We’ve discussed the impact of material price and supply fluctuations in the construction industry in detail before and our clients are still experiencing this disruption every day.
However, as we head into the second half of 2022, amidst union strikes in the rail sector, the rising cost of living, and inflationary pressures all within a post-pandemic and post-Brexit landscape it’s important to consider the workforce volatility within the construction industry.
We believe it will be the biggest challenge for the sector for the next 12 months, so companies that plan effectively will emerge ahead of the competition.
The Wider Problem
In a recent Deloitte survey, “52% of engineering and construction executives indicate their organization is facing a severe labour and talent shortage on the job site.
The impact of not filling job openings can negatively affect construction companies in more ways than one, including project delays and cancellations, projects being scaled back, inability to respond to market needs, losing project bids, and failing to innovate, among others.”
Across the pond, according to the US Bureau of Labor Statistics, “Industries at a Glance” report, by August 2021, the industry had yet to recover about 20% of jobs lost to the pandemic, while many other labour-competing industries, such as transportation and warehousing, had recovered all jobs lost.
It’s hard to pin this down to a specific reason, but the employment market did see many early retirements and job changes after the pandemic as the crisis made many people pause and reflect on the world of work. It reframed the industries people chose to work in, as they looked at resilience and continuity of income in a completely different light.
With an eye back on the UK, we also have the additional complications of Brexit, where many skilled workers left the country for EU members or went back to their native countries due to instability and the inability to plan for the longer term.
With inflation levels hitting highs not seen for many years (and we won’t attempt to discuss the reasons here,) there is significant additional pressure on the bottom line. This isn’t just a simple supply issue – but an operational cost issue.
Unions, led by Unite, the construction union, submitted a pay rise claim to the Construction Industry Joint Council (CIJC) seeking a 10 per cent increase in wages to meet rises in the cost of living for around 500,000 construction workers. The union warns that unless the industry begins offering decent wages it will result in the continuing failure to attract new starters.
Finding A Solution for Your Business
With such a complicated issue and so many moving parts in play, we know there are no quick fixes or simple hacks to address the problem of labour supply and cost in the construction industry – but we also believe that investing in supply chain technology is a great start.
For a relatively small cost in the grand scheme of your construction business, it’s an investment that will pay off and continue to yield returns as the platform becomes more embedded into the operation.
Everything Begins With Data
Supply chain solutions like SourceDogg give you data and information processing superpowers. The more you know about the current state of the supply chain, the more insight-led decisions you can make.
With all of your data in one place, you can assess:
- The number of suppliers you have in specific categories
- The capacities of the current supply chain
- The accreditations and certifications they have
- The ESG, DIE, SVP and other environmental credentials the supplier has
- Competency and performance issues with supplier relationship management data
This data powers the ability to be proactive based on the upcoming order book, potential orders and bids you’ve got pending and the longer-term resilience and growth plans you’ve got as a business.
It’ll help you:
- Identify shortfalls and kickstart the recruitment process for new suppliers
- Comprehend competency and look for development opportunities
- Understand cost and spend balances across the portfolio – helping you analyse where you’re leveraged too heavily and too reliant on certain suppliers.
Technology helps you develop a detailed gap analysis, and have a granular view of the situation which then gives you a competitive advantage.
Taking the Next Step
Once you have all of your data in one place and planned the approach to strengthen your labour and skill base, supply chain technology platforms help you execute based on these plans.
If you’re recruiting for new suppliers, platforms like SourceDogg:
Help minimise duplication, by delivering easily duplicatable processes for RFI’s, RFQ and PQQ-style information requests from suppliers.
It centralises all communications in one cloud-based platform rather than across excel sheets and in the inboxes of your staff. This will mean your team can do more, faster than ever before and accelerate the supply chain strengthening process.
Once you’ve reached out to the supply base, technology streamlines the onboarding process too, so you can start work more quickly and minimise risk simultaneously, ensuring all the necessary paperwork is in place.
The suppliers will love this too – you’ll be seen as the forward-thinking, easy-to-work-with client who wants to give them work and manage it in a simple, professional way.
Making it Work!
We know that those first few steps aren’t quick and simple fixes to the labour supply challenge. However, you have to start somewhere and get ahead of the potential problems before they snowball.
Once the suppliers are in place you’ll have solid data upon which to build an appraisal and performance review process. This helps ameliorate some of the labour cost issues you’ll face as you can track performance across multiple metrics.
Whether it’s timeliness, snagging, the detail and accuracy of quotes and the reality of final costing – if you’re using a supplier relationship management tool everyone will have transparent clarity for professional and proactive discussions.
As things change on a project, which they seemingly always do, this can all be logged in the system, to ensure that everyone knows where they are at and is aligned in their understanding of roles and responsibilities.
Platforms like SourceDogg are also essential tools to help the learning, growth and development of your supply chain. You can help them succeed by displaying where they could earn more work if they had credentials that certain projects demand. This is where the supplier/client relationship begins to flourish for mutual success.
Are You Ready?
As we reach the second half of 2022 and with so many plates spinning in the construction industry, we appreciate that there is no perfect time to consider digital transformation.
But if not now… when?
We’ve discussed the increasing need for resilience across all aspects of construction businesses and utilising a supply chain software platform can help you develop this by deploying the power of data.
“If you can’t measure it, you can’t manage it” the saying goes… and when there is so much in flux in the external world it is becoming increasingly important to get a handle on the factors you can control. We’d love to show you how SourceDogg works in practice to help you do this.