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What are the steps to developing supply chain resilience in engineering and construction?
November 01, 2022
Future-proofing your supply chain is as important as ever
The global pandemic almost instantly transformed the market in 2020. Drastic fluctuations in demand, plant shutdowns and labor scarcity disrupted supply chains globally, pressuring engineering and construction (E&C) firms to bolster supply chain data and resilience capabilities. Indeed, many firms have come to appreciate the importance of digitizing and automating analog or manual supply chain data processes.
Two years on, a stubborn pattern of supply chain woes is becoming entrenched, including unprecedented levels of materials scarcity, global port slowdowns and continued labor shortages. A recent PwC survey found that 64% of US firms still experience moderate or severe risks surrounding securing materials from suppliers. Such challenges reveal long-obscured vulnerabilities — even in some of the most efficient and robust supply chains. We believe that building out a smarter, more transparent supply chain is one of the most important issues facing E&C firms in the medium and long term, as highlighted in our recent report on the future of the E&C industry.
Trends surrounding greening up the industry persist, including using low-carbon materials and assessing the overall carbon footprint of an asset. Most recently, in September, New York City Mayor Eric Adams signed Executive Order 23, directing the city’s various capital project agencies to reduce greenhouse gas (GHG) emissions by setting specifications for low-carbon concrete, requiring environmental product declarations for structural steel and concrete. This is because concrete can account for up to 85% of embodied carbon in building projects. Other sections of the order call for project agencies to achieve credits linked to life cycle assessments (LCA) for capital projects and to develop action plans aimed at reducing embodied carbon in capital projects. If other cities follow suit, competition for low-carbon building materials will likely further pressure supply chains.
Digital supply chain control towers: A foundation for greater agility and resistance
Despite the pent-up demand and backlogs in design and construction projects, opportunities for recovery and sustained growth are also on the horizon. While materials costs and lead times may not be rising as steeply as before, they remain unpredictable. Today’s priority for many E&C firms is to find creative ways to help manage resource constraints to work through these backlogs. Doing so means careful planning and execution to help avoid further shocking supply chains with volatile materials-ordering patterns that might have unintended consequences that exert counterproductive forces and further exacerbate matters.
One of the keys is to leverage up-to-date technologies to help yield authentic end-to-end supply chain visibility which, for many E&C firms, could be an ambitious undertaking. Companies that can take advantage of this potentially transformative phase in their industry by building out a more proactive, agile and cost-efficient supply chain stand to emerge stronger than their competitors.
Reconceiving end-to-end supply chain visibility should be more than a goal in itself. It should involve embracing a new philosophy on how to develop future operational strategies — and that could mean changing a business’ culture.
So how do you achieve supply chain visibility? Start with these critical steps:
- Share observations to date on your supply chain visibility state of health, including the entire web that encompasses your partners’ supply network.
- Define the potential value you believe your company could recover and create by adopting a new way of looking at your supply chain.
- Articulate a framework for addressing the key operating model requirements to help achieve better decision-making and outcomes through end-to-end visibility.
- Benchmark insights on lessons learned and potential barriers to achieving that vision.
Digital supply-chain control towers: a foundation for greater agility and resilience
While most E&C firms grasp the importance of digitizing and automating supply-chain data and processes, few have achieved adoption maturity. In general, the industry has been slow to achieve supply chain transparency via artificial intelligence-enabled control towers, built on a growing suite of technologies including cloud technologies, advanced data analytics, telematics, global positioning systems (GPSs), application programming interfaces (APIs), machine learning and digital twins.
Connecting such technologies by a digital thread ultimately can touch nearly every part of the business — tracking everything from inventory and warehousing data from suppliers to real-time data on logistics. What is the purpose of a supply chain control tower? Control towers not only provide near real-time situational awareness, but can also yield predictive analytics about the future state of supply chains, including disruptions that could otherwise lie hidden beyond the horizon. For example, gaining insight to one vendor’s current (or even future) shortage or delay in distribution enables swift decision-making on alternative sourcing of materials or equipment.
Embrace the cloud
Speciality industry cloud solutions can introduce efficiencies and provide visibility into sourcing, production and planning processes using advanced demand sensing, artificial intelligence and machine learning to help automate decisions and flag future volatility. Such cloud applications can add transparency to suppliers, third-party partners and customers, so companies can anticipate and prepare for problems before they arise. Cloud technologies can also forge synergies. One example is using supply chain data from a cloud solution that can also be used to feed into GHG emissions monitoring.
Keep a vigilant eye on supply chain cyber proofing
While digitizing the supply chain can bring numerous benefits, it can also widen the attack surface for cybercriminals. Building cybersecurity protection throughout the supply chain has, therefore, become increasingly critical to achieving not only cybersecurity writ large, but also supply chain agility and resilience. According to a PwC survey, 63% of US industrials expect that third-party threats will increase in 2022 over 2021, with 58% expecting to see an increase in reportable incidents occurring at the supply chain software level. As a result, US industrials are taking action. For instance (according to the same PwC survey), one in two manufacturers provided information-sharing or assistance to third parties to shore up their cybersecurity postures over the prior twelve months. Meanwhile, more than a third of respondents (36%) have rewritten contracts with certain third parties to mitigate risk, and 30% exited partnerships with third-party vendors (presumably as a result of unacceptable cybersecurity risks attached to them).
Main takeaways
- Supply chain control towers should be treated as a necessity, not a choice. E&C firms are often behind the curve on digitizing and automating the supply-chain processes — principally via building a supply-chain control tower — not only to yield cost (and time) efficiencies, but also to help achieve a real-time (and even future) vision of the supply chain to act on predictive analytics.
- Adopt strategies to streamline your supply chain to help manage backlogs. Numerous tactics should be adopted to get through project backlogs, including material indexing, repurposing existing designs, ordering long-lead materials earlier and stockpiling oft-used commodities.
- Mind your cyber attack surface. As E&C firms develop their digital, real-time supply chains, they should also take precautions to secure what could be a widening cyber attack surface.
- A modernized, digitized supply chain can change how you operate — and compete. Building smart, robust, end-to-end supply chains can be critical for E&C firms to stay competitive, protect margins and enhance trust and reputation in the market.
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