What is supply chain management and why is it important?

If the pandemic taught all of us something was that an optimal management of the supply chain guarantees that toilet paper won´t be running out on your local supermarket. If that does not tell you that this is an important area withing every industry, nothing else will better explain it.

Nonetheless, when it comes to the construction industry, this must be one of the most important areas that guarantees that every stakeholder in the construction value chain is at ease… when everything is running smoothly. That´s why we are putting our focus and calling for startups with solutions that help optimize the supply chain in the industry to participate in this year´s Construction Startup Competition.

In the Supply Chain Management category, we are looking for startups offering innovative solutions that help in the procurement of a project, introduce marketplaces for materials and resources, offer material tracking and logistics coordination, inventory management, fleet management & dispatching, and marketplaces for delivery and last-mile solutions.

Take a more in depth look at what we are looking for and see how you can be of help. 

Table of Contents

What is supply chain?

A supply chain is an entire system that produces and delivers a product or service, from the very beginning stage of sourcing the raw materials to the final delivery of the product or service to its end-users. It includes the flow of materials, products, information, and money associated to all of them, making it one of the most complex areas of the construction value chain. The term itself originated in the manufacturing industry but its essence goes back to years before data was available at the palm of our hands. 

The supply chain lays out all aspects of a production process, including the activities involved at each stage of a project, information that is being communicated within all parts involved, natural resources that are transformed into useful materials, human resources, and other components that go into the finished project.

supply chain management

As it is known, the construction industry´s value chain is composed of so many players and it´s so fragmented, that supply chain management becomes one of the key components to ensure that a project is running smoothly, on time (and budget), and that every stakeholder involved is fully aware of how their area is doing and the progress its undergoing.

A typical supply chain for a construction project includes engineers, architects, prime contractors, material suppliers, and specialty subcontractors who come together to work on a single project. The complex chain often consists of short-term relationships and non-standard procedures, as every construction project is unique and it´s very likely that the players involved work together only that one time in their lifetime (or only a handful if they´re lucky).

What is supply chain management?

Supply chain management (SCM) in the construction industry plays a crucial role in improving the coordination and communication between every stakeholder in the construction value chain, all while ensuring the quality and profitability of a construction project.

With so many places along the supply chain in construction that can either add value through efficiencies or lose value through increased expenses, proper SCM can increase revenues, decrease costs, and impact a company’s bottom line.

Sadly, disturbances in the supply chain management since the emergence COVID-19 have resulted in the increase of materials cost and more delays in projects, as the availability of materials becomes a big hurdle. More so, there´s an increasing fear amongst general contractors that costs will continue increasing over the next 6 months of 2021, according the most recent report from Dodge Data.

worker at a warehouse storage supply chain

From CEMEX Ventures perspective and insights gathered through their analysts’ team, SCM is one of the biggest opportunity areas in construction, as it stands outs as one of the most underinvested in the sector.

“It´s very challenging given all the branches that encompass a supply chain. This also makes it one of the ripest for improvement given the number of players in the ecosystem that form the industry´s supply chain” states Gonzalo Galindo, head of CEMEX Ventures. “Although this particular area in construction has been hungry for disruption for many years, the pandemic surely accelerated the necessity to develop technologies, solutions and new opportunities to further optimize the construction industry´s supply chain, as it plays an important role in the sector´s speedy recovery post-pandemic.”

If we look at other sector, there´s a glimpse of hope. The retail sector, for example, has seen an uptick in funding during the first quarter or 2021, with investments in technology to make the supply chain and logistics flow faster and more efficiently nearly doubled on a year-over-year basis, amassing $8.6 billion (USD). We are eager to see how this will reflect on the supply chain investments in the construction industry in the coming years.

a truck deliverying goods

How SCM works

Supply chain management (SCM) is a concept highly focused on the production and logistics aspects. Today, although it represents an autonomous managerial concept, it´s still largely dominated by logistics.

SCM strives to observe the entire scope of the supply chain. Yet, as fragmentation continues to be an ongoing issue in the construction industry, many challenges in the construction supply chains are still very present, mainly due to the interdependency of every area, the lack of a proven or standardized SCM model for the industry and of course, the lack of integration and collaboration between all parties involved.

Design changes, inaccurate calculations, and lack of trust among the stakeholders can be a hurdle in the effective implementation of SCM. Poor quality of materials and equipment, inadequate training of subcontractors and workers, and the constant variability of the workforce from one project to another are some of the other challenges. Furthermore, there are no tools to efficiently measure the performance of all the parties involved in the project.

What can entrepreneurs and leading companies aim to do to better?

Planning

Adopting digital technologies to improve supply chain planning is essential for promoting innovation in the sector. Collaboration within the network and an integrated planning process to deliver a project will secure a better optimization from the beginning phases of a project.

For example, in a construction project, supply chain planning enables effective strategic development in managing contractors to procure the right resources, build, commission, and handover the project on time and to cost, thereby fulfilling the client’s requirements.

Importantly, an enhanced strategic planning capability is required to allow contractors to move away from a procurement-focused approach towards an outcome-aligned end-to-end supply chain approach.

worker planning supply chain on a tablet

Sourcing (Materials/Service)

As part of the initial process of a project, it´s crucial for built professional to have tools that enable the procurement process, from estimating, to quoting and ordering of both materials and resources needed for the project ahead.

Startups who offer solutions that help solve this challenge must reduce miscommunication amongst the stakeholders, limit purchasing predicaments and allow for enough flexibility that doesn´t restrain a project to the initial terms, all while keeping within time and budget.

Likewise, the emergence of marketplaces that allow for the acquisition of the materials needed, as well as those who integrate material tracking, are looked at as extremely beneficial to further optimize the SCM process.

Making (Efficiency and productivity)

After acquiring materials and resources, built professionals must be on top of its delivery and handover to ensure that no delays or missing materials show up in the times ahead.

To ensure advances in productivity from supply chain management, a major shift in the way the construction industry organizes its supply chain must occur. The transformation process is critical and must visualize supply chains and decision making based on timely and accurate data, as well as improve its inventory, on-site handling to prevent missuses, and fleet management.  

Delivering

It´s important for built professionals to minimize delays and reduce the need to store materials, as it´s not always possible because of space limitations, risk of deterioration, material theft, and storage costs and handling. In an ideal world, materials are delivered just-in-time and their availability would not be a hurdle.

That´s why, what is considered the shortest end in the logistics process is essentially one of the most important ones, so many eyes are placed in solutions for the delivery and last-mile delivery of materials. Marketplaces that allow built professionals to handle this process more easily are heavily needed in the industry, making it an area that startups can leverage knowing the need in the market.

While each step of the way should be taken seriously, there is no point of higher priority than that of the last mile delivery stage, where the goods from a transportation hub move to their final delivery destination.

containers waiting to be picked up and shipped

Examples of supply chain management

GoFor

GoFor, part of CEMEX Ventures investment portfolio, is a North American leader in the same day, last-mile delivery of construction materials. They provide their clients with a reliable and affordable delivery of materials, whether small loads to big, bulky items, either on demand or pre-scheduled.

Their platform helps craft a better customer experience, allowing its users to track their orders and its costs, integrate it with their tools, and provide contactless delivery of materials to ensure safety for both ends.

GoFor was founded in Canada in 2016 and is quickly expanding amongst the biggest cities in United States, now offering their services to multiple industries by supplementing their busy fleets or choosing them as an out-sourced logistics partner for deliveries.

During the pandemic, the startup opened its last mile delivery service platform to send essential supplies such as food, hand sanitizers and masks. This marked  a $9.8m seed round investment received in 2020 during a critical moment, where global circumstances forced retailers to rethink how they get goods to customers.  As a result, the demand for GoFor’s last minute, last mile logistics marketplace and its SaaS-based dispatch platform was overwhelming.

LINKX

LINKX is a cloud-based logistics software for the delivery of goods in Mexico. Their platform allows for the optimization of their operations by managing their loads and deliveries on real-time and integrating all ends of the transaction.

The startup allows freight operators to assign deliveries to their own carriers or third parties, offers advanced shipping notice prior to the delivery of materials, digitizes the delivery confirmation, allows for partial delivery confirmation to avoid billing errors on incomplete orders, and provides a full digitalized report on real-time with data-based conclusions about their client’s operations.

Soil Connect

This startup, part of our portfolio and named one of the Top 50 Contech Startups of 2020, created a digital marketplace that connects built professional who need to dispose of soil with those who need it, introducing a better and more efficient way of acquiring materials in the built sector.

Soil Connect matches its user based on distance, enabling them to transact at shorter distances, saving thousands of dollars and substantially reducing the construction industry’s carbon footprint by minimizing CO2 emissions and preventing waste to end up in landfills.

CEMEX is currently piloting this solution in Florida and testing a possible expansion in other markets in United States, providing users with materials for their projects directly through the app.

Voyage Control

Voyage Control helps construction companies, developers and owners manage their logistics and supply chain; this ranges from deliveries to the jobsite, inventory control and support for payment apps, end to end supply chain management, and meeting compliance requirements.

The benefits of Voyage Control include streamlining operational processes, enhancing security, reducing congestion, improving driver compliance, and benefitting the environment.

Businesses that use the platform go beyond construction sites alone.  They also have clients in ports, events, and facilities management. Over 100,000 businesses have used their platform to save time in their processes, amassing over four million deliveries across Europe, North America, and Asia Pacific.

The UK based startup was one of the five winners of Construction Startup Competition 2020.

CEMEX Go

It´s also worth highlighting that CEMEX has their own solution and digital platform that streamlines workflow, CEMEX Go. The platform allows its clients to purchase products, track deliveries, and manage orders seamlessly and easily.

What’s CEMEX Ventures doing to improve supply chain management?

CEMEX Ventures is actively looking for startups and entrepreneurs who offer solutions and new business models that help optimize the supply chain management of the construction industry. Whether it´s by investing in them or partnering to expand their solution in other markets, we are eager to introduce younger players in the ecosystem to the industry´s decision makers and leader so their solutions can help make the sector better for everyone in the construction value chain.

As part of 2021 Construction Startup Competition, we are ready to evaluate startups in the “Supply Chain Management” category and together with Dysruptek, Ferrovial, GS Futures, Hilti, VINCI Group´s Leonard and NOVA by Saint-Gobain find the future legends of the construction industry.

Apply to Construction Startup Competition 2021 today! The application phase will remain open until June 27.