The Role of Suppliers in Construction Innovation
It's clear that the construction industry has a long way to go in order to truly improve global productivity levels to satisfy increasing demands and manage labour shortages. In order to make this advancement, the industry needs more than just construction contractors to improve their planning and building processes, it requires every single player in the construction ecosystem to get creative and innovate collaboratively. One of the most important and influential players in this process is the supplier.
Supply chains have been challenging since the beginning of time, and no one has ever been able to escape this challenge. In construction, developers, builders, contractors, manufacturers, distributors, and architects are all trying to reimagine a new path forward, all while trying to manage their own bottom lines.
Of course, change is a major challenge for an industry like construction. Construction is highly risk-averse, fragmented, and complex. Time and cost overruns are the norm. Not to mention, contractors are constantly facing squeezed margins, making it difficult for them to find the resources to innovate in the first place.
All of these issues have led to an industry culture based around speed and low costs. While construction businesses have every right to aim for these two goals at all times, the irony of this situation is that the emphasis on these two factors is also one of the major reasons why the industry can't move forward.
To make matters worse, construction faces a huge global labour problem, affecting every single company in the ecosystem, from developers to suppliers. Everyone in the ecosystem is struggling to find ways around this problem and it continues to affect organizational decision-making to a large degree.
As a supplier, you need to cater to this industry mindset of speed and the cheapest prices, manage your own supply chain issues, all while struggling to find enough labour on the plant and warehouse floors themselves. Boy does this sound challenging.
According to a recent study by McKinsey Global, while today material distributors may represent up to 17% of the construction ecosystem, their value could erode significantly unless changes are made to their business models. 20% of respondents to McKinsey’s survey believe that failure to change could result in material distributors declining to the point of non-existence within 10 years. Suppliers simply must add more value to the services they provide in order to survive.
However, the silver lining is that the COVID-19 pandemic has shaken the ground beneath this entire industry and has forced the entire ecosystem to re-evaluate how they operate their businesses. Construction companies of all kinds have been exploring a new wave of construction technology spanning everything from collaboration tools through to pre-fabrication.
The good news is it's not too late for suppliers to collaborate with the rest of the ecosystem to both survive and thrive in the new age of fully-digitized construction companies. There are many different ways suppliers can play their part to innovate and move the industry forward. Here are a few of the more prominent examples:
Suppliers shouldn't just maintain a simple vendor-customer relationship with their contractor clients. Instead, they should play a more active role in their client construction projects to better understand the required timelines and forecast demand far in advance.
At the end of the day, contractors will want to work with supplier partners who can provide value-added services that go above and beyond any other ordinary supplier. If you can help your clients throughout their project lifecycles, you will not only be able to better manage your own supply chain, but you will also make your clients extremely happy.
Just like contractors, builders, and developers, suppliers too can find ways to introduce automation into their operations. Automation doesn't necessarily mean finding a super intelligent i-Robot to run your warehouse and plant operations. Rather, suppliers can start by finding ways to automate their logistical and back-office workflows.
The perfect technology to explore here is Construction Workflow Automation (CWA). With CWA, suppliers can fully automate workflows across order fulfillment, purchasing, inventory management, procurement, and much more. By focusing on streamlining existing workflows as much as possible for logistics and office teams, companies can increase efficiencies to a point where they can offset the gap being created by labour shortages. Getting workers to work alongside full software automation can enable suppliers to support a lower headcount but still maintain high output levels for their clients.
After CWA, suppliers can then start to explore hardware-based automation such as warehouse robotics and smart machinery. Automation can truly help suppliers in ways that will allow this construction segment to grow alongside the rest of the industry.
The industry needs to move away from the just-in-time model and focus on more predictive models based on real-time data. By deploying data analytics platforms, suppliers can become more sophisticated in how they forecast demand, segment their clientele to better understand material needs, and improve the management of their own supply chain.
But suppliers should not explore data analytics in a silo. This must be a collaborative effort with their contractors and builders. Bring contractors into the mix by providing private access to a subset of the data so they themselves can anticipate delivery timelines far in advance and plan for their own projects accordingly. By collaborating with your clients, you will set yourself apart as a true supplier partner who is not just interested in offering the best competitive price out there, but as a partner who wants to help clients deliver their project on time and under budget!
Suppliers collaborating with the rest of the construction ecosystem through a shared data paradigm will increase transparency across the board and encourage all parties to learn and work together.
Want to get started with your new data analytics strategy today? Check out our article here for a quick 3 step guide!
Rest assured, modular construction is not just a fad. It's here to stay.
The suppliers who embrace new prefabrication methods are the ones who will come out on top in the long run. Use your data analytics platform to compile a picture of what your various client segments typically require the most and when. Work with your clients to understand what they need the materials for and whether there are any prefabricated opportunities available for repeatable building components.
Using this intel, suppliers can implement new prefabrication strategies to unlock additional revenue opportunities and help their customers build faster.
Another big issue holding the industry back is that there is no standardized marketplace for contractors to connect with suppliers, compare prices, and make purchases seamlessly. Instead, what we have is a highly-fragmented wild west approach where contractors must do a lot of legwork to get out there and make their material purchasing decisions.
This is terrible for the industry as it forces contractors to spend way too much time finding materials. And for the contractors that don't want to go through that effort, they end up sticking to suppliers they're familiar with, even though those suppliers may still be offering higher prices and facing their own supply chain issues. It's hard for contractors to really find the best fit for their projects.
It's time for suppliers to get on-board with the idea of joining a construction marketplace and advertising their products via this new channel.
In order for innovation to happen successfully in the highly complex and fragmented construction industry, it will require collaborative efforts from every kind of company in the industry's ecosystem.
While builders and contractors find new ways to improve project planning and on-site productivity, suppliers must find new ways to manage supply chains and forecast demand as early as possible. Suppliers can form better partnerships with their clients, deploy automation, become data-driven, embrace modularization, and find new advertising channels. All of these efforts represent significant advancements for not just suppliers alone, but for the entire industry.
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