Supply chain mapping: the hidden dangers

25 February 2019

What can the manufacturing sector teach construction about supply chain mapping?

Supply chain mapping is increasingly adopted as standard practice across a number of industries as stakeholders seek to limit their exposure to risks emanating from events beyond their control, further down the supply chain.

Could construction be about to benefit from supply chain mapping techniques as a result of the increasing use of offsite manufacturing?

"At the moment the industry survives by having this uncoordinated supply chain of labour and suppliers but, as methods get more sophisticated, supply chains must be established much further in advance,” says Dave Cahill, Senior Partner at JLT Specialty.

“This has massive implications – if one link in that supply chain fails, a whole project could be hit.”

Currently, tier-one contractors know all their tier-two suppliers quite intimately and many of their tier-three suppliers well. But, beyond that, the trail grows a little cold.

A project manager may be blissfully unaware that components of the heating and ventilation equipment, or microchips for their building controls system, come from the other side of the world.

The consequence of a disparate network of suppliers is that events which may, at first, have seemed remote and unconnected to the project works have the potential to cause havoc in the supply chain when they are least expected to – resulting in increased lead times and mounting costs.

“There are still very few construction companies doing ongoing monitoring,” says Nick Wildgoose, Principal Consultant – Supply Chain Excellence at Resilinc, which helps companies including Aston Martin, Micron and Cisco map their supply chains and then alerts them to potential disruptions.

“Some companies get static information from their tier-one suppliers, but they don’t get real-time information related to all the critical parts of their supply chains.”

Aside from the ‘everyday’ disruptions – such as IT hitches, adverse weather and cyber breaches – businesses with multi- jurisdiction supply chains are now bracing themselves for a new form of disruption.

The Business Continuity Institute (BCI), in its annual Supply Chain Resilience Report 2018 reveals that 36 per cent of the 600 companies surveyed flagged up ‘new laws or regulations’ as a cause for concern.

With Trump’s new tariffs and the uncertainty over the changes that Brexit will bring, the BCI’s findings are perhaps not surprising.

For instance, Achilles, which provides supplier pre-qualification programmes, industry audits and risk management services to industries including construction, predicts that the US tariffs on steel and aluminium imports will have far-reaching effects.

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“We discovered that 80 per cent of the commodity codes we track, covering heavy industries and services, will be affected, even those not directly related to metals,” says Achilles in its report,

Between the hammer and the anvil: tracking the disruptive effects and increased costs of US steel tariffs (September 2018).

Some businesses in the US are already suffering but the impacts will spread further.

The report highlights the fact that more than half the goods imported into the EU from the US are ‘intermediate goods’, which will be affected by tariffs if they contain steel.

The Brexit aftershock

As for Brexit, though European countries would be the first to experience any initial rises in costs and lead times, these effects will migrate to other parts of the world too. And even though the links may not be immediately obvious, construction will feel the aftershocks.

Wildgoose says: “This illusion that the construction industry sector exists on its own is wrong.

“It sources from high tech, chemical and manufacturing supply chains. What if there was a problem with semiconductor chips, for example?

“Construction equipment producers could be hardest hit because the chip suppliers would be looking to satisfy their other bigger customers first.”

This is a risk that will only increase, points out Wildgoose. As buildings, infrastructure and cities become ‘smarter’, their reliance on the Internet of Things and interconnected technologies will increase.

The good news is that industries with complex and interconnected supply chains – such as automotive and IT – are already harnessing digital technologies to help provide warnings on potential disruptions.

Resilinc uses artificial intelligence and machine learning o scan hundreds of thousands of sources, including social media, in more than 40 languages, to look for over 40 different risk events from strikes to floods and earthquakes.

‘War room’ planning

Knowing where the furthest reaches of your critical supply chains are and how materials and components flow between various points allows for ‘what if’ analyses.

What if that port is closed? What if steel prices rise by X per cent? This can then also help prepare for ‘war room’ planning if incidents do occur, explains Wildgoose, so that delay and associated costs can be mitigated.

In an ideal world, those running a major construction project should sit down in the planning phase, with supply chain mapping integrated into the risk management process.

However, most current forms of procurement mean that supply chains grow and emerge as a project progresses. They should all, however, consider the risk aspects of the supply chain being taken on.

A larger shift to offsite construction methods would be a game changer in this respect. Although, it isn’t clear yet how the industry will evolve to allow this model to function, says Cahill.

“In light of the industry’s difficulties in recent years it is clear that tier-one contractors need to modify their current supply chain model to deliver the changes they are looking for.

Offsite manufacturing could be the catalyst needed to couple supply chain mapping to risk management strategy, creating a new model to drive reductions in supply chain risk.”

In the meantime, today, most construction projects are already hybrids, encompassing some aspect of offsite construction or manufacture.

Some examples include tunnel segments, the pumps for a processing plant, mechanical and electrical modules, or bathroom pods.

All this points to the fact that most construction projects have far-reaching supply chains; if only they mapped them.

TALK TO AN EXPERT

For more information, please contact Dave Cahill, Construction Business Development Leader on +44 20 7558 3482.

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