Re-thinking construction supply chains

Whilst some construction activities are a one-off, many publicly funded construction activities are repetitive in nature and benefit from an injection of supply chain thinking.

Construction was not an area on which our work was particularly focused, but in late 2015, we won a research grant from Innovate UK to look at how supply chain integration in construction could be improved by applying the principles of segmentation more prevalent in a fast moving consumer goods (FMCG) environment. The management principles that have traditionally underpinned the realm of construction is project management, as each individual construction project is considered a ‘one-off’ and requires management through design, build, commissioning and hand-over. These type of ‘one-off’ projects still exist, but we were studying infrastructure type projects. The maintenance and development of the UK water and highway infrastructure. Historically, each piece of work would have been viewed as a separate project which potentially then needed to go out to competitive tender and then be project managed. This is a time consuming process, and there was increasing recognition that there is repetition between certain upgrade and new build activities. Whilst very much still in the early days, it is recognised that if water and highway infrastructure companies were to contract differently with their construction partners, there is the opportunity to apply FMCG thinking to construction supply chains. This would help overcome some of the huge issues the industry is facing in terms of over-spend, over-run and skills shortages. These challenges need to be overcome if the UK were to realise its industrial strategy ambition to be a global player in the construction industry.

Fundamental to this is augmenting our current project management expertise with supply chain thinking. To the majority in the construction industry supply chain = supply base management. If the industry were to take a more holistic view of the supply chain, starting with the profiling of the demand for different types of projects (as shown in the figure above) there is a real opportunity to deliver ‘innovation through repeatability’. Initial findings from our research have found that in infrastructure type of environments there is a significant base level of demand. This enables the industry to take a longer term view point. To make the work visible to the extended supply chain to enable the effective and efficient planning of resources and provide a stable bedrock to the industry. This will enable projects to be delivered cheaper and more consistently. Competition within the supply chain will still exist as work will be allocated across a range of pre-determined suppliers, whose share of the work can flex depending on their performance through a framework agreement.

There are some projects that have major technological challenges. These types of projects are more emergent in their nature and may need to flex to budget constraints. These projects require the early identification of a collaborative partner through a competitive bidding process, who can see the project through from start to finish.

It is early days for the adoption of supply chain thinking in the UK construction industry but it has the potential to really help the UK to deliver its 2025 ambition.

Talking point

• How developed is SC thinking in the construction industry in your country?
• Do you have centrally co-ordinated infrastructure projects that could benefit from this kind of approach?
• What are the challenges of adopting such thinking?