How experts are navigating supply-chain constraints

Almost two years after its onset, the COVID-19 pandemic continues to have a profound influence in social and economic terms, as well as on health and wellbeing. The consequences for supply chains, both nationally and internationally, have been equally startling. Key construction materials and labour have been both hard to find and increasingly expensive.

The emergence of the Omicron variant means supply constraints are unlikely to ease any time soon, with the Construction Leadership Council warning late last year that Omicron is likely to extend material shortages “well into 2022”.

With these factors in mind, Construction News convened a digital roundtable, sponsored by software provider IFS, to explore the ongoing challenges facing firms in the sector – and the strategies adopted to ease them.

Mitigating supply chain issues

Lendlease head of supply chain for Europe Andy Fulterer says his firm’s procurement practices have sharpened considerably over the past two years: “We’ve been doing extra due diligence around any financial impacts that might be felt in the supply chain, looking at the risk of companies disappearing. It’s been constantly evolving, with more reporting up to group- and managing director-level than probably ever before.”

As a large developer and contractor, Lendlease is better equipped to cope with difficulties than smaller firms. “We’ve got the benefit of a global supply chain team,” Fulterer explains. “So we’ve been managing the risk as a global organisation.”

That has meant working with supply chain partners “to get a good view of what’s happening, and where we need to really push our projects, to get ordering and get things ready in advance”.

He adds that Lendlease has “not felt the impacts that maybe we expected to feel, at a project level, but maybe that’s still to come”.

The warning of trouble ahead has Willmott Dixon Interiors head of supply chain Jon Meeks nodding in agreement. He says that assessing which companies in your supply chain might be getting into difficulties is a tricky business, but that there are often red flags. “Whilst it’s always good for people to come forward wanting work, and saying they’ve got gaps in their workload, you have to ask if there is more to that,” he explains. “Is their price right? Is it at market rates? There is a risk that they’re looking to buy work.”

Wates group procurement director David Oates says that his organisation is also now looking more closely at its supply chain to assess where the risks might be lurking. In part, the contractor’s aim is to pass on more accurate cost data to its clients. “We really dive deep into our supply chain when these issues arise, in terms of deliveries, cost increases and so on,” he says.

“We’re very interactive with our distributors or manufacturers, and we get down to the source points, so the information that we’re feeding back up to our customers is timely. We interrogate that information. It’s about being really close to our supply chain to understand the issues.”

Like Lendlease, Willmott Dixon Interiors had also taken proactive steps to secure materials further ahead in its programmes than before. “I secured some land over in Slough, so we could bulk-buy materials up front,” Meeks says.

“We knew material prices were going to increase rapidly and because of that we decided to buy quite a lot of cladding and brickwork, and so on. They can be stored, so we could hold the market price at the front end.”

Stocking up can, of course, exacerbate supply problems – much as toilet rolls vanished from supermarkets at the very start of the pandemic. Meeks counters that nothing his firm has stockpiled will be wasted, and that its approach has helped to relieve pressure on its supply chain.

Better relations

Around the virtual table, there is broad agreement that proactive support for suppliers, and maintaining strong relationships, have become more important in times of shortage. VolkerWessels UK group procurement manager Ben Rowe says: “We’ve got some wonderful subcontractors and important supply chain partners that have really come to the fore.”

“We’ve seen the biggest impact in smaller subcontractors – the ones that live hand to mouth. They really were impacted with buying just-in-time and [trying to source] materials that weren’t there”

Ajaz Shafi, John Sisk & Son

Rowe adds: “We’ve always had strong values of how we treat people […] We’re very good payers and I think basic, good procurement practices have stood us in good stead. Where we really needed people to come to the table and go the extra mile for us, [they did]. The challenges have made us collaborate more and I think the value of procurement has risen as well. We’ve always had a fairly good-sized procurement team, but certainly the board is more interested in procurement.”

As well as drawing attention from the boardroom, Rowe says the trials of the pandemic have encouraged better procurement planning. He says he has seen this both internally, within VolkerWessels, and externally, with clients and the wider supply chain. “We’ve always talked about the need for planning, but that is becoming more apparent than ever,” he notes. “At the height of the pandemic, we were having daily team calls on key items, and with our supply chain. I think it’s just about trying to engage people as early as possible, sharing all the information that we can, to try and be in it together and get to the best outcome.”

John Sisk & Son managing director for UK south Ajaz Shafi also cites improved co-operation as an upside of the pandemic. “We’ve all lived through something absolutely unique and the reaction from most people is similar, but we’ve seen the biggest impact really in smaller subcontractors – the ones that live hand to mouth,” he observes.

“They really were impacted with buying just-in-time and [trying to source] materials that weren’t there. So we had to put a lot of focus on understanding what’s going on in that market, and helping them through it. On a number of occasions, that actually involved bearing the additional cost [ourselves]. It was about managing that, rather than leaving it to the supply chain. We’ve had to get involved a lot more than we’ve ever had to in the past.”

Constraints and how to solve them

Dan Keogh, preconstruction director at concrete, demolition and piling specialist Morrisroe, provides a subcontractor’s perspective, noting that the biggest issue his company has faced is the labour shortage. The summer months, he says, were particularly tough, as workers took the opportunity to get away, often for long periods. “The fall in labour [in 2021] – through that summer period – just exacerbated the shortage of labour that we have in the industry,” he says.

“There isn’t that balance of people waiting in the wings to fill the roles, and that’s driven up labour costs as well,” he adds. “We’ve been talking about material costs and how they’ve risen, but there’s also labour costs rising and we’re having to swallow that. In terms of projects we’re tendering, we can only present that to our upward supply chain.”

“We established a supply chain specifically to deliver schools, based on a standardised product, six or seven years ago, and that forward-pipeline visibility has been really beneficial for us”

Chris Arno, Bowmer & Kirkland

Whether constraints lie in materials or labour, clients can often resolve problems, according to Bam Nuttall head of supply chain James Lees. The civils contractor has secured increased revenue during the pandemic largely due to government pressing ahead with infrastructure spending. Where clients can provide higher confidence about project timetables, contractors are able to plan ahead and avoid high-cost, short-term buying.

“It starts from the customer, as well as from the tier one and other contractors,” Lees says. “Unfortunately, [contracting] is a low-margin business and, if we get projects bumped by a year, we cannot afford to carry the overhead and the supply chain, waiting for a decision.”

Bowmer & Kirkland framework director Chris Arno says clear goals have been vital in delivering projects for the Department for Education. “We established a supply chain specifically to deliver schools, based on a standardised product, six or seven years ago, and that forward-pipeline visibility has been really beneficial for us,” he says.

“The minute we’ve secured planning approval, we can enact the ordering process. We’ve got some important end dates that can’t be missed because we need to get children’s bums on seats in September. So we’ve really had to think about ordering early, taking a little bit of risk ourselves; but once we have planning approval, the risk profile reduces. The feedback that we get from our supply chain is that forward visibility of a pipeline and a standardised product has been invaluable.”

Future-proofing the supply chain

Increased use of standardised designs and modern methods could be critical to improving supply chain resilience in the future, comments Kenny Ingram, vice president for the construction and engineering sector at IFS. “The more you standardise, the easier it is to plan ahead,” he says. “We’ve got a very strong story on modular, and the join between [onsite] construction and the modular offsite world. It’s a very hot topic for us.”

But easing procurement through standardisation is not an option for everyone, cautions British Land development director Laura Hall. She notes that major London projects are typically bespoke designs that are difficult to modularise. “If you’re working in Manchester, there’s much more standardisation in office developments, whereas in central London, the type of customer we’re developing for wants something that’s different. They want it to be a showcase for their brand, so standardisation does become harder.”

The wide-ranging scope of the debate underscores the extent and impact of supply chain problems seen over the past year, and the variety of approaches taken to ease issues. The common threads are the importance of clear communication and collaboration. Sharing information early, taking the time to understand a partner organisation’s position, and treating all parts of the supply chain with respect have all been critical to getting through the tough times.