As dark clouds gather over the construction industry, Collin Ziemerink, EVP Industrial Manufacturing & Services discusses some of the challenges executives face and offers practical advice on how to weather the storm.
The construction industry is on the brink of a crisis, with some major challenges coming this year. Unpredictable tariffs, the rising cost of materials, a shortage of skilled labor and major shakeups in the transportation industry are all combining to change the construction landscape. However, if executives are prepared for these new realities, it is still possible to achieve meaningful and consistent growth.
Two things will be imperative for construction executives looking to survive and thrive in a rapidly changing and volatile industry:
- Better project management
- More efficient end-to-end supply chain
Understanding, and preparing for, the impact of tariffs
Construction executives need to step up their game in view of new global tariffs and an unpredictable trade war which will make building materials more difficult to source and more expensive to buy. Understanding the politics will be increasingly important to the sourcing process as new tariffs on timber, steel and other construction materials make projects more expensive, increase the complexity of the supply chain and create a necessity to seek out alternative suppliers.
In addition to re-evaluating sources of building materials, industry leaders will also have to look at the scheduling and logistics options behind each sourcing decision as a driver shortage and increased regulation not only cause delays but also increase overhead.
Greater optionality is key to survival
Vendor selection will require constant re-evaluation in the face of fluctuating variables, unpredictable tariffs and other factors. Common, but inefficient, vendor selection methods based on insider sourcing and familiarity will need to be replaced with meaningful scorecard metrics based on real-time, unbiased data analytics. To do this effectively, companies need to have additional tools at their disposal.
Gain better insights to your end-to-end supply chain
Those in the industry will be especially anxious to move into Industry 4.0 innovations, which will mitigate the challenges and help bring about more growth. Current building practices are stalling growth and increasing cost, yet the outdated practices are still used daily. Construction businesses need to identify the newest technologies, capitalize on improved business practices like Total Value Optimization (TVO)™ and implement Industry 4.0 changes to avoid being left behind.
Just one example of disruptive Industry 4.0 technology is 3D printing, or additive manufacturing, which creates parts on-site/on-demand, minimizing need for inventory space and eliminating the incidence of unavailable parts. Instead of focusing on sales of physical building materials companies will focus on selling copyrights to designs which will be created by 3D printers on-site.
Applying a Total Value Optimization (TVO)™ approach helps overcome these major challenges as construction firms adjust their supply chain to withstand uncertainties. Gaining a better view of the entire buy-make-move-fulfill supply chain and focusing on creating value as opposed to simply controlling costs will lead to meaningful and consistent growth in any political climate. Let’s not forget that some of the industry’s greatest innovations have happened at times of major upheaval proving necessity really is the mother of invention.
Is your construction business ready to face the challenges ahead? Need help to understand how Industry 4.0 could impact your organization? Maine Pointe's industry and delivery experts can help.
If you would like to talk in more detail about on any of the issues raised in this article, contact one of our executives at firstname.lastname@example.org for a no-obligation chat.
Calculate the value potential for your business. Complete our TVO Self Assessment Tool ™ and receive an automated Value Opportunity Report. This provides an indicative quantification of the value improvement potential (EBITDA & cash) across your buy-make-move-fulfill supply chain.
Maine Pointe is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics and operations. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill supply chain to deliver the greatest value to customers and investors at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe’s engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com