Beating supply chain stress – a guide for construction firms

No-one knows who will win the election—but we can be sure that whatever the result, there will be more changes for US construction supply chains.

Here’s how you can get on top of the risks and gain a competitive advantage by maximizing resilience in your supply chain.

There’s no denying that construction supply chains have been hit hard in recent years. The seemingly never-ending challenges include inflation; changes to policies, tariffs, and regulations; extreme weather events like the Houston storms, and the crisis that refuses to disappear—COVID 19.

The volume of change can feel overwhelming—so we’re sharing insights from 2 experts to help you get ahead of the game:

Mike Viator —A VP at an Austin-based supplier of products and services and products to the construction industry. Mike shares how he optimized his business supply chain to gain a competitive advantage.

Professor Richard Wilding OBE—We’ve summarized top tips from his LinkedIn course, Supply Chain Fundamentals: Risk and Resilience so you can get ahead of internal and external challenges.

Here’s what we’ll cover

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CASE STUDY – Follow in their Footsteps: How one US firm tackled supply chain disruption to achieve competitive advantage

Mike Viator is a vice president at ESC Spectrum—a $100m plus firm, which supplies continuous emissions and monitoring systems (CEMS) to construction and power projects across the USA.

He said that Covid put massive pressure on the supply chain of his firm—which has a critical need for very specific parts, with limited availability.

Amid a surge in demand, lead times for those components increased almost three-fold.

In response, ESC Spectrum implemented a comprehensive resilience and risk-management programme to protect the company, and gain a competitive advantage for the future.

The firm scrutinized its supply chain operations at all levels—and delivered a strategic partner programme.

The company worked with its partners to agree business objectives, values, communications, and a method of optimizing customer service.

This means ESC Spectrum now works more collaboratively with vendors to solve any issues and find solutions, and has improved its supply chain, procurement and delivery capability.

It also tackled discrepancies across supplier contracts and pricing, in order to achieve consistency and stability.

Mike said: “COVID 19 presented a real threat to cash flow. If we couldn’t ship, we couldn’t invoice. “Construction is a low margin industry and any mistake can take you from profitable to not profitable. But by managing this, we’ve put ourselves in an improved position against our competitors.”

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The ‘Seven Deadly Risks’

Painful though it might feel, it makes sense to review your operations in detail, and proactively identify which of 7 key risks you’re potentially exposed to:

Economic factors

Can you control costs at a time of high inflation and recessions? How could you cope with price increases?

New regulations

Will changes to regulations in transportation, labor, or environmental standards impact your supply chain operations and compliance requirements?

Surges in demand

Do you have contingency plans if your supply of critical parts falls over?

Can you control availability and costs?

Transportation and logistics issues

Could congestion at ports, and the shortage of truck drivers delay the transportation of goods?

Natural disasters and extreme weather

Crises like the Houston storms cause not only a devastating loss of life, but also severe impact on businesses. Do you know where your supply risks are?

Cybersecurity threats and technological failures

Are your IT systems and data secure? Could you cope if you lost data?

Changing environmental regulations and sustainability pressures

Do you have policies, procedures and compliance on sustainability/ESG rules?

Or could you get caught out?

How construction companies should tackle supply chain risks

With a snapshot of how you’re doing, here are the top 8 ways in which you can get ahead of your competition, according to Professor Richard Wilding OBE:

1. Develop your supply chain strategy

Develop a supply chain strategy and you’ll be able to manage risks proactively, and deliver operational excellence to help build trust with customers.

A good place to start might be to look at approved standards or templates for managing risk.

These are ISO 310000—the risk management standard, and ISO 44001—the collaborative relationships management standard.

Work collaboratively with all parts of your business to agree processes, systems, the best set up of facilities and equipment, technologies, and teams to help you deliver on customer expectation.

2. Establish the context of your supply chain

Next up, get to grips with what your chain looks like.

First, list and summarize the arrangements you have for key products.

For instance, use Google Maps to pin the locations of your direct suppliers, indirect suppliers, and raw material sources.

The format doesn’t matter—it just has to be simple enough that anyone can understand it.

Identifying risks

From there, you can look at the five key risk areas which are most likely to affect your business operations:

• Demand-side risk—reviewing the list, are you heavily dependent on a single customer, or buyers who are in poor financial shape?
• Supply side risk—are your suppliers based in locations which could create long lead times? Are they financially sound, or is there a risk they might go bust?
• Process risks—look at what your customers require in terms of product quality standards and processes for secure data, communication, and management. Don’t get caught out.
• Control risks—check you’re in control of stock and regulatory compliance.
• Environmental risk—look at whether your key sites are exposed to natural risks like weather events, as well as issues around ESG such as the use of child labor

3. Analyse supply chain risks

Once you know your key supply and demand risks, you can analyze and evaluate them. You may even be able to stop some problems from happening in the first place.

It’s worth running through some scenario “what ifs” with likely consequences for your production, finances, reputation and supply chain.

Then think about the implications—how long it would affect production, find an alternative supplier, organize alternative transport, or squeeze your finances?

4. Decide how to treat supply chain risks

From there, you can implement mitigation and contingency plans to proactively reduce the likelihood and severity of risks.

Mitigation steps might include buying extra supplies ahead of potential price rises, diversifying your supplier base, or branching out into additional sectors.

For contingency planning, agree how you will respond in the event of incidents within the supply chain.

5. Design products and services for supply chain resilience

You might be able to ‘design out’ risks associated with products and services.

Try ‘building in’ the option to use alternative materials or suppliers.

This gives you flexibility on responding in the event your preferred choices are unavailable.

6. Communicate with all stakeholders

Suppliers—changes to supply chain can have wide knock-on effects, making people’s jobs more complex and affecting your supplier base.

Don’t allow your people to make decisions in isolation, which could affect others.

Build and maintain strong relationships with your supply chain to optimize communication and trust.

It’s worth putting in place shared goals to encourage cooperation and effective responses in a crisis. It’s also likely to minimize conflicts.

7. Create agility and flexibility

There is now a wealth of tech options available to help you to manage your supply chain and make rapid strategic and operational changes in response to unpredictable events.

Check out what’s on offer from logistics providers, shipping companies, or independent cloud firms tracking the supplier base in areas like compliance and ESG—like Achilles, Sage, or Once for All—which help to manage and validate supplier data.

Many of these systems also enable you to share information transparently with everyone involved with your supply chain—including customers and suppliers.

This ensures a quick response—and as we know, time is money.

8. Continually monitor and improve supply chain risk management

Your supply chain strategy and management should not be one-off exercises which sit in a drawer.

Make sure you continually review and update them—checking that what you’re doing is working, usually via performance reports.

Final thoughts

As a construction professional, you might feel that you have little control at a time of significant uncertainty and unpredictability.

But you can get ahead if you follow steps from experts like Mike Viator and Richard Wilding.

Keep in mind the what, how, and who of risk and clearly identify who is responsible with set timeframes for action, and how you’ll monitor and review it.

By shoring up your supply chain, you’ll actually firewall your entire business—and be on the front foot ahead of further disruptions.