Five ways to mitigate construction supply chain disruptions
In this rapidly changing and uncertain environment, the role of the supply chain is in sharp focus. Businesses dependent on domestic and international suppliers are under pressure to mitigate potential disruptions. The resultant shortages include plant, raw materials, critical components, finished goods and labour.
Globally, construction clients are asking themselves difficult questions: how will the supply chain look in the aftermath of COVID-19? How will capability be altered and, if your supply chain is dependent on raw materials and critical components, how much inventory should you stock to weather this crisis? Will there be shortages upon resurgence?
If you have identified high risk, high impact supply chain disruptions, the following five points will support you to position your business and get the best results from the market amidst these trying times.
1. Re-check criticality
Have you correctly determined ‘what’ and ‘who’ are business critical to your project and operation?
For most project based organisations, up to 80 per cent of the personnel working in offices and on-site are third party employees, supported by external vendors whose competencies and products will be required when the market recovers. We recommend you review your spend profile, discuss with your internal stakeholders, and look to review alternative supply options now.
2. Increased regular open communications
Are you talking enough?
Make sure you are aware of your supply chain’s business continuity plans. This also indicates you are attentive and willing to help as time progresses.
3. Specialist’s discussion
Are the right people talking?
Connecting experts from both organisations can broaden your knowledge of what is happening and help to give a more informed decision on next steps. Finance director to finance director level conversations can often add significant value.
4. Review your terms and conditions
Is your commercial model appropriate for the market?
Where businesses have achieved a strong market price in previous negotiations, is it worth looking at the cost benefit analysis of maintaining the relationship with an alternative model? Finding an alternative supplier at this stage is likely to be inefficient compared to a more collaborative approach.
Negotiating a change in commercial and payment terms for a fixed period of time may well sustain both organisations, rather than drive insolvencies and supply chain failure.
5. Drive innovation and continuous improvement
Communicate and listen to your supply chain’s ideas and initiatives – there could be alternative products or ‘ways of working’ that might be more appropriate.
Please visit our COVID-19 response page for all of our resources relating to the impact of COVID-19 on the construction sector.