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How Important is Supply Chain Management in Constructio

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The construction industry is known to be highly fragmented, comprising of various stakeholders, including architects, suppliers,
contractors, and indirect suppliers. Supply chain management (SCM) in the industry can play a crucial role in improving coordinatio
between the stakeholders while ensuring the quality and pro tability of a construction project.

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Supply Chain Management in Construction

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The concept of SCM emerged from the manufacturing sector and was popularised by automotive manufacturers who used tools such
as just-in-time delivery and logistics management for their production processes. The application of SCM in construction has been
limited and focused more on a particular aspect of the supply chain rather than the industry as a whole.

The supply chain is a nexus of organizations involved, from the point where the supplier procures the raw material until the point th
client receives the product, on the di erent activities and processes that produce value in the form of products and services for the
client.

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Products and services o ered by organizations in the construction industry account for approximately 80% of the project cost. These
resources are often made to order or unique to each project with limited scope for repetition. SCM can help in the e cient managem
of how and when these products and services are procured while improving the overall quality, functionality, and pro tability of a
project.

Bene ts of SCM in Construction

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SCM can provide a competitive advantage for organizations by enabling them to manage the various factors and variables within the
project more e ectively and e ciently than their competitors. It can ensure e cient management of materials and information to
improve the performance of their suppliers.

Organizations can reduce uncertainty related to materials, equipment, and logistics within the supply chain by creating long-term
alliances, which further leads to reduction in costs. SCM also provides equal opportunities to all vendors and enables the formation o
repeat alliances with reliable suppliers.

In addition, SCM can ensure that the project timelines are created in an e ective way, and deadlines are met, thus improving client
satisfaction and the organization’s reputation in the industry. Incorporating digital technologies can further improve the
implementation of SCM in the sector.

Digital Supply Chain in Construction

The highly fragmented nature of the construction industry makes it di cult for managing the construction process, especially when
project involves multiple suppliers and contractors. A digital supply chain can help in synchronizing the supply chain network acros
the numerous parties involved in the project.

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Digital technologies can provide data related to materials, equipment, and construction milestones while coordinating the schedules
the various parties. It can also assist in collating inventory details across all parties and enable real-time decision-making based on th
data.
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Further, the use of technologies such as the Internet of Things (IoT) and arti cial intelligence (AI) can provide insights into the
performance of equipment and assets. Such technologies can also aid in quality improvement, resource consumption, and cost
reduction.

Challenges for SCM in Construction

The lack of a proven or standardized SCM model for the construction industry makes it challenging to be implemented e ectively. On
of the most common challenges for SCM in construction is the lack of integration and collaboration between all the parties involved.

Design changes, inaccurate calculations, and lack of trust among the stakeholders can be a hurdle in the e ective implementation of
SCM. Poor quality of materials and equipment, inadequate training of subcontractors and workers are some of the other challenges.
Further, there are no tools to e ciently measure the performance of all the parties involved in the project.

Steps to Overcome Challenges

Successful implementation of SCM in construction can only be achieved when all the parties involved are receptive to change across
aspects of the supply chain. Such change can be brought about through a cultural shift and an understanding among all parties on ho
SCM can bene t and generate pro ts.

Improvement of communication and trust between the stakeholders is essential to manage the risks and unexpected events through
the project development. Involving all parties in the supply chain during the early stages of the project can help understand the
timelines, risks, and requirements.

E ective management of subcontractors should also be implemented by considering the subcontractor as part of the supply chain an
inviting inputs from them to add value to the project. Finally, speci c parameters must be developed to use as a criteria to form
alliances with supply chain partners, while also ensuring ways to monitor the performance of the alliance partners.

FAQs
What is supply chain management in construction?
The supply chain is a nexus of organizations involved, from the point where the supplier procures the raw material until the point th
client receives the product, on the di erent activities and processes that produce value in the form of products and services for the
client.

What are the bene ts of supply chain in construction?

1. SCM can provide a competitive advantage for organizations by enabling them to manage the various factors and variables within th
project more e ectively and e ciently than their competitors.
2. With SCM, organizations can reduce uncertainty related to materials, equipment, and logistics within the supply chain by creating
long-term alliances, which further leads to reduction in costs.
3. SCM can ensure that the project timelines are created in an e ective way, and deadlines are met, thus improving client satisfaction
and the organization’s reputation in the industry.

What is the major challenge for implementing SCM in the construction industry?
The lack of a proven or standardized SCM model for the construction industry makes it challenging to be implemented e ectively. On
of the most common challenges for SCM in construction is the lack of integration and collaboration between all the parties involved.

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Santoshi M
EDITOR

Santoshi is a construction enthusiast who likes to write about the latest technological trends and innovations in civil engineering. She is an author and editor a
theconstructor.org.

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