Beyond Brexit - Engineering & construction: Is my supply chain prepared?
01 October 2018
By Robert Walker
As I mentioned in my last blog, Where are my people? I've been having more and more conversations with CEOs and leaders of Engineering & Construction businesses about the impact of Brexit. Many of them have expressed major concerns about the industry’s readiness for leaving the EU.
Last time, I shared some reflections on the impact on people and recruitment. This time around, I want to look at two other critical areas - materials and supply chain.
Where are my materials?
Talent isn’t the only supply issue facing the industry after Brexit. In June, my colleague and PwC’s Head of Brexit, Andrew Gray, reiterated the PwC view that the UK and EU will probably reach some kind of Free Trade Agreement. The challenge is that we don’t know what that will look like. His blog revealed that, unsurprisingly, this means many business still haven’t made plans for life after Brexit.
But in Engineering & Construction we can’t afford to wait for the border and trade arrangements to become clear. We must start planning. Now. We simply don’t have the supplies of raw materials we need in the UK. We’re already reliant on EU imports for things like bricks - we’re not making enough at home. It’s the same story with concrete, stone, tarmac...just look at the number of Lafarge trucks driving up and down the UK’s motorways.
Other industries are already taking action. Pharmaceutical businesses are stockpiling medicines. Automotive manufacturers are building up supplies of car parts.
Data: The key to planning for future demand
If you’re working on major multi-year infrastructure projects, the chances are that you’ll want to order in bulk, in advance, to lock in the best prices for materials. That’s easy when the supplies are free-flowing, but what happens if EU supplies take longer to come - if they come at all?
Do you start stockpiling now? What will that cost for storage? And what about ‘just in time’ materials that you can’t stockpile - like ‘bespoke facade’ units, which you can’t buy that far in advance, at least until you know the building spec.
This leads us to one of our ‘no regret decisions’: Know your supply chain.
We can’t rely on sourcing from within the UK. We either don’t produce what we need, or, for the things we do, demand will outpace supply, pushing up prices and waiting times.
At PwC, we think this calls for rigourous planning. We’re already helping clients use data and analytics to make sure their supply chain management is robust and ready to cope. Accurate, well-organised data can help you plan for what you’re going to need, when you’re going to need it, and how you’re going to get it. Without the forward-planning insight that data analytics can provide, you could be left in limbo as the supplies dry up.
Who am I relying on ?
When it comes to your supply chain, it’s not just materials you need to consider - but also who’s in the chain. For many construction projects, the chain goes far beyond the main contractor or tier one supplier. Every level relies on somebody - right down to the micro-businesses at the end.
This brings with it another kind of risk. If the big players at the top are finding it hard to get hold of materials or labour, you can be sure that the people at the levels below will be finding it even harder. Any break in the supply chain - at any level - could cause major delays or have a big impact on your costs. In our low-margin sector, we just can’t afford this kind of risk.
So, expanding on the idea of ‘Know your supply chain’, it will be more important than ever to know who you’re relying on, and to understand what plans they’re making to cope.
This brings us to two more ‘no regrets’ decisions: Check out your contracts and Engage with key third parties.
Again, data can be key here and as mentioned above we’re already working with clients in this area. For example, by using existing project data including contract data and Building Information Modelling (BIM) data to gain confidence and transparency over the delivery of projects. This could then provide the building blocks for digitising entire construction value chains in the future.
But beyond that, data work harder for companies now. Using advanced analytical techniques can help construction businesses to better understand projects and provide visibility into the performance of a company’s supply chain. Aside from the primary goal of finding the opportunities to be more efficient, this can help with things like forward planning - spotting potential challenges with suppliers and breaks in the chain.
Expanding on this point, one thing we believe the industry should do is coordinate a ‘plan for readiness’. Imagine what could happen if nobody is talking to each other - all the small suppliers, further down the chain, will be absolutely overwhelmed when you all start demanding labour or supplies from them. The industry should be thinking now about how to manage the requests and requirements, ahead of time, so that the demand doesn’t cause a crisis in supply.
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