The effect of Brexit and the COVID-19 pandemic has forced UK companies to evaluate how robust their supply chains are and to implement strategies to future proof their business as the procurement landscape undergoes a significant transformation. An increased global demand for raw materials such as steel, timber, PVC, and chemicals has led to shortages in supply and unprecedented price increases. The explosive combination of China’s economic recovery, the stockpiling of materials because of new Brexit regulations and import tariffs and the container supply shortages forcing shipping rates up, has resulted in the construction industry evaluating the tangible benefits of a local supply chain. So, what are the key advantages of buying locally?
The disruption caused by Covid to many manufacturing supply chains has taught us that a business must be agile when it comes to procurement to ensure business continuity. According to the Office for National Statistics, the total trade in goods with EU countries decreased by 23.1% and with non-EU countries decreased by 0.8% in the first quarter of 2021 compared with Quarter 1 in 2018. A fundamental benefit to a local supply chain is the flexibility it offers to scale up to meet supply and demand during peak times. Lead-times for production and delivery are notably reduced because the materials are not subject to a lengthy journey from overseas or delays at customs.
Being in control of your supply chain allows you to be reactive to market demand whilst keeping a tight hold on costs. Efficiency and communication are key, so selecting suppliers with whom you trust and have built a strong working relationship with will help you maintain quality, supply, and cash flow. This is much easier to do if suppliers are local, as sites can be inspected, and procedures observed to ensure quality control is satisfactory and meetings in person help to build long-lasting relationships. The challenges with working with international suppliers are that it is not so easy to pop in to check on operations or to talk through and resolve problems quickly. These benefits link in with the key requirements of a supply chain as outlined by the Chartered Institute of Procurement & Supply (CIPS), which are: Connectivity; the capability to exchange information with external supply chain partners in a suitable format for facilitating collaboration. Integration; the process of combining or coordinating separate functions to enable effortless interaction. Visibility; the ability to access relevant data in terms of its relevance and importance to the supply chain and Responsiveness; the ability to react quickly and effectively to customer needs by delivering the right product at the right time and at the right cost.
Logistics costs within construction refer to the expense incurred from moving raw materials from the source of extraction or production to the project site. Construction logistics is an essential part of supply chain management, with off-site transportation of materials estimated to account for 10-20% of the total project expenditure in typical construction projects, it is a cost that construction managers and planners need to better understand so that logistics activities can be evaluated, and the costs reduced. Sourcing from local suppliers and in bulk quantities for storage of materials on-site can help drive down overall costs to keep projects within budget, as well as reducing the project’s carbon footprint.
4. Environmental Benefits
Construction companies are working hard to shake off their reputation as an environment damaging industry with high energy consumption and harmful carbon dioxide levels. Responsible for commissioning over 40% of builds, the Government is the UK’s largest construction client. To ensure the construction industry reduces their impact on the environment they have set out several socioeconomic and environmental sustainability targets which must be adhered to. These include a focus on using renewable and recyclable resources, the reduction of waste and energy consumption, protecting the natural habitat and building non-toxic, healthy, and high-quality environments. These key principles form the building blocks of sustainable construction.
Engaging with local SME’s and employing them within your supply chain contributes towards greener manufacturing by reducing shipping and storage, which in turn reduces carbon emissions and energy usage. The protection of the environment and sustainable manufacturing is a hot topic, so the more that construction companies do to promote best practice in these areas, the more it will boost their reputation and secure more business by demonstrating a corporate social responsibility. There is a growing demand for contractors to have an awareness of their social and environmental impact on communities, ensuring your supply chain can demonstrate dedication to carbon footprint reduction, will lead to higher levels of success when tendering for and securing contracts.
5. Local Community Benefits
As local authorities continue to invest in priority infrastructure to meet the growing demands of communities across the country and boost economic growth, there is an understandable expectation that the public money invested into these projects will provide benefits for local communities that are more far-reaching than just the build alone. Over 90% of UK construction contractors are SME’s, making them the cornerstone of the construction supply chain. Prioritising SME’s, local labour, goods, and services improves employment opportunities within the area and supports local economic growth. These are key benefits to support corporate social responsibility within construction projects. For these reasons it is important that large construction companies adopt SMEs as pillars of strength within their core supply chains and remove obstacles that can deter SME’s from accessing contracts or working closely with Tier 1 contractors. This can be done by providing clear visibility of the future pipeline of work, supporting SMEs to take on more apprentices to close the skills gap in the sector, and working with public sector bodies to improve procurement processes so that SME’s can access collaborative procurement frameworks. Framework arrangements, such as North West Construction Hub and Scape Group, can increase opportunities for SMEs, directly or via the supply chain, if framework operators make it a requirement and the contractors involved deliver on their commitments. Procurement frameworks recognise the importance of using purchasing within construction as a device to roll-out the spend as widely as possible through the local economy through local businesses, which in turn benefits local communities and develops a skilled workforce.