The Supply Chain Ripple Effect: Q&A with a Purchasing Expert
COVID-19 impacted all facets of construction. But perhaps the first area to feel the effects was the supply chain and the preconstruction work associated with it. Here David Hamilton, vice president of purchasing at Structure Tone, explains this ripple effect and the strategies firms can consider for managing it during a crisis.
1. When COVID-19 ﬁrst began to take hold in China, were you immediately concerned about the impact on the supply chain in the US?
Our industry lives on information. When there is a shutdown any-where in the world, our immediate thought is, “Will that affect our projects?” As the news from China got more intense, we first started talking to our local suppliers. Many lighting components come from China, so we called our primary lighting distributors. This was early on, and even then, they confirmed the virus was already having an effect. That’s when we really started reaching out even more to have our ear to the ground and plan ahead based on what we’re hearing.
2. How did those concerns change as it became clear that COVID-19 would impact the US?
The impact the virus had on China was our biggest clue and gave us reason to prepare for what could happen here. As we talked to more people, the picture of how serious this could get became clear. We started to take inventory with each manufacturer to build up an overall picture. We needed to find out what was meant by “We won’t be able to get that material.” Was that because it’s truly not available? Have we tried other channels? We wanted to leave no stone unturned.
3. As construction managers, how do we get ahead of these kinds of disruptions?
Knowing the market and key players is critical. You need to already have your contacts and build those relationships so that when it comes to times like these, you already have those important relationships established. Information is key as well. I like to use the word “gleaning.” We try to collect all the little nuggets from each conversation to help build the bigger picture. We also have three primary, tried-and-true methods for managing supply chain challenges in any situation: Expediting, Substituting, or Stockpiling.
4. What are the pros and cons of expediting?
Expediting really comes into play when the schedule is the absolute most important factor of the project. You can work with the factory to work extra hours or to move up the production line, at a cost, of course. Some clients are amenable to paying for that time savings, especially if there’s no flexibility in their schedule. The challenge is that not every manufacturer is able or willing to expedite and it does affect the budget.
5. When is substitution a more viable option?
If a product isn’t going to be available in time and expediting is out of the question, we look to substitution. We often go through a substitution exercise as part of preconstruction anyway. We want to protect the original design as much as possible, but we present any potential challenges we see down the line when we’re assessing a project, sometimes even before we have the job. The design team often develops a design based on certain products, and we don’t want to disrupt that vision. Finding a workable solution comes down to communication and understanding the goals of the project and the team, downstream to our subs and up-stream to our client.
6. Can you pre-purchase or stockpile materials for any project?
Stockpiling is an excellent strategy if the costs of storing and transporting the materials are worthwhile. For instance, in Manhattan, storage is a challenge. But for a greenfield project outside of an urban core, it’s a great idea. One of our clients, for example, was delayed in getting their new office project started. They knew, however, they did not want to change the design, so we ordered all the materials ahead of time so they were ready when the project began. That decision saved a huge amount of time and effort on submittals and lead times. The challenge, of course, is that buying ahead of time locks you into those decisions—there’s no changing your mind. But this is an especially good option for large, institutional clients who have real estate design guides and protocols that dictate most of the materials they will use.
7. How do you determine which approach is best for a given project?
It really comes down to understanding the schedule, budget, and, most importantly, the client and their goals. What will serve the project best? A client may have a lease expiration that makes the schedule most important. In that case, we know we should be prepared to expedite or substitute, if needed. Other clients are very focused on the budget, so substituting a more available product might be their preferred option. Each method has pros and cons, but typically one of these general approaches can get us to the end line successfully.
8. Some experts predict another COVID-19 surge could happen next fall. What lessons did you learn that can help you manage supply chain challenges even more eﬀectively if this were to happen again?
The proactive focus on communication is still what I would do again. But now we have even more contacts and an even deeper understanding of the interrelations within the industry. We will continue to check in with our partners, whether or not there’s a crisis happening. You never know what tidbits you might glean out of a conversation that will be helpful down the line.
As a company, we also learned a lot about how best to tap into our own expertise. We brought together experts from around our company into a taskforce to address everything from supply chain, to design implications, to jobsite health and safety. Many of us had all of this knowledge at the ready but hadn’t really had the impetus to document those best practices and strategies. Now we have that and can deploy that wide network of understanding to help our clients in any situation.