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Why Supply Chain Management is so Important

Updated: Sep 14, 2022

Supply Chain Management

Construction is characterised by a high degree of specialisation. Many firms specialise in specific types of work, although the products of the industry (i.e. the completed projects) are more often bought by clients as complete entities. This means that there is a need during the production phase for a management layer, whose task is to integrate, control and co-ordinate all the various inputs required in order to deliver the completed project to the client. In recent years, more and more specialist firms have been used changing their role increasingly to one of management and co-ordination.

The construction supply chain may be considered as the network of organisations involved in the different processes and activities that produce the materials, components and services that come together to design, procure and deliver a building.

The supply chain is traditionally assembled to carry out a single construction project, sometimes known as a temporary multi-organisation. In many cases, the people involved in the design and construction processes differ from one project to another, with the construction team being formed and reformed for each new project. It must very quickly go through all the usual 'team-building' processes if it is to operate as an efficient working organisation.

A graph presenting a standard supply chain management in construction, from raw material to client or end user

Above illustrates part of a typical construction supply chain for a traditional procurement route (although in reality many more subcontractors could be involved). This represents lines of communication as opposed to contractual arrangements. The problems for process control and improvement that the traditional supply chain approach produces are related to:

  • the various organisations coming together on a specific project, at the end of which they disband to form new supply chains

  • communicating data, knowledge and design solutions across the organisations that make up the supply chain

  • stimulating and accumulating improvement in processes that cross the organisational borders;

  • achieving goals and objectives across the supply chain; and

  • stimulating and accumulating improvement inside an organisation that only exists for the duration of a project.

The capturing of data is fundamental to be able to understand how the supply chain is working holistically, it:

  • allows areas for potential improvement and good practice to be identified;

  • facilitates sound decision making;

  • allows the impact of any decision to be tracked; and

  • allows the identification of lessons learned for future stages and projects.

Objective data also allows performance management discussions to be held in a constructive manner based on fact, avoiding difficult and often emotive discussions based on opinions. Not only does this allow performance to be managed in a collaborative manner, but it can also prevent an erosion of relationships over time.

Data needs to be collected in a standard format to allow efficient aggregation and analysis. Once systems are in place, reports can be designed to provide the right data, in the right format, to the right person, at the right time, so that decisions can be made in an informed manner to protect the progress of the project.

Data provides undisputable evidence for supply chain performance management and allows a focus on continuous improvement rather than defensive behaviours. Data can be used to:

  • objectively identify areas of good performance;

  • objectively identify areas for potential improvement;

  • inform performance management discussions;

  • determine which input processes are delivering better outcomes, allowing the targeted sharing of knowledge to improve collective performance;

  • facilitate robust decision making in the context of governance and assurance regimes;

  • allow the benchmarking and comparison of performance; and

  • allow lessons to be drawn.

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