Supply chains in construction
The supply chain is the interconnected hierarchy of supply contracts necessary to procure a built asset. Managing the supply chain involves understanding the breakdown and traceability of products and services, organisations, logistics, people, activities, information and resources that transform raw materials into a finished product that is fit for its purpose.
Unlike the automotive industry, the construction industry has the particular difficulty that every building is different, a unique prototype, developed by a team of consultants, contractors and other suppliers that may never have worked together before and may never work together again.
To add to the complexity, different procurement systems place elements of supply chain management with varying disciplines and organisations.
On a 'traditional' building project, design consultants are first tier suppliers, working for the client, and the contractor has a supply chain of sub-contractors and specialist suppliers. On PFI or design and build projects, however, there may be just one first tier supplier (sometimes the contractor) and design consultants will work for them as part of their supply chain.
On large or complex projects, responsibility and performance may cascade down the supply chain to a plethora of suppliers sometimes unknown to management at the top of the chain. For more information see: Suppliers.
One of the problems in the construction industry is that the first and second tier of the supply chain typically sign up to fairly onerous agreements, but as the chain develops, so the contractual liabilities decrease until suppliers at the end of the chain are often not locked in at all.
The key to supply chain management is providing a strategy that aligns with the project programme. This starts at the design stage, scoping the work into packages. Early evaluation based on feedback from the supply chain can produce enormous cost benefits and value. Capacity and production capability in a market controlled by supply and demand are particularly significant if programme bottlenecks are to be avoided.
In recent years larger companies offering continuity in construction have taken an increasing interest in establishing relationships beyond direct, first tier suppliers. Framework contracts and partnering agreements have pioneered this approach, encouraging the involvement of selected suppliers at relatively early stages of projects while offering continuity of work. This has led to greater collaboration between lead designers and product designers to the advantage of all parties.
'Integrated supply team' describes the integration of the complete supply chain involved in the delivery of a project. This may include the main contractor, designers, sub-contractors, suppliers, facilities managers, and so on. The integrated supply team is particularly relevant on public projects that may follow private finance initiative (PFI), prime contracting or design and build procurement routes. Under these routes, the entire supply team may be appointed after the project brief has been prepared, often under just one contract rather than separate contracts with each individual company.
Supply chain integration (SCI): 'involves everyone in the supply chain working cooperatively and collaboratively, so that the collective effort effectively delivers the client’s requirements and avoids unnecessary work. SCI is about adding value to design and construction processes, improving time, cost, quality, health and safety and other outcomes.' Ref BIM Overlay to the RIBA Outline Plan of Work, published by the RIBA in 2012.
NB In June 2019, the Construction Leadership Council (CLC) published Future Skills Report, criticising extended supply chains and calling for more direct employment of labour. Mark Reynolds, chair of the CLC skills workstream said: “This important report clearly sets out the challenge the industry and our clients face and the actions that must be taken now to avoid significant skills shortages in the future. When we have seen projects with higher levels of direct employment the results are often better, the workforce more engaged and ultimately the client and end users are happier with the final product.”
[edit] Related articles on Designing Buildings
- 2021 Building Engineering Business Survey.
- Broken chain.
- BSI construction product identification system.
- CLC urges inclusion of fluctuations provisions in contracts.
- Collaborative practices.
- Collateral warranties.
- Contractor.
- Contractor vs supplier.
- Cyber resilience.
- Down payment chain.
- Fair payment practices.
- Fragmentation of the UK construction industry.
- Framework agreement.
- Green supply chain management.
- Integrated supply team.
- Named supplier.
- Onerous contract.
- Partnering.
- Reflections on 2021.
- Subcontractor vs supplier.
- Supply.
- Supply chain integration.
- Supplier.
- Supplier selection.
- Supply chain management.
- Vertical integration.
- What is causing the rise in steel prices?
Featured articles and news
CLC and BSR process map for HRB approvals
One of the initial outputs of their weekly BSR meetings.
Building Safety Levy technical consultation response
Details of the planned levy now due in 2026.
Great British Energy install solar on school and NHS sites
200 schools and 200 NHS sites to get solar systems, as first project of the newly formed government initiative.
600 million for 60,000 more skilled construction workers
Announced by Treasury ahead of the Spring Statement.
The restoration of the novelist’s birthplace in Eastwood.
Life Critical Fire Safety External Wall System LCFS EWS
Breaking down what is meant by this now often used term.
PAC report on the Remediation of Dangerous Cladding
Recommendations on workforce, transparency, support, insurance, funding, fraud and mismanagement.
New towns, expanded settlements and housing delivery
Modular inquiry asks if new towns and expanded settlements are an effective means of delivering housing.
Building Engineering Business Survey Q1 2025
Survey shows growth remains flat as skill shortages and volatile pricing persist.
Construction contract awards remain buoyant
Infrastructure up but residential struggles.
Home builders call for suspension of Building Safety Levy
HBF with over 100 home builders write to the Chancellor.
CIOB Apprentice of the Year 2024/2025
CIOB names James Monk a quantity surveyor from Cambridge as the winner.
Warm Homes Plan and existing energy bill support policies
Breaking down what existing policies are and what they do.
Treasury responds to sector submission on Warm Homes
Trade associations call on Government to make good on manifesto pledge for the upgrading of 5 million homes.
A tour through Robotic Installation Systems for Elevators, Innovation Labs, MetaCore and PORT tech.
A dynamic brand built for impact stitched into BSRIA’s building fabric.
BS 9991:2024 and the recently published CLC advisory note
Fire safety in the design, management and use of residential buildings. Code of practice.