"There must be much more collaboration and transparency with suppliers and subcontractors," said CSLPG © Paulo Fridman/Corbis via Getty Images
"There must be much more collaboration and transparency with suppliers and subcontractors," said CSLPG © Paulo Fridman/Corbis via Getty Images

Five-point plan to improve construction procurement

27 August 2020

An industry group has developed a five-point plan to help construction procurement build more “robust supply chains”. 

As the construction sector has been one of the hardest hit during the pandemic, companies need to ensure they have the right procurement and supply chain capabilities and make improvements to any weaknesses in the function.

The Building Supply Chain Resilience in the Construction Sector white paper, produced by the Construction Senior Leaders Procurement Group (CSLPG) at CIPS, highlighted that “procurement needs to be placed at the heart of this solution, building robust supply chains that are fit for the future”.

The five points are:

1. Address supply chain vulnerability

One of the challenges highlighted was bridging the “disconnect between business and the supply chain”. Meanwhile, the subcontracting structure used in construction projects can result in “little or no supply chain visibility”.

CSLPG said: “More transparency and a review and rebalance of risk is required with proper mapping of the supply chains to fully understand the areas of vulnerability.”

A shift towards a “self-delivery model” where suppliers provide services without third parties could bring better visibility, or a closer relationship with subcontractors could enable controls to be put in place to mitigate risks.

The report recommended that procurement professionals play a key role in business continuity through close monitoring to “predict disruptions, understand where to intervene and put plans in place to mitigate or minimise disruption”.

2. Utilise demand planning 

The report said: “Without a clear picture from across the sector many suppliers are still unsure of how much demand they can expect to see moving forwards and when it is needed.”

Procurement teams need to learn to collaborate with other companies in a “non-competitive way” to understand the market and plan ahead to ensure supply remains stable and supply allocation is minimised.

It warned : “The subcontracting nature of construction products muddies the water further, as much of the goods are purchased by subcontractors.”

3. Redesigning supply chains for reduced risk

Recent supply chain challenges have been triggered by the “fragility” of global supply chains following Covid-19 and Brexit. In light of such events, “organisations across all sectors are looking to near or on-shore suppliers to reduce risk”, according to the report.

To achieve this change major government investment may be required and procurement teams need to work together across the sector to develop the local supplier capability and capacity, as well as ensuring necessary quality and regulatory standards are met.

4. Standardisation allows flexibility and cost reduction

The CSLPG said an increase in “specifications and suppliers causes inefficiencies throughout the supply chain and introduces more layers of risk”.

It recommended: “A focus on standard specifications across projects allows more flexibility in sourcing from suppliers, drives up quality standards and brings total costs down.

“Standardisation should be balanced with driving innovation, particularly when it comes to striving for more sustainable solutions.”

However, using sole suppliers in other countries for critical materials and products can also increase risks such as disruption, as the Covid-19 crisis has shown. 

“More procurement, supply chain and logistics-led solutions are needed to bring the construction sector up to the margins and productivity of other industries,” said CSLPG.

5. Procurement needs to evolve...

Industry crises often expose weaknesses in the system and can provide an ideal opportunity to review what needs improving. 

CSLPG emphasised the function needs to learn and develop so that “when a similar situation arises the sector is in a better place to deal with the repercussions”, and construction projects can continue on time and within budget.

“This catalyst for change relies on a redesign of how procurement is positioned and utilised to maximum effect within organisations.”

The report recommended increased collaboration across procurement teams and help in rebuilding their organisations, as well as simplification and risk reduction in supply chains.

“To reboot the supply chain into action there must be much more collaboration and transparency with suppliers and subcontractors to ensure that we all emerge from the results of the pandemic in a good place where capacity and productivity increases at a sustainable pace and margins continue to grow at healthy levels for all parties,” it added. 

CSLPG called on “all businesses involved in the construction sector to have resilient supply chains with full supply chain transparency, better planning, risk assessment and mitigation, and a focus on value rather than price”.

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