The global construction sector marked 2021 as a year of multiple disruptions. In November,
nearly one in two UK construction firms (47%) reported supplier delays caused by a myriad of issues ranging from the pandemic (the great disruptor of the last two years), labour shortages and inflationary pressures, among others.
These disruptions are expected to persist in 2022 and beyond. However, even before the pandemic, construction firms have always had to deal with unforeseen events that threaten their supply chains. These include accidents on job sites, criminal activity, natural disasters and issues with suppliers. With these in mind, supplier relationship management has to be a top priority for any construction company.
The key is to have a risk management system that protects your supply chain from these threats. Here’s how to get started building this system.
1. Adopt a Multi-Sourcing Strategy
The adage “Don’t put your eggs in one basket” is worth remembering when assessing your supply chain’s resilience. Whilst there are benefits to single sourcing (i.e., working with a single supplier), such as stability and lower costs, this approach also amplifies your risk exposure. Whenever a supplier is unable to meet their obligations, your business could face difficulties continuing work and meeting your contractual obligations in a project.
In contrast, a multi-sourcing strategy helps you spread risk across multiple suppliers. For example, if you have a problem with a subcontractor that provides plumbing services, your other suppliers, such as electricians or carpenters, can continue working. The downside to this approach, however, is that it requires more time and money to manage multiple suppliers.
2. Prepare Backup Suppliers
Even with a multi-sourcing strategy in place, you still need a backup plan for those instances when suppliers cannot fulfil their supply chain obligations. This could stem from any number of issues, such as unexpected product demand, scheduling conflicts or problems within their supply chain. They might even be forced to go out of business due to cash flow issues.
Whatever the case, it’s a good idea to have a list of backup suppliers on hand for these kinds of unforeseen events. It’s also a good idea to have agreements with them, such as reserving production capacity or materials, albeit at a higher markup.
3. Improve Your Supply Chain Visibility
Large construction businesses often have complex supply chains comprising multiple contractors, subcontractors, middlemen and a wide range of suppliers — each one fulfilling different operational requirements.
This complexity can make it difficult to know what’s happening at every stage of your supply chain. Improving your supply chain visibility allows you to detect supplier issues early on in the production line — well before the product or service is delivered to your buyer.
One way to improve visibility is to shorten your supply chain pipeline. This can be done through intermediaries such as procurement offices and trading companies, which serve as hubs for your suppliers.
4. Use Supply Chain Risk Management Services
Supply chain risk management services take care of many tedious aspects of risk management. For example, accreditation schemes such as the Common Assessment Standard consolidate supply chain compliance across 13 areas of risk management, giving contractors a faster path to demonstrating their commitment to best practices. For construction clients, working with subcontractors that have achieved the Common Assessment Standard gives them peace of mind knowing their supply chain is in reliable hands.
5. Periodically Review Supply Chain Risks
Supply chain risk management is not a one and done deal. A risk assessment conducted today is likely to be out-of-date in a year — you may have new suppliers, new clients, and more products and services.
You’ll need to assess your supply chain risks at least once a year to ensure your contingency plans and measures are up to date.
Author: Alex Minett
Alex Minett is the Head of Product & Markets at CHAS, the UK’s leading health and safety assessment scheme and provider of risk mitigation, compliance, and supply chain management services. With a working history in the audit and management consulting industry, Alex is experienced in implementing visions and strategies. Skilled in negotiation, management, and business development, he is passionate about driving CHAS in its mission to safeguard organisations from risk in the UK.
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