Supply chain crisis: how the construction sector can adapt
By Katerina Mansour - 31 May 2022
Over the past two years, the world has been experiencing significant supply shortages and delays. Indeed, after months of dealing with the impact of the pandemic, supply chains have also been rattled by the ongoing conflict between Russia and Ukraine. This supply chain crisis has had a severe impact on many industries. Due to the pandemic, businesses often shut down or faced a shortage of workers. This, in turn, affected the production and trade of many key products and resources. A survey showed 94% of Fortune 1000 companies experienced supply chain disruptions from the pandemic. Months later, the conflict in Ukraine exacerbated the increase in commodity prices that had already been observed during the pandemic. It also increased transportation costs, namely due to factors like rising fuel prices and airspace bans.
Indeed, sanctions and bans against Russia have not been without consequence on supply chains, as even beyond fuel, the country exports many commodities.
Ukraine is also an exporter of many commodities, which have faced significant stoppages or delays since the beginning of the conflict.
Surveys have shown that in response to the supply chain crisis, many businesses are adapting their strategy, namely when it comes to digital transformation. Indeed, an EY survey from late 2020 showed 64% of supply chain executives believed digital transformation would accelerate due to the pandemic. 59% said they had adopted new supply chain risk management practices over the past 12 months. A McKinsey survey from the same year showed 93% of executives planned to increase their supply chain resilience.
Contech startups are rising to the occasion
Because of the significant impact of the pandemic on the construction sector, contech startups experienced a boost in funding and revenue. Indeed, according to Crunchbase, venture-backed construction tech startups raised over $3.8 billion in funding in 2021.
In this article, we’ll look at some of the solutions startups offer to improve construction supply chains. Although no solution can fully solve the ramifications of a supply chain crisis, they can certainly help mitigate the impact of said crisis.
Supply chain management solutions
Supply chain management is the handling of the entire production process of a good or service. This typically starts with the identification and sourcing of raw materials or components and ends with the delivery of said good or service. The entire process involves working with a variety of suppliers and stakeholders that help the product progress through different phases of the supply chain.
To help companies optimise their supply chains, reduce costs and mitigate risks, many supply chain management platforms have emerged. Some are specialised in one specific aspect of the supply chain (e.g. procurement or delivery), while others are broader in their offering. These solutions typically include features such as:
- Raw material sourcing
- Supplier management and monitoring
- Inventory forecasting
- Traceability of products
- Shortage scenario planning
- Supply and demand planning
- Real-time risk analysis
- Centralised communication
A variety of technological advances help emerging startups provide key data and insights to construction stakeholders through their platforms. Some of these include:
- AI for predictive analytics
- IoT for product traceability
- Blockchain for immutable record-keeping
- Satellite imagery to detect disruptions
- Machine learning for material swapping
- 3D printing for local production of parts
In the sections below, we’ve highlighted a few of the use cases tackled by supply chain management solutions. We’ve chosen to focus on some of the areas most closely applicable to supply chain management in times of crisis. Our list isn’t exhaustive by any means, but it provides a good starting point for internal reflections on innovation in construction supply chains.
Digital procurement platforms
The goal of procurement platforms is to provide clients with a comprehensive understanding of their supplier risk, and an easy solution to source new suppliers as needed. This is key in times of crisis when your typical suppliers may no longer be an option. To avoid important delays, new suppliers must be acquired in a timely manner. Some startups to illustrate this category include:
Scoutbee’s digital procurement platform provides AI-powered supplier discovery and intelligence. It enables users to search for suppliers globally and gain a 360° view of each one to enable better decision making. The platform speeds up sourcing processes and enriches risk mitigation.
Penny’s E-Source solution allows users to easily gather, organise and compare quotes to find the best offer. It also includes savings reports to help understand where, why and how savings were made on a project.
Real-time risk intelligence platforms
These platforms aim to detect events that could impact a business in real-time, to enable faster decision-making. By quickly being alerted of a problem (natural hazard or catastrophe, blocked road due to an accident, maritime piracy, etc.), businesses can act fast to reduce the impact on their operations. This is especially useful for logistics and transportation, two key components of the construction sector. The Covid-19 pandemic and geopolitical events like conflicts or political unrest can have a significant impact on the transportation of products and materials. Here are a few examples of startups tackling this issue:
Hozint provides real-time threat detection to immediately alert clients when an ongoing or upcoming threat to business continuity and supply chains presents itself. By leveraging AI, the startup provides alerts of events with varying impacts, occurring within a set geographic perimeter. Beyond identifying threats that have already happened, it also identifies events with possible disruptions in days or weeks to come.
Contingent develops a supplier insights platform that supports sourcing processes, supplier monitoring and operational resilience. The platform continuously collects data about a company’s current suppliers, sending out alerts whenever a noteworthy change occurs. This could include a change in ownership, financial performance, new sanctions, etc. Recommendations on the potential impact of the recent news or changes are also provided.
Platforms to secure workers
It’s no secret that the pandemic worsened the construction sector’s already significant issue with labour shortages. As a response to this growing pain point, startups have developed platforms to help the construction sector find the right workers for their projects.
Faber Connect has developed a marketplace of construction workers. Users need simply to create their project via the platform and indicate what type of workers they’re looking for. They’ll then receive applications from relevant workers interested in the project. Once a worker is selected, the startup’s platform can be used for management purposes (hours worked, invoices, etc).
Werk has developed a hiring and relocation platform focused on construction specialists. The startup makes it easier for companies to hire specialists from abroad for their construction projects by handling the relocation process for them.
Acquisition of alternative materials
When certain raw materials become impossible or too costly to acquire, seeking out alternatives is key. By alternative, we typically mean perhaps uncommon materials that can replace traditional ones. For example, cement can be replaced with a variety of materials that have similar properties and are more sustainable. Upcycling materials is also an option worth considering. This typically consists in reusing materials that would have otherwise gone to waste, such as those extracted from the demolition of buildings. While the development of alternative materials is typically linked to sustainability efforts, these alternatives could prove useful during a supply chain crisis. Let’s look at some startups in this space:
Madaster develops a digital platform that acts as a library of building materials. The platform lists key information about the materials buildings contain (quality, origin, location in building, etc). Based on this data, these materials can more easily be reused for other construction projects rather than become waste when the time comes.
Arqlite develops a sustainable building material entirely made from recycled plastics, which it calls Smart Gravel. The gravel’s use cases include lightweight construction concrete, lightweight precast elements and long-lasting drainage layers.
Carbicrete, one of our rated startups, develops cement-free concrete. To produce cement-based concrete, cement is first mixed with aggregates and water. With CarbiCrete, steel slag replaces cement. Beyond sustainability, these types of solutions also present an advantage in situations like sand or cement shortages.
A long road ahead
Even before the conflict between Russia and Ukraine, it was understood that supply chain disruptions as a result of the pandemic would continue for the foreseeable future. However, with the addition of a major conflict, it’s unclear how long the supply chain crisis will last.
Supply chain management solutions are one of the construction sector’s key resources to help alleviate the impact of the current supply chain crisis. However, even outside of extreme contexts like those we’re experiencing today, startups in this space present useful solutions to the sector’s most notorious pain points.