Organisations in construction are constantly adapting against an evolving backdrop of supply chain risks and changing business landscapes. Although many of these risks are difficult to plan for, there are a range of approaches that can help improve supply chain management for better project and industry outcomes.
Australia’s supply chain involves labour, product and materials, subcontractors, consultants, plants, and equipment — all of which are supported by complimentary industries such as freight and logistics that are rife with issues caused by COVID-19.
Adding to the challenges and complexity of a supply chain is that some aspects of it might be temporary — meaning it’s built up and then torn down with each construction project, especially on small to midsize projects.
Further contributing to the temporary nature of construction supply chains is that each successive project may add variables including location, geography and market. This will in turn adjust the necessary types of services and materials and where they are sourced.
What is supply chain risk?
In the context of construction, supply chain risk is any potential event or issue associated with any entity within the network that, if experienced, would have a negative knock-on effect to organisational objectives. Risk is dynamic in terms of where it is in time, what the supply chain is facing, and its potential effect.
It is also important to note that supply chain risk management is the management of risks and not the direct management of individual parties within the supply chain network.
Examples of different risks include:
Performance risk
- Skill shortages
- Financial stress
- Up and downstream blockages
Compliance risk
- Traditional obligations
- Emerging targets
- Regional/international differences
Uncertain world
- COVID-19 pandemic
- Force majeure
- Criminality
A supply chain consists of not only goods — which may be more susceptible to the effects of an uncertain world — but also subcontractors, which introduce additional performance risk along with potential disruptions to their unique supply chains as well.
Once the unique needs and initiatives of clients, owners, and applicable laws are added — along with remaining compliant while meeting the tangible targets of the project — the process can seem daunting.
Effective and concise communication
Strong communication throughout all layers of a supply chain is an effective way to mitigate these risks. Communication needs to be ongoing and weaved throughout all layers of the supply chain including internal communications, projects and business units, and through the organisational hierarchy.
Risks and challenges present opportunities for improvement, understanding and even a competitive advantage, with a plethora of enablers, tools and systems available to leverage those opportunities.
Taking a digital platform approach is one of the most efficient and effective ways to manage communication channels and store and share information. This results in minimal double handling of common data and provides one source of recorded and verified truth on key risks.
Leverage technology efficiently and effectively to manage information
With the rapidly-shifting operating landscape — whether it’s XPE or Environmental, Social and Governance (ESG) targets or third-party compliance — there’s a dramatic shift towards effective tools for managing and understanding vendors.
InEight delivers field-tested construction project management software for owners, contractors, engineers, and architects, offering tools that support the capital project life cycle at all stages.
InEight focuses on delivering practical customer solutions in contract and capital management and document control and simultaneously creates a high-quality user experience.
Recently there has been much interest in utilising work packaging concepts, including traditional self-perform work for subcontracted scopes. Contracts, at least in their software, are often limited in detail from what is created within the system and managed to facilitate the payment process.
However, adding the capability to break down those line items into claimable components presents new opportunities for subcontractor progress, easier invoice validation and earned value. This then brings additional intelligence and detail all the way back through that supply chain process.
Contractors not only benefit, but subcontractors as well from the additional transparency and improved tools that allow them to more effectively demonstrate progress and back up information for invoices.
The human element
The human element is crucial in understanding and effectively managing risk. Experience and qualifications are a genuine value-add when identifying and addressing long-term risks, certainly regarding supply base, but also in the employee base.
Positive change is not possible unless all the affected stakeholders actively contribute to that change. If the aim is value creation for all parties — industry, clients of industry and society — then it’s a team effort that manifests as demand increases for supply chain transparency and accountability.
Digitalised practices can better enable this, vastly improving communication around risk and providing evidence of best practices to assist and support the digitalisation of the industry.
Organisations can achieve this through the growth of things like shared services, offering a dedicated career path in supply chain or procurement, and hiring and cultivating long-term multi-project experiences to help inform those challenging decisions.
Technology provides visibility on supply chain risks and provides a governance framework to effectively manage risk. This ensures companies are as productive as possible on projects and not drowning in the administration and manual processes of sourcing, gathering and passing data.
This sponsored editorial is brought to you by InEight. For more information on how InEight’s technology can assist in mitigating your biggest project challenges and supply chain risks, please visit ineight.com.
