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Supply chain challenges for the Building & Construction Industry

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Published: Reading time: 5 min
Joost van Doren Director Industry Solutions
Joost van DorenDirector Industry Solutions
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The construction industry’s importance is well-known. But there exists an industry often overlooked, yet indispensable - the building and materials sector. This sector plays a critical role in providing the essential building materials upon which our modern world is constructed. In this blog post, we will explore some of the key challenges faced by the sector and discuss how companies are working to overcome them.

The building materials industry is vast and dynamic. Building materials like concrete and steel have complex and energy-intensive manufacturing processes requiring a variety of raw materials. Pressured by shifts in demand from the developed to the developing world, high energy prices and reduction of its significant GHG footprint, the need for digital transformation to drive efficiency and sustainability has never been more clear. With cement alone accounting for approximately 8 percent of global CO2 emissions, the call for innovation is resounding.

Compared to other sectors, the building & construction industry has been more selective in adopting digital technologies. Many organizations rely on spreadsheets and legacy solutions, resulting in a scattered IT landscape with limited visibility throughout the supply chain. Adopting next-gen planning software will be a significant step towards modernizing operations, as it drives standardization and digitization of these manual processes across the organization, enabling data-driven and end-to-end decision making, in the end leading to increased efficiencies and reduced costs. And here are the main transformations:

Reacting faster to demand changes
Demand is shifting: from office to home-work, an increasingly mobile population, growing emerging markets, and uncertainty around tariffs impact construction needs globally. Leading companies are able to anticipate demand fluctuations by integrating a variety of demand signals in their forecasts; think of internal drivers like the CRM pipeline to external indicators like macroeconomic conditions, investments, and mobility data.

Managing complexity due to market consolidation
Strong consolidation has turned the market into a more global business, increasing size and complexity of companies. Therefore it is even more important to make sure that all internal and external stakeholders are fully aligned on operations strategy and decision-making through collaboration and integrated business planning.

Mitigate impact of material shortages and price fluctuations
All stakeholders, from extraction of raw materials, manufacturing of building products as well as their sales and distribution to customers need to stay close together in order to respond quickly and reliably to any change. Traditional forms of communication and collaboration still are the norm today, resulting in slow and unresponsive chains. Digital collaboration on the other hand allows companies to collaborate and connect in real-time with suppliers from all tiers of the supply chain. Ensuring continuous alignments of forecasts, capacities, inventories, production- and distribution plans, and immediately dealing with disruptions that may occur.

Incorporate the impact on sustainability in your decision-making
With growing awareness of environmental issues, there's increasing pressure on the construction industry to adopt sustainable practices. This includes sourcing eco-friendly materials, reducing waste, and minimizing the carbon footprint. Meeting these expectations while maintaining profitability is a challenge.

To provide end-to-end visibility eco-systems need to be connected. Integrating sustainability metrics allows suppliers to share information about the environmental impact of their products. This supports companies making informed choices, aligned with their sustainability goals, and meeting client or regulatory demands.

Allow for mass customization by close customer collaboration
In Engineered-to-Order or even Made-to-Order building products, product complexity and customization options are driving planning complexity. Direct and real-time customer collaboration allows for a more informed understanding of demand requirements. Additional capabilities such as attribute-based planning supports planners to deal with SKU complexity.

Fast respond to increasing supply chain disruptions
COVID, inflation, and energy costs drive variability in material availability, logistical breakdowns, and labor shortages, constraining every point in the value chain. End-to-end control tower views provide capabilities to mitigate these supply disruptions and rapidly react to demand changes. In addition, logistics integrations and “digital thread” tracing of material to project real-time visibility, enables accurate tracking of shipments and inventory levels, facilitating JIT delivery strategies and reducing excess inventory. Closely collaborating with suppliers to identify and mitigate risks, as well as establishing alternative sourcing options, helps in navigating and recovering from supply chain disruptions quicker.

Conclusion

Companies must continually innovate and optimize their supply chains to maintain market share and profitability. Staying ahead in this competitive landscape requires a relentless focus on efficiency and cost-effectiveness. The building and construction industry grapples with a myriad of challenges, ranging from logistical complexities to regulatory compliance and from demand fluctuations to geopolitical risks. These challenges, if not addressed, can lead to delays, cost overruns, and compromised quality. 

Next-gen supplier collaboration software emerges as a pivotal tool in this context, offering solutions that streamline communication, enhance transparency, optimize resources, and foster proactive decision-making. By centralizing information, integrating  various data sources, and providing real-time insights, this software not only addresses the immediate challenges but also paves the way for digital transformation in the construction sector. As the industry continues to evolve in an ever-changing global landscape, embracing such technological solutions will be paramount for companies aiming to stay competitive, efficient, and resilient.

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About the author

Joost van Doren Director Industry Solutions

Joost van Doren

Director Industry Solutions

Bio: Joost van Doren is Industry Solutions Director at o9 Solutions, bringing over 12 years of dedicated expertise to the transformation of supply chain decision-making. With a proven track record, Joost has played a key role in numerous transformation projects, leveraging his expertise and background in Operations Research to consistently deliver pragmatic solutions that drive impactful results.

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