Homes and other structures can’t be built without the right tools, and neither can the supply chain in the construction materials and building supplies sector.
As noted by The Concrete Producer, “efficiency is the name of the game” in construction logistics. The transportation, distribution, and logistics segments of the sector must increasingly embrace technology to shore up efficiency.
Supply Chain Visibility Equals Time and Money for the Construction Industry
Never was the old adage “time is money” more relevant than with the construction supply chain. Builders depend on materials and supplies being delivered just in time — not early, not late. Builders could suffer severe financial consequences if a project falls behind schedule. For example, a one-day delay could mean an extra $100K in equipment fees. As such, proper order of delivery for construction materials is crucial. Correct preparation of a construction site to accept delivery materials and supplies is also vital, as too many companies fall short on on-site logistical planning and wind up experiencing material-related project delays (MRPDs).
Delivery delays equate to squandered time, a valuable resource in the construction industry. A study from the Construction Owners Association of America found that 63 percent of labor time on big construction projects is wasted on waiting for materials and equipment, according to Digitalist magazine. For an industry with as little as a 2 to 8 percent average margin, not solving for this inefficiency could be a make or break scenario for the builder.
Here are just three of the consequences construction businesses, and those who serve them, face if they fail to prioritize supply chain visibility:
- Loss of money due to damaged or lost materials and supplies.
- Loss of money due to inadequate delivery.
- Loss of customers due to poor service.
“Blurred and incomplete” data leads to significant challenges for supply chain visibility
As it stands, many players in the construction supply chain need a stronger foundation in order to achieve greater efficiency.
According to GEODIS’s 2017 Supply Chain Worldwide Survey, only 6 percent of supply-chain-dependent companies said they’d reached full visibility into their supply chains. In the survey, 77 percent of the companies reported little to no end-to-end visibility. In the report, GEODIS aptly describes supply chain visibility in construction as “blurred and incomplete.”
However, an operator in the supply chain for construction materials and building supplies could gain a distinct competitive edge by implementing a visibility solution before its competitors do.
The highly fragmented nature of the construction industry — featuring players such as manufacturers, distributors, dealers and contractors — makes it difficult to gain visibility, according to a research paper titled “A Service Oriented Framework for Construction Supply Chain Integration.” The paper places blame for this on “loosely distributed” information, applications and services, and a wide range of software and hardware capabilities.
Technology is the key to unlocking efficiency gains
Slow adoption of technology has historically hampered operational efficiency in construction transportation, distribution, and logistics. However, by enabling intelligent planning of delivery, construction, and supplies, the use of technology in the final mile can increase visibility and have a revolutionary impact on job-site planning.
According to Research and Markets, digital transformation (including incorporation of end-to-end visibility into the supply chain) has proceeded at various speeds in the construction materials and building supplies sector:
- Heavy-side producers (aggregates, ready-mix concrete, cement, asphalt paving and so forth) are in the earliest stage of digital transformation.
- Light-side producers (concrete products, wallboard, insulation, bricks, tiles, pipes, glass and so forth) are in the early to middle stage.
- Distributors (wholesalers and retailers) have reached the middle or advanced stage.
“However, even the most digitally advanced construction materials companies lag significantly behind companies in industries such as media, retail and travel,” Research and Markets reported in 2016.
End-to-end logistics visibility can not be an “afterthought”
Often, logistics can be an “afterthought” for a construction site, if they are considered at all. The lack of intelligent planning around logistics can lead to bottlenecks in the project, eventually leading to strangleholds, lost time for builders, and lost operational efficiency costs.
This is changing, however, as supply chains across the world transform into customer-centric organizations. The companies included in the GEODIS survey recognize the urgent need for end-to-end visibility: As a supply chain priority, visibility moved from No. 6 in GEODIS’ 2015 survey to No. 3 in 2017.
For construction supply chain experts who have already invested in improving end-to-end visibility, GEODIS reported that one-fourth of companies with full end-to-end visibility into the supply chain had EBIT (earnings before interest and taxes) that was 25 percent of turnover. This means that visibility leads to higher profitability. Additionally, a survey by Supply Chain Insights showed that 70 percent of companies that had acquired those solutions realized ROI within 13 months.
With regards to the construction industry, materials suppliers that invest today in providing their customers with greater visibility into job-site deliveries will capture greater market share as builders flock to those that enable them to plan more efficiently manage their job-site logistics.