Construction planning requires meticulous material procurement and inventory management to ensure tradespeople have the right materials at the right time. In the past, this area has involved prioritizing timely delivery and minimal stock through methods like Just In Time (JIT). However, the contemporary industry landscape demands a new strategic outlook due to significant supply chain disruptions, with material shortages causing substantial project delays and cost overruns.
Established supply chain strategies are outdated and inadequate when it comes to meeting the challenges of the contemporary construction industry. Increasingly, construction companies are focussing on building resiliency in their supply chains, developing alternative solutions for an era where they can’t expect materials to be available when they are needed. Where purchasing materials used to be the final step of the build process, site managers now need to place orders for materials as soon as the design phase is complete. As project managers are forced to source materials sooner, their supply chain approaches are changing, and they now need to focus on a storage and delivery model that abandons the typical processes used in the past. How can strategic stockpiling help deliver smoother, more productive projects? Here are some of the most compelling advantages:
Cost Stability
One of the most significant advantages of stockpiling is the ability to lock in prices and avoid market fluctuations. Construction materials such as air handlers, chillers, and mixing tanks are subject to huge cost fluctuations over time, which can wreak havoc on a project budget devised at one price estimate but implemented at another. By purchasing these materials in bulk beforehand, contractors can stabilize their costs, making financial planning more predictable and secure.
Supply Chain Reliability
Supply chains, especially international ones, are increasingly susceptible to disruptions. Delays caused by supply chain disturbances affect 70% of all projects and are a top concern for contractors everywhere. Having a safety stock of crucial materials provides significant risk mitigation, giving construction teams confidence that the projects can continue through delays. This reliability is invaluable, especially for projects with strict deadlines and penalties for late completion.
Enhanced Project Scheduling
Access to necessary materials without waiting for shipments allows project managers greater control over scheduling. Knowing that materials are in stock provides more accurate and reliable project forecasting, helping to plan and allocate resources more effectively. And, with greater flexibility to adapt to changes in project timelines, they can accelerate or adjust their responses to project scheduling needs based on other factors without being bottlenecked by material shortages.
Reduced Downtime
Stockpiling materials minimizes the risk of idle worksites, ensuring that workers have what they need to stay productive. Downtime in construction costs both time and money, sometimes tens of thousands of dollars per day, and the industry tens of billions of dollars per year. But, with materials stockpiled, construction teams can maintain a consistent workflow without interruptions, ensuring that each phase of the project progresses smoothly and in a timely way.
Competitive Advantage
Ultimately, contractors that adopt a proactive approach to material procurement often enjoy an edge over others who may be eyeing their place in the market. If a contractor can consistently deliver on project milestones and deadlines, they are seen as reliable partners capable of completing projects on time and within budget—a reputation that is crucial for future business opportunities. It all adds up to increased negotiating power, client confidence, and competitive bidding.
The strategic stockpiling approach to supply chain management, where contractors purchase and store large quantities of essential materials well in advance, is garnering a lot of attention and for good reason. While strategic stockpiling requires upfront investment and adequate storage facilities, the long-term benefits of reduced material cost volatility, supply reliability, and project efficiency often outweigh these costs, making it a wise strategy for project completion in today’s uncertain market.
To read more about the background of strategic stockpiling in the construction industry, click here. Or, to learn more about how Trangistics implements strategic stockpiling through warehouse management services, click here.