How can construction firms bring order to complex supply chains using technology?
27 November 2023
Between high interest rates and persistent inflation, the construction industry currently finds itself in a tricky spot. With high borrowing costs adding further pressure to construction firms across Europe, profit margins are becoming increasingly tight.
But despite the seriousness of this situation, there is cause for hope. YardLink’s most recent research investigating ‘the true cost’ of the supply chain revealed a range of inefficiencies throughout the industry’s procurement processes. These inefficiencies _have meant when senior procurement managers have gone over budget, they’ve done so by 46%.
How does that finding signal hope? Well, inefficiencies, unlike inflation, are within companies’ power to change. That’s where the opportunity lies.
Early struggles with procurement
Opportunities to remove inefficiencies present themselves early on in the procurement process. Our research found that procurement teams have to review quotes from 11 different suppliers before choosing one, on average. That’s for an average of 167 different pieces of equipment per project. Clearly, that’s a significant amount of time construction firms spend on what could be a relatively straightforward task in many cases.
Yet, to further extend the process, supplier selection draws in employees from across the business. The research revealed that CEOs and MDs in 30% of construction firms are involved in these basic decisions, which can increase the tedium, delay, and the risk of human error.
After an order has been made, further inefficiencies also arise. Contractors communicate with subcontractors, and suppliers, in a range of different ways, including emails, phone conversations and text messages. They often share important details on calls, which are not always recorded, causing delivery details and site contacts to become misconstrued or, even, lost. As a result, 28% of senior procurement managers reported last-mile delivery as a problem. Speed of service has been a problem for a further 28%.
Even once equipment has arrived on site, contractors face another set of challenges. For 30%, damaged, faulty, or unhygienic equipment has posed a problem. Not only that, but when equipment is due for collection after use, over a quarter (28%) of senior procurement managers report experiencing delays. This makes for a frustrating process rife with delays, which only serves to inflate overall costs.
A major problem that prevents firms from overcoming these inefficiencies is the prolific use of legacy technology. We found that the majority (65%) of firms still use either basic spreadsheets or a pen and paper to manage their entire supply chains – from supplier selection to equipment return. This means firms are spending significant sums of money managing disorganisation and correcting human errors, which ultimately ends up wasting their time.
Refreshing the industry with tech
In other industries, like retail, supply chains contribute to about a third of overall spending. In construction, it’s nearly half (44%) of overall budget (or £7.4m per project). This statistic alone should be cause for firms to sit back and consider how they can reduce their spend on the supply chain.
The answer is a lot simpler, and easier to implement, than they might imagine. The biggest challenge for senior procurement managers, according to the research, is ‘a lack of digital tools and innovation’. As such, just like most other sectors, this is a problem that construction can easily resolve.
To dig its way out of this tough economic climate, construction firms must move towards embracing technology, as opposed to rallying against it. Digital tools can enable game-changing visibility over supply chains, reduce administrative burdens, and fundamentally streamline inefficiencies.
About the author
Matt Bloor is the Chief Commercial Officer of YardLink, the UK’s leading construction procurement platform. A highly experienced professional with a significant record of achievement in sales, operations and commercial management, Bloor has 15 years of experience in the construction sector. Before joining YardLink in 2019, Bloor held multiple senior roles, including Head of Sales at Elliott (now an Algeco company) and Head of Sales and Head of London Operations at Hewden.