Preparing construction sector supply chains for future growth

Article by Achilles

The construction sector is seeing an increase in activity all over the world. Driven by positive economic growth, low interest rates and strong demand, revenues for the sector look set to continue an upward trajectory in the coming years.

An increased level of output not only means lots of opportunities for growth and expansion across the construction sector, it also means increased pressure on supply chains.

Every construction project is unique and they will often involve teams of consultants, main contractors, developers, subcontractors and suppliers that may only ever work together once. As a result, supply chains can include a wide array of procurement systems, organisations and disciplines. On larger, more complex projects responsibility can get lost further down the supply chain as you reach a large group of smaller suppliers. Knowing everyone in your supply chain and what they are doing on a daily basis can be difficult for management.

Global growth – a mixed picture

The growth picture is not uniform around the world, and behind the macro view of increased growth and output lies a variety of regional challenges and dynamics.

Chinese growth slows at last

Firstly, China’s construction industry looks set to slow down considerably over the coming years. PWC cites the first ever decline in housing output in the country’s recent history, and its continuing shift to a consumer and service-based economy. This means both the US and Indian construction sectors could grow faster than their Chinese counterpart over the next 15 years, but all three countries will still account for 57% of global growth.

Pressure on margins in Europe

Despite a recent return to growth across Europe, supply chain pressure remains a big issue for companies in Ireland, the UK and the Netherlands as a shortage of subcontractors and materials places stress on margins. Many buyers are looking to digital solutions to help them combat labour shortages and substantially improve their productivity.
Infrastructure investment drives Nordic growth

All over the Nordic region, a growth in infrastructure investments is helping boost growth in the construction industry. In Sweden, the government has pledged to spend around €65 billion on infrastructure between 2018 and 2029, while Norway is set to spend NOK 120 billion on its railway system alone in the years up to 2023. Denmark’s government has committed €13.5 billion to infrastructure investment over the next few years.

A feature across the region is a diverse range of smaller companies all competing for business. Norway has 23,000 companies operating in the construction sector, ranging from smaller entities with under 10 employees to bigger multinational enterprises. In Sweden, there were 213,434 companies making up the countries construction sector, with the number increasing 21% from 2010 to 2016. The growth in the number of available suppliers is creating supply chain management challenges for buyers.

In particular, buyers need to effectively map their supply chains in order to make sure that all companies comply with laws, particularly those regarding social responsibility and wage requirements. In Norway, which has thousands of smaller suppliers, buyers can quickly find themselves with large, complex supply chains.

“The main challenge for buyers is making sure that every supplier they work with are compliant with Norway’s laws and regulations,” said Carsten Krøger, Senior Engagement Manager at StartBANK. “Buyers need to know that all workers and companies coming to work here are paying the right taxes, earning at least the required minimum salary, complying with our health and safety regulations and corporate responsibility laws. This places a huge importance on effective supplier pre-qualification.”

How to prepare for increased demand

The construction sector has the potential to experience real growth in the coming years, but the way supply chains operate and are managed needs to change too. Our communities, like StartBANK and BuildingConfidence help lay the foundations for scalable growth by increasing transparency and giving buyers and suppliers access to clean, validated data.

More about our communities

For Nordic operators, this could be the difference between growth and stagnation in the near future. But it is also important for Chinese operators looking for opportunities in a changing economy, or European companies looking to secure the best talent from a limited pool. By putting data at the heart of the relationship between buyers and suppliers, we help make planning, forecasting, budgeting and execution more effective.

For the construction industry, pre-qualification is becoming an important standard. This is one of the main strengths of our communities. Through our audits and qualification schemes, buyers and suppliers are able to operate in complete clarity. Not only does this help to increase transparency, it also helps sharpen competitive edges and create scalable models.

A good supply chain can adapt to any challenge. Our communities help create them in the quickest, simplest and most effective way possible.

Get great insights in your inbox every month