Supply Chain Disruptions and Construction Industry Transformation
Planning ahead, running different scenarios, identifying labor needs, and employing technology will help to improve project costs and schedule on today’s jobsite.
One of the biggest changes is that owners are seeking to exert greater control over the value chain. Using industry partnerships or collaborative contracting, owners are striving to integrate more fully with procurement decisions as well as with design, engineering, and construction.
By working with contractors during preconstruction, owners can achieve early commitment for procurement of critical materials, as well as work with designers to ensure what is ordered will match the requirements of the completed project design. A general contractor who has existing relationships with vendors, subcontractors, and suppliers may be able to secure holds based on a letter of intent despite the fact that current hold times for prices or shop availability are much shorter than they have been in the past.
Phased bidding and work releases can allow procurement and work to start before the final document set is complete. While the team’s focus may be on procurement of critical path materials such as steel, joists and deck, lumber, roofing, and/or PVC pipe, it is important to manage the procurement and delivery of all other manufactured materials, such as insulation, paint, scaffolding, specialty tooling, and more. Planning ahead and addressing the availability of these materials, and considering substitutions when necessary, can make a significant difference in project schedule.
By working with contractors during preconstruction, owners can achieve early commitment for procurement of critical materials. Running Different Scenarios
Running scenarios and choosing between alternatives may be necessary to keep a project on track. While it would be impractical to select entirely different critical path materials for a given job, it is a good idea to compare materials costs to installation methods.
For example, it has been typical to place steel orders for the least amount of tonnage, which usually translates to more individual fabricated pieces. In the current environment, one solution may to be to order fewer pieces, allowing the shop to fit in fabrication of the order sooner. However, this must be balanced against the cost of larger construction equipment to support heavier steel pieces, expected labor capabilities, and transportation costs. Being flexible with delivery times and materials storage can also offset price and scheduling difficulties, although these must be balanced against other concerns, such as insurance.
Early manufacturing of select components, designing or redesigning mechanical systems to use standardized shapes and sizes, and/or switching to on- or off-site assembly may also offer solutions. Owners may even find it beneficial to revisit their master plans at this time. This is because different project types are currently experiencing different outcomes in terms of project schedule. For example, renovation projects that don’t require steel or roofing will be less affected by material lead time issues.
Experienced contractors and planners can run scenarios on big-picture decisions and land use and development, keeping overall business goals on track even as timelines and project delivery goals are adjusted. Contracts should be modified to have transparency. They may include escalation clauses and other language that distributes risk. Including such clauses in a bid can reduce uncertainties and, therefore, may even lower bid amounts, since the contractor’s need to build in margins for risk will be reduced. For contracts with shipping companies, nontraditional approaches such as shared transports, alternate modes of transportation, and/or just-in-time delivery may provide solutions.
Being flexible with delivery times and materials storage can offset price and scheduling difficulties. Satisfying Present and Future Labor Needs
In addition to materials, labor shortages are currently threatening timely, on-budget project delivery. While it is always important for an owner to verify that all partners involved on the team exhibit effective hiring practices and employee retention programs, in a tight labor market, additional factors should be considered. Contractors’ and subcontractors’ hiring practices should demonstrate an emphasis on attracting future-oriented employees (for example, by attracting digital talent or workers with specialized areas of interest) and have robust employee mentorship programs.
As part of subcontractor prequalification, contractors should identify a given subcontractor’s labor and unique abilities, then assemble teams and schedules in a way that optimizes strengths. Some subcontractors may be able to manage specific risk categories, achieving efficient division of labor and improving the odds of success for the overall project outcome. Contractors who remain friendly competitors with others in the market differentiate themselves in the current environment, improving results by partnering to combine strengths.
While the construction industry was slow to adopt technology, many owners, contractors and subcontractors have now built expertise…a timely milestone, since many of the new technologies are a boon to construction scheduling and management. BIM models are supporting early stage planning, and end-to-end software helps offset some supply-chain unknowns. Drones help with site assessment and enable insights regarding design and construction challenges.
Contractors’ and subcontractors’ hiring practices should demonstrate an emphasis on attracting future-oriented employees. On the other hand, technologies that affect a facility’s end-use stage — notably, new kinds of robotics and automated equipment — present challenges to construction rather than offering solutions; they require owners to face a learning curve and to increase their level of investment. Owners may also be under pressure to consolidate or scale up operations due to market demands and the speed of technological change. Fortunately, in all these cases, construction teams can rely on the helpful technologies of BIM, construction management software, and more to remain in control of project delivery.
Historical databases are one area in which a contemporary, tech-based solution is not as reliable as usual due to current price volatility. In this case, communication with third-party sources and vendors can help fill in the knowledge gaps. Subcontractors, like general contractors, often have direct links to specialty suppliers for early indications of price escalation or shipping delays. The team can also pursue data collection according to published indices agreed upon by both the owner and project managers.
Getting construction supply chains “back to normal” will be a welcome development, but until then, teams can effectively use a project’s preconstruction phase to manage disruptions. Constructability reviews, evaluation of alternatives, forecast refinement, and risk-sharing are among the proven approaches to improving project costs and schedule on today’s jobsite.
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