing to reduce the period in which the project is supposed to run. The quicker the processes, the lower the costs incurred.
Better Response to Conflicts
Construction projects have a lot of complexities and face a lot of challenges. Sometimes you may have to deal with logistical problems, while other times, you could be facing supplier or contractor problems. The company that supplies materials might go out of business or a prime contractor may decide to back out of the project. Supply chain management can help with such problems and know how to respond to conflicts.
Delivery of Value to the Client
Using supply chain management in construction reduces logistical costs, inventory in the supply chain, and lead time. When combined, all that maximizes the value for the project owner and ensures that all members in the supply chain create a quality construction project.
Supply chain management in construction helps you look at the big picture and find possible risk areas. After this analysis, you can develop a backup plan to help you respond to such a situation.SCM allows you to take proactive action rather than react when a situation arises. That limits quality control issues and other adverse effects. Knowing these risks also helps you achieve leaner operations like reducing inventory costs.
How to Choose a Construction Supply Chain Management System
You now have an idea of the benefits of supply chain management in construction. However, how do you select the best CSCM system? Here are a few tips to help you out.
Determine Your Needs
It is vital to assess your construction project needs when choosing supply chain technology. While most SCM systems are designed to help you manage different departments like inventory, financials, transportation, human resources, and more, not all solutions are created equally. You may end up stuck with multiple features that you do not need.
The only way to select a solution that suits your project needs is to understand how the parties involved perform their tasks. That will give you an idea of the features you need to achieve the set short and long-term objectives regarding cost, productivity, and service delivery. Stay focused on your needs and avoid extra features that will only confuse users and take up space.
You also need to examine your end goals. Decide on what you need to accomplish and the time frame. Understanding your expectations will help you decide whether you may need another solution to add to your existing operations.
Understand the Impact the SCM Will Have
Implementing a supply chain management system in any construction project will have an impact on several areas. You need to determine if the system is flexible enough to support growth and determine if it delivers user-friendly functionality.
The best SCM in construction should help you reduce costs, increase efficiency, streamline different processes, and improve all the parties involved. You need a system that offers excellent agility to ensure the construction project goes as scheduled.
Find a System Customized for Your Industry
Not all supply chain management software is suitable for construction; some are meant for e-commerce businesses and others for manufacturing businesses. Buying software made for a different industry will only put a dent in the supply chain process.
A good example is a supply chain management system meant for pharmaceutical companies. The system needs to have a supply chain that focuses on natural products to end-user products manufactured in a safe and healthy environment to enhance the safety of the products. You cannot use this supply chain system in the construction industry. Ensure that you get an SCM software that is designed for the construction industry.
Work With a Reliable Vendor
It is critical to get an SCM solution from a reliable vendor. You need to find a company that understands the issues faced by supply chains. The vendor also needs to have experience working with construction companies, whether large or small.
Find out how long the vendor has been in business as you do not want to end up with software that comes from a company that will not be around in a year. Ask around for a trustworthy and reliable vendor that specializes in construction supply chain management software.
Consider Your Budget
Consider the amount you are willing to spend on a supply chain management system. If you are handling a small construction project, you should not overspend on a system with needless complexity. Choose a system that suits the current size of your project and your income. Also, you should go for a system that can grow with your company.
The Type of Training and Support Provided
Speak to your vendor on the type of training and su[port offered before you settle on one SCM system. The vendor needs to have a history of support and provide several avenues of training to get everyone up to speed on the system. Some vendors will offer certification classes to expand one’s knowledge base.
Decide if You Want Cloud-Based or On-Premise Deployment
Both systems have their pros and cons. Cloud-based deployment is widespread as it provides close to unlimited storage, low cost of entry, real-time upgrades, mobile features, and ease of access. An on-premise deployment, on the other hand, is more secure.
Implementing supply chain management in construction has numerous benefits. Apart from decreasing costs, SCM also improves your relationship with vendors and distributors, promotes effective communication among everyone involved in the project, and ensures you finish the project within the set timeline.