Segura recently partnered with Responsible Solutions to tackle supply chain risk in the construction industry. So what transparency issues do UK builders face?
Popularity rises for construction in the UK
Confidence in Britain's construction industry recently reached a nine-year high, according to Reuters. In fact, the falling availability of sub-contractors and shortages of material supplies is creating a bottleneck, according to the monthly Markit/CIPS UK construction purchasing managers' index (PMI).
Following the UK’s continuing recovery from the recession, both private and public sector construction are being given more funding, and new projects are taking shape across the country.
“Recovery is not a foregone conclusion however,” explains Dr Noble Francis, Economics Director of the Construction Products Association.
“Several important risks remain, primarily around the strength of the UK and Eurozone economies, the policy outcomes following the 2015 General Election and the impact of any supply constraints”.
As well as the scarcity of skilled labour and materials, construction companies also need to consider the quality and compliance of the goods they source.
Tackling complex construction supply chains
Supply chain risk management typically revolves around transparency. By examining the raw materials, services, and logistics that go into any project, you can understand whether the finished article is responsibly sourced or fit for purpose.
While many manufacturing sectors have a steady production line and reliable supply chain partners, construction projects are often a lot less stable, operating on a basis of location and individual project requirements. It’s possible that a new collection of architects, construction firms, electricians, plumbers, suppliers and subcontractors may be formed every time, making it difficult to keep track of professional relationships.
Subcontracting can also lead to a complex chain of contracts procuring each element of a building. A construction firm often works as a first tier supplier for the client, with a whole supply chain of suppliers and subcontractors behind them. Whilst the primary supplier may agree to strict contracts and regulations, it’s likely that the secondary and tertiary suppliers at the bottom of the supply chain will be completely unknown to the client.
The longer the chain, the lower the visibility and the higher the supply chain risk.
It’s important to collaborate in any supply chain, but building projects often bring together many diverse disciplines. It is common practice for construction companies to source materials, fixtures and appliances from a wide variety of suppliers, who may in turn subcontract orders out.
For instance, UK construction companies are currently working to meet an ambitious Energy Performance of Buildings Directive which requires all new buildings to be “nearly zero energy” by December 2020. It’s thought around 20,000 homes will need to be retro-fitted with carbon-reduction technologies and smart meters every week in order to meet this deadline.
Achieving supply chain visibility in construction
Failure to tackle supply chain risk can be disastrous, particularly with big projects that rely on complex financing arrangements.
Recently, there has been increasing interest in establishing relationships beyond direct, first tier suppliers. Framework contracts and partnering agreements have pioneered this approach, encouraging the involvement of selected suppliers in early project stages.
Supply chain risk management isn’t easy, but Segura’s software platform can help. Our cloud-based technology platform makes it possible to create a comprehensive audit trail by tracing orders through the supply chain. Keeping all sourcing within a pre-approved framework of suppliers - and sending real time alerts if any supply chain risks threaten your building project.
