Construction is one of the most complex industries on the planet…especially when you consider the wide range of projects the term “construction” includes. From industrial and commercial to residential and infrastructure, it’s a rapidly expanding sector that encompasses a wide range of activities. What’s more, the industry is evolving to include high-tech projects such as data centers and semiconductor fabs.
With this level of complexity, there are a countless number of moving parts that must constantly be managed. Typically, this impossible job falls on the project manager, who must wrestle all the moving parts into place to ensure the project is done on-time and on-budget. There’s a lot that can go wrong, but skilled project managers are experts at anticipating and rectifying problems before they become a real issue. However, they still have their work cut out for them.
One of the key components of the construction industry is the supply chain, which is responsible for providing the materials, equipment, and services needed to complete a project. However, the supply chain is not without its problems, and its negative impact on the construction industry is becoming increasingly clear.
4 Supply Chain Challenges for Construction Projects
1. A Global Materials Shortage is Delaying Projects
One of the main challenges facing the construction industry is the shortage of materials and equipment. The demand for construction materials, such as steel, concrete, and lumber, has increased in recent years, and the supply chain is struggling to keep pace.
This has led to a rise in prices, making it more difficult for construction companies to keep their projects within budget. Additionally, the shortage of materials and equipment has led to delays in construction schedules, as companies are forced to wait for the supplies they need to arrive.
What initially began due to the implications of the global pandemic has now persisted for years. In fact, Buildertrend data recently revealed that the average job was delayed 46.8 days in 2022. This equates to projects being on average delivered about a month and a half late. To rectify the delays caused by the supply chain, many supply chain managers are looking at local sourcing to speed up delivery times.
2. Poor Supply Quality is Causing Rework
Another major challenge for the construction industry is the quality of the supplies provided by the supply chain. Many construction companies have reported receiving sub-standard materials and equipment, which can result in increased costs and decreased productivity.
For example, low-quality steel can lead to structural problems, while poor-quality concrete can result in a weaker foundation. These issues can cause significant delays and cost overruns, and can even lead to project failures and expensive rework. In fact, a study found that poor quality can increase a project’s costs by up to more than 50%, and can cause delays by up to 50%.
For more info, check out these 9 common causes of rework in construction and how to fix them.
3. A General Lack of Transparency is Hindering Planning
Third is a general lack of visibility in the supply chain, which is also the source of many other problems. With the complex network of suppliers, manufacturers, and distributors, it can be difficult for construction companies to track the status of their supplies. This leads to confusion, miscommunication, frustration, and improper utilization of resources.
This is especially problematic on construction projects with tight timelines, such as modular construction. The resulting unexpected delays tend to have a major impact on the construction schedule, causing diminishing margins and a slew of other negative consequences.
4. Unplanned Events Cause Supply Chain Shockwaves
Lastly, the supply chain is highly subject to unplanned disruptions, such as natural disasters, strikes, labor shortages, and other events that can disrupt the flow of materials and equipment. With the industry operating on thin ice already, any type of unplanned event can serve as the impetus for a failed project.
These disruptions can cause significant delays in construction projects, as companies scramble to find alternative sources of supplies. In some cases, the impact of these disruptions can be so severe that they result in the cancellation of projects altogether.
Solutions to Supply Chain Challenges
As you can imagine based on the above reasons, the negative impact of the supply chain on the construction industry is one of pressing importance. Many sources predict that the road ahead is expected to be a bumpy one.
To rectify the challenges faced, the construction industry must work to improve the visibility and reliability of the supply chain, and to identify and mitigate the risks associated with disruptions. The following are four of the common proposed solutions to the supply chain crisis.
1. Meaningful (and Scalable) Digitalization
One of the ways that the construction industry can address these challenges is by deploying digital technologies and data analytics. Digitalization has been proven to have a powerful impact on supply chain management.
For example, using digital tools and sensors to monitor the supply chain can help to improve visibility and predict disruptions by analyzing and extrapolating past performance data. Additionally, data analytics can help to identify trends and patterns in the supply chain, allowing companies to take proactive measures to address problems before they become major issues.
However, in order for the deployments to have a positive and lasting impact, it must engage the right stakeholders to move past the pilot stage. An innovation pilot is great, but the technology must be further scaled to additional projects and facilities in order to be useful.
2. Develop Mutually Beneficial Collaborations
Another solution is to increase collaboration between the different players in the construction industry. Too often, the competitive nature of the industry gets the best of us and stunts progress. By seeking out external partnerships and openly sharing information, we stand a much better chance at implementing lasting solutions to the supply chain crisis.
For example, by working together, construction companies, suppliers, and manufacturers can develop more efficient supply chain models that minimize waste and improve the flow of materials and equipment. Additionally, by sharing information and best practices, the industry can work to identify and mitigate the risks associated with disruptions.
3. Creative Education and Recruiting
The supply chain isn’t the only area within construction experiencing a shortage. It’s no secret that a global work shortage has hit the construction industry especially hard. According to McKinsey, in April 2022 “the US construction industry had roughly 440,000 job openings, and the US manufacturing industry had more than one million.”
Education will be a crucial part of building up the next generation of skilled workers. In turn, these workers can help to improve the quality of its products and services, and reduce the risk of sub-standard materials and equipment. Recruiting and training younger generations such as millennials and Generation Z (who are especially skilled at using digital technologies) is one of the best ways to close the labor gap.
Organizations like the National Center for Construction Education and Research and Skills USA are already beginning develop effective tactics to recruit and train new workers.
4. Conservation of Resources
Finally, the construction industry must work to create a culture of sustainability and environmental responsibility. This means taking steps to reduce waste and emissions, and to conserve natural resources. By doing so, the industry can better utilize resources while also making progress on achieving ambitious environmental goals.
A Better Construction Supply Chain
The combination of these solutions will not only help solve the supply chain crisis, but will also shift construction into a more successful era. With projects finishing late and/or over-budget more often than not, margins are diminishing. Drastic changes are needed in order to meet the massive infrastructure demand the world is currently experiencing.
To learn more about our approach to digitalization, schedule a free demo or check out our blog post on how connected worker technology can help resolve the labor shortage.