Integrated supply chains could help construction businesses avoid the next big crisis

As supply chains have become more globalised and more complex they have become more exposed to risks – including significant and costly disruption events.

There is an increasing dependency on supply chains and greater interconnected risk in those chains. Thus, when these complex networks break down – and they do – the results can be expensive.

The recent Californian West Coast port labour contract dispute, for example, caused long delays to trans-Pacific trade affecting a number of businesses from car manufacturers to meat exports.

The long-running disputes involved two unions which represents port employers – the International Longshore and Warehouse Union and the Pacific Maritime Association. The two parties have been negotiating employee pay and terms and conditions. But the conflict has caused huge supply chain disruptions. Cargo congestion increased during the disputes, slowing down freight traffic at ports that handle nearly half of all US maritime trade and more than 70% of the country’s imports from Asia. The Port of Oakland, for example, said that in January imports fell by 39% to 44,171 containers, compared with the same month last year. Exports fell 26% to 57,581.

This case study serves as a reminder for construction companies to implement a structured and comprehensive approach to ensure appropriate resilience in their supply chain.

One way of doing this is through an ‘integrated supply team’, such as that already adopted by some large construction projects, including the London Olympic Park.

This approach breaks down the silos linking up the various approaches to risk and thereby reduces the overall impact and the likelihood of disruption.

“We have done a large amount of work to integrate our supply chain into our risk management,” says Rob Halstead, head of risk management, Crossrail.

Given the huge scale of Crossrail – currently Europe’s largest construction project – it was established early on that the operation would need a common risk management system across the project, and the firm selected Active Risk Management (ARM) and then implemented it across the organisation and tier one suppliers.

“It’s very important that contractors share our approach and so we have insisted they share our risk management systems,” says Halstead.

“The fact we can do this is a function of our size – our suppliers have to be engaged with what we want to do and the way we do things – but it is also significant that our senior team are very positive about risk management and absolutely behind this.”

Kevin Morecroft, vice president, risk management, Skanska AB and head of risk, Skanska Civil Engineering UK, says: “I have seen the integrated approach used to great success. You have to have the will and the wallet to do it successfully; there is always a cost implication and scaleability on smaller projects can be a challenge. But if you can create that culture, you can get away from the antagonistic relationships between contractor and subcontractor.”

This approach can be particularly successful on complex builds. “The key to this is setting out the collaboration group at the beginning of a project and then putting the structure and control in place to ensure it works effectively every day,” says Martin Chown, head of supply chain and procurement, Balfour Beatty.

Getting to grips with this complexity may require appointing a dedicated supply chain officer charged with improving risk management and making sure the supply chain and procurement processes are taking an appropriate account of risk.

“Having an integrated view across the whole supply chain gives us the ability to award work to the best performing companies and ensure the whole supply chain is connected with the common goals agreed with our customers,” says Chown.

“Integrated supply chain teams will bring all disciplines together so that everybody understands their role and is able to perform at their very best.”