Technology for Supply Chain Risk Management: It’s Good Business

Supply chain risk management platforms can provide visibility into products and services, organizations, logistics, people, activities, information and resources, improving safety in the process.
By Danny Shields
September 5, 2020

The construction industry is tough—physically difficult, frequent long hours to meet deadlines, exposure to weather conditions—all of which combine to make it one of the most difficult industries for supply chain risk management (SCRM). In 2019, one in every five workplace deaths occurred in the construction industry, possibly indicating a need for closer management of the supply chain to ensure the right people and materials are on the jobsite.

Supply Chain Complexity = Risk

Construction supply chains are among the most complex and difficult to manage because each project is different. The uniqueness of each project requires identifying and vetting suppliers, contractors and vendors who may have never worked together before and may never work together again. Complicating matters is the common issue of having to use varying procurement systems to build the supply chain. All of these variables equal increased risk and complexity requiring a higher level of management.

During the next 10 years, the need for construction workers is projected to grow at 11%, considerably higher than the average of all industries, making it clear the demand for skilled workers will continue to grow in the future. Contractor and supplier management will be increasingly in the spotlight as the construction industry grows.

Complex Supply Chains = Difficult-to-Manage Visibility and Quality in Construction

Visibility into and tracking of key areas such as training, certification and insurance is an ongoing issue and can raise the risk profile of any supply chain, but it’s even more problematic in the construction industry. On a typical building project, first-tier suppliers generally are design consultants who work with their particular sub-contractors and suppliers who specialize in specific services and/or materials. The bigger, more complex the project, the longer the supply chain. As a result, some suppliers at the end of the supply chain are invisible to organizations at the top.

This lack of visibility almost inevitably creates uneven performance and responsibility requirements throughout the supply chain. As an example, first and second tier suppliers may be held to strict service level agreements with the client, but the third-tier suppliers may not have the same stringent SLAs. This expectation-lowering only increases as it goes further down the supply chain.

Technology = Improved Contractor and Supplier Safety

Many construction companies still use old methodologies such as paper and spreadsheets and file cabinets to track key aspects of their contractors and suppliers’ histories, such as certifications, insurance and safety requirements, rather than taking advantage of technologies such as contractor management platforms.

A survey of data collected by a leading supply chain risk management provider shows a 51% improvement in safety for the construction industry in TRIR (total recordable incident rate) when using a risk management technology platform. Additionally, the DART (days away/restricted/transferred) measurement showed a 50% improvement. These numbers are specific to the construction industry, though the data set includes input from 95,000 companies across several industries.

Tech Platforms Manage Complexity in Construction Supply Chains

Supply chains in the construction industry have a lot of moving parts, and it’s difficult to—if not impossible—to maintain visibility into all of it. SCRM technology platforms do the hard work to help construction companies work only with leading contractors and suppliers who function on sounds business principles and produce consistent quality.

True supply chain management includes end-to-end traceability on the products and services, organizations, logistics, people, activities, information and resources used to transform raw materials and labor into a finished product. Inadequate visibility creates a higher risk profile throughout the supply chain, and while bringing on a supply chain manager is a good step, the right management tools are equally important.

SCRM technology platforms bring together all aspects of supply chain management, from contractors to materials to worksite safety. Companies must ensure that their own employees follow proper safety procedures and processes, and that their contractors and suppliers meet certain safety compliance requirements. Technology platforms for supply chain management ensure organizations work only with vetted suppliers with the insurance, proper training and qualifications to perform the job.

Contractor management technology also cuts administrative costs as it promotes safety in the workplace. Holistic contractor safety technology helps to confirm contractors are properly insured, have the appropriate certifications and can step into the required work safely and immediately. Additionally, adherence to work safety standards are monitored during and after the completion of the project.

SCRM tech platforms simplify the verification process for worker qualifications and also provide online training to help speed up their entry onto the project. This process also ensures that only the right workers are permitted to perform critical job/project functions. In fact, contractor/supplier prequalification tools ensure that only those contractors and suppliers who are vetted and compliant make it on the worksite. The result is better quality and less rework.

Strong supply chain management should be a primary consideration for construction company executives. Simply put, it’s good business.

by Danny Shields
Danny Shields is a Certified Safety Professional (CSP) with more than 18 years of both field and management level experience across multiple industry verticals. He currently manages the global subject matter expert and solution engineering teams for Avetta, a cloud-based supply chain risk management solution technology company. Danny utilizes his experience and technical knowledge to ensure Avetta customers are provided world class service to support QHSE & ESG maturity.

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