Construction supply chain management: Advice from the experts

Global events in recent years have significantly impacted the construction supply chain. In April 2020, just a few weeks after COVID-19 was announced as a global pandemic, 975,000 construction workers (about 13% of the workforce at the time) lost their jobs. Such a significant drop in the workforce had an appreciable impact on the entire industry.

With fewer workers, projects and deliveries slowed down substantially. Before the market could recover, Russia invaded Ukraine in February 2022, causing additional supply chain disruptions. Ukraine’s semi-manufactured goods exports significantly slowed, and sanctions against Russia trade of fuel and energy products, metals, machinery and equipment, and chemical products. Even construction companies not directly engaged with Ukrainian and Russian suppliers faced supply chain issues due to subsequent shortages of fuel and raw materials, along with the resulting price fluctuations.

An astounding 20% of global container shipping travels through the Red Sea. However, recent attacks on cargo ships and tankers have forced shippers to reroute around Africa, adding thousands of miles and several days to each journey. As a result, certain routes have become substantially more expensive — Shanghai–Genoa have seen an approximately 350% increase.

In the coming year, we’ll continue to see the impacts of global supply chain disruptions, volatility in material pricing due to surpluses and shortages, and an emphasis on leveraging technology to streamline inventory management. However, we’ve also seen several positive changes and opportunities for growth on the horizon, such as significant technological improvements geared toward better management of supply chain issues. 

To better prepare construction companies for the increasing turbulence of supply chain management, we turned to our leading expert, Patrick Shea, SFS Supply Chain Manager, for insider guidance and tips to weather future storms.

Leverage the latest technologies

Significant advancements in construction technology enable improved efficiency and cost-savings on commercial construction projects. Automated inventory management systems minimize the manual effort required on your team, while helping you to avoid rush shipment fees by ordering on-time.

Implement an inventory management system

Material requirements planning (MRP)

MRP leverages technology to plan out materials needed and optimal timelines. This tool identifies raw materials and manufactured goods required for each product ensuring you’ll have the required products when needed.

Use SFS’s inventory management solution

SFS offers a line of unique inventory management tools, including:

• M2M by SFS — Our mobile application for monitoring inventory, tracking delivery timelines, processing orders, making express orders, and more.
• labelLOG® — A lean scanner solution operated via the M2M by SFS mobile application. The labeling system is affordable, simplifies ordering, and makes inventory management accessible across third parties.
• The tag — Our sensors detect when inventory is low and automatically place an order to replenish stock. Order information can be accessed in real-time via the M2M app, making it easy to view item statistics, order status, delivery timelines, and more.

By using all of these systems in tandem, it’s easier than ever to manage your inventory, monitor stock, and replenish items as needed. Reduce the manual warehouse management responsibilities of your team by implementing SFS’s Digital LOGistics tools.

Implement proactive procurement planning

Since many unforeseen events—like political disruptions, labor shifts, and extreme weather—can impact material accessibility, proactive procurement planning is essential in 2024. Instead of ordering materials as needed, proactive procurement planning aims to minimize supply chain disruptions by acquiring required materials in advance of when they’ll be used. Since many suppliers have a long lead time, proactive procurement planning helps keep commercial construction projects on track.

Effective proactive procurement goes beyond ordering excess construction materials in advance. You can monitor trends to anticipate what may be popular in the future and acquire the materials you predict will be popular in the coming months.

Proactive procurement planning can also help optimize costs. By placing larger orders in advance, you can often get competitive pricing and avoid rush fees for last-minute orders.

Monitor trends within the construction industry

Analyze seasonal trends and weather forecasts

By monitoring trends, you can ensure you’re equipped with materials for upcoming commercial construction projects ahead of increased market demand that may strain supply chains. For instance, if your organization typically sees an uptick in commercial roofing projects in the fall, plan to have enough roof membranes on hand. Similarly, if you operate in an area prone to hurricanes, consider ordering extra weather-proofing materials ahead of the summer months.

– Keep an eye on market pricing forecasts

Our Supply Chain Manager, Patrick Shea highlighted recent market volatility and its potential impact on inventory surplus. “With the volatility of demand for products over the last couple years, inventory surplus is a major issue in 2024 and requires intensive management within the Supply Chain and the Sales organizations. 

“The inventory surplus has the potential to negatively impact Working Capital and may affect profitability due to the timing of when the inventory was purchased and manufactured versus when the inventory is actually sold. This issue may also affect the ability to compete in the market due to the inventory being at a higher price than what the same inventory may cost today.”

Watch out for impacts on the global supply chain

In recent years, we’ve seen firsthand how world events can significantly impact the supply chain worldwide. Keep a close eye on the political climate and global events that could trigger material shortages, freight delays, and shipping disruptions.

“With the geopolitical atmosphere, there could be disruptions once again in the global supply chain,” shared Patrick Shea. In 2024, we’re keeping an eye on recent events like:

• Unrest in Ukraine — In addition to slowing or halting export routes that passed through Ukraine and Russia, the war has been credited with increasing freight costs, gas prices, and congestion in alternative routes.
• Red Sea shipping crisis — Many attacks on cargo have caused shipments to reroute, leading to costly delays.
• Instability in China, Taiwan, and North Korea — Due to ongoing repercussions of COVID-19, territorial disputes in the East China Sea, and conflict between the US and China, trade relations within this region could be seen as vicarious. Global access to Taiwan’s microchips and semiconductors is particularly vulnerable, as this small island is responsible for more than half of the world’s total production.

Sales and operation planning

Sales and Operation planning is an important topic that is overlooked in many organizations. Patrick Shea emphasizes, “Sales and Operation planning is an integrated process that aligns demand, supply, and financial planning and is managed as part of a company's master planning. This process starts with understanding the customers' expectations regarding their demand requirements and order fulfillment.” 

Sales and Operational Planning can have a major impact on an organization's financial health. Demand requirements and order fulfillment dictate many other aspects of project planning, including…

• Sales and manufacturing planning
• Capacity planning (labor and equipment)
• Purchasing requirements
• Inventory planning
• Warehouse and distribution planning
• Logistical planning (Transportation Management for Truck Load, Less than Truck Load (LTL), and Ocean Freight)

Optimize Brand Transparency

Demand transparency

Patrick Shea shares that a common challenge that can easily be solved is “a lack of alignment with respect to customers’ expectations and a failure to obtain all information to ensure the continuity of supply.” There is a significant need to improve visibility in the total construction supply chain so that proactive solutions can be achieved prior to issues occurring.

As of 2022, only 6% of organizations have full visibility into their supply chain. In 2024, make it a priority to improve communication and coordination with suppliers. Enhancing communication will ensure you’re in the loop about upcoming delays, potential backorders, or other problems. SFS aims to be a reliable companion, not just another supplier. Our team is ready to support your project's needs and can help you make strategic adjustments based on item availability and procurement times.

Shorten the supply chain wherever possible

Fewer distributors ensure faster fulfillment by minimizing stops from the manufacturer to you. With less stops along the way, you also reduce the risk of delays and disruptions as materials make their way to you.

Of course, the fewer parties involved in your construction company’s supply chain, the less you’ll spend on material acquisition, significantly growing your profit margins.  

Perhaps most valuable is by shortening the supply chain, you gain better control over:

• Safety measures
• Better labor practices
• Efficient production
• Sustainability standards

Reduce variety

Optimize orders by lessening unnecessary variety among the materials you use. Many suppliers provide discounts in exchange for larger orders and long-term contracts.

Prioritize domestic suppliers

As we’ve seen with COVID-19 and the Russian invasion of Ukraine, international suppliers are at increased risk of disruption. By shoring up your suppliers, you can reduce the risk of disruption and speed up delivery times. For example, the supply chains for the majority of fasteners and tools offered by the US division of SFS are concentrated within the United States, therefore reducing the potential impact of international affairs on our own ability to deliver.

Increase sustainability within your supply chain

Implementing sustainable practices will allow you to minimize waste and optimize resources, all the while streamlining your construction project’s supply chain. 

Improve on-site material management 

Ensure processes are in place to optimize material use. Implement proper handling and storage procedures to reduce the risk of material damage. When storing materials, ensure they’re in a secure location. Always document what materials are stored where and for which project so they can be located easily when it’s time to use them.

Coordinate project schedules to align deliveries with construction timelines. Just-in-time planning ensures materials aren’t left on a project site longer than necessary, where they risk damage or theft.

Implement waste-reduction strategies 

Design with material optimization in mind, aiming to reduce the total amount needed. Plan to use similar materials for multiple applications, instead of different items for every project. This will allow you to minimize redundant materials while optimizing individual orders.

Measure accurately and monitor inventory to avoid over-ordering. With the SFS’s M2M system, you can keep a close eye on your inventory, ensuring excess material isn’t lost or forgotten about. 

Identify reusable materials and ensure they’re handled appropriately. Always consult your reusable materials before cutting into new items.

SFS: Your reliable supplier for fastening systems and beyond

In 2023, SFS not only experienced growth but also attained remarkable results in sustainability efforts. While we implemented a variety of different green iniatives, we saw particularly noteworthy progress in heightening our reliance upon energy generated from renewable sources and significantly reducing direct emissions.

We worked closely with our supply chain network to implement green programs to eliminate waste. We launched solar programs at our facilities in Durant and Reading, Pennsylvania, to minimize our carbon footprint. We have also deployed reporting tools, such as Integrity Next, with our vendor base to capture data from our vendors and transportation partners to measure our carbon footprint.

SFS brings nearly eight decades of experience successfully managing our supply chains to deliver millions of construction fasteners worldwide. Yet we don’t rest on our laurels, instead continuing to leverage product engineering breakthroughs and exciting manufacturing technologies like 3D printing to better satisfy customers’ needs, including their project timelines.