The construction industry is undergoing a transformation fueled by new technology, particularly in areas like software integration and industrial-grade logistics, to enhance efficiency and competitiveness. What are these new technologies? How are they used? And what do they mean for the future of construction supply chains?
Construction Industry Trends in Focus
In their recent industry report entitled The Next Normal In Construction, strategy and management firm McKinsey identified nine shifts they predict will radically change the way construction projects are delivered. Of these nine expected trends, one of the most notable is a change in how value chains and supply chains are approached for major construction projects. According to McKinsey, construction companies are increasingly taking more control over essential activities within their value chains, such as design, engineering, specialized component manufacturing, supply chain management, and onsite assembly.
Let’s look specifically at the supply chain management aspect of this industry trend. In some ways, a rethinking of supply chains supports many other construction industry trends, such as modular construction and automation. Similar to other manufacturing sectors, managing the supply of key components will be crucial for ensuring timely and efficient delivery of materials for production and a smooth supply of goods for onsite assembly.
Much of the change regarding supply chain innovation will come from the introduction of new technology in these areas, especially software. According to the McKinsey industry report, “Overall software usage is expected to increase as technology advances—for example, through more sophisticated data analysis and increased IoT connectivity. According to IDC, IT-related software and infrastructure will grow 5.3 percent and 1.7 percent, respectively … Some estimates indicate it could even double as the construction industry starts to catch up with the manufacturing industry in terms of IT spending as a share of revenue, which is currently at two to three percentage points”.
As we enter a new era where software is a key pillar of construction, companies are increasingly relying on analytics and online marketplaces to hit deadlines and stay on budget. From advanced data analysis and IoT-enabled devices to integrated project management software, digital solutions are now critical for handling complex logistics. So, as digital technology is set to transform supply chain interaction models, where will these new types of software appear in supply chain management? Here are three notable ways:
- BIM (building information modeling) will promote earlier decision-making in the construction process
- Material distribution will shift towards online platforms with enhanced logistics management
- Comprehensive end-to-end software platforms will enable companies to improve control and integration of their supply chains
These emerging platforms offer centralized sources for materials and help connect builders and suppliers more efficiently, offering timely delivery and heightened inventory management. Consequently, design, planning, and logistics benefit from reduced delays and improved efficiency. As construction companies move to control more of their value chain, they are turning to innovative digital Investments in technology and digital channels are now essential for construction companies looking to keep pace with market shifts.
Logistical Opportunities
Adopting a digital-first supply chain model presents both challenges and opportunities for those in charge of procuring, storing, and transporting materials. On the one hand, the increased integration of digital tools means that logistics must be more precise and responsive, which is a difficult request for any project. On the other hand, construction projects that adopt advanced analytics for inventory management, demand forecasting, and on-site logistics planning are better positioned to thrive in this new industry environment, able to take advantage of all the benefits that the new technology offers.
Instead of attempting to manage new logistics software in-house, partnering with a sharp, prepared logistics service provider (LSP) can boost a project’s supply chain abilities by using their own digital technologies. Here’s how:
Comprehensive Inventory and Procurement Tracking
Your LSP can track materials from procurement through warehousing to delivery on-site. Some LSPs can even provide visibility from the point of order, such as when an item is ordered from a manufacturer, and continue tracking all the way through to delivery at the job site or warehouse.
Automated Scheduling and Early Notification System
Automation of scheduling and early warning for delays or issues is critical. A software-savvy LSP can notify managers about scheduling conflicts or potential delays in real-time, enabling proactive adjustments rather than manual updates and communication.
Real-Time, Centralized Reporting and Data Management
Using their own platform, a great LSP can centralize all data, providing a one-stop shop for real-time reporting on all logistics activity. This enables quick access to updates across procurement, warehousing, transportation, and delivery status, facilitating coordinated decision-making.
Historically slower than other sectors in adopting advanced digital tools, the construction industry is now integrating valuable digital channels, integrated supply chain logistics, and end-to-end software platforms. As part of this industry shift, LSPs are playing their part by providing advanced digital tools to help capture project efficiencies. By embracing these digital innovations and strategic logistics partnerships, the construction industry is poised to achieve greater efficiency, control, and adaptability, laying the groundwork for a more connected and resilient future.