SUPPLY CHAIN MANAGEMENT IN CONSTRUCTION AND ITS BENEFITS
The concept of SCM emerged from the manufacturing sector and was popularised by automotive manufacturers who used tools such as just-in-time delivery and logistics management for their production processes. The application of SCM in construction has been limited and focused more on a particular aspect of the supply chain rather than the industry as a whole.
The supply chain is a nexus of organizations involved, from the point where the supplier procures the raw material until the point the client receives the product, on the different activities and processes that produce value in the form of products and services for the final client.
Supply chain management in the construction industry is the relationship between the suppliers and the contractors involved in the overall project. This integrated approach is the foundation of success whereby all the stakeholders have a full understanding of the resources, logistics and the people involved to ensure the project and programme are delivered on time and budget.
While the construction industry will never die, as suggested in the Farmer Review (2016), there is always a looming risk of costs spinning out of control on complex projects or due to unpredictable events such as funding or political change.
Fortunately, there are many opportunities to ensure that costs do not spiral. One solution is intelligent and informed commercial management processes, experience and governance. Sound commercial management is a foundation to project and programme success and worth its weight in gold as not only does it keep programmes on track but it ensures the proactive identification of delays or risks.
Closely linked to this is having a successful construction supply chain strategy, which will start well before construction commences and have cooperation and competition at its heart. It engages stakeholders, and ultimately, it is predictable and forward-looking.
In recent years, we have seen a growing trend for the infrastructure sector to turn to other industries such as high tech, manufacturing and retail to look at what informs successful supply chain management in construction. Despite the differences between these sectors, there are many tools and techniques that infrastructure can adopt or are surprisingly already similar.
BENEFITS OF SUPPLY CHAIN MANAGEMENT IN CONSTRUCTION
Supply Chain Management can provide a competitive advantage for organizations by enabling them to manage the various factors and variables within the project more effectively and efficiently than their competitors. It can ensure efficient management of materials and information to improve the performance of their suppliers.
Organizations can reduce uncertainty related to materials, equipment, and logistics within the supply chain by creating long-term alliances, which further leads to reduction in costs. SCM also provides equal opportunities to all vendors and enables the formation of repeat alliances with reliable suppliers.
In addition, SCM can ensure that the project timelines are created in an effective way, and deadlines are met, thus improving client satisfaction and the organization’s reputation in the industry. Incorporating digital technologies can further improve the implementation of SCM in the sector.