Blog 005 - Supply Chain Security

Specialist Contractors rely heavily on their supply chain and for the most part, the co-operation of the supply chain is what allows Specialist Contractors to thrive. Whether it is smaller labour only subcontractors in the M&E world or large timber merchants to the carpenters, the supply chain keep the industry fed and moving.

Keeping this in mind, should we be concerned about the recent news of suppliers making large cut backs, in short, YES! Travis Perkins have announced 2,500 job cuts and branch closures, if this is what it takes for them to remain competitive in a very squeezed market then they must look after their own business, but with many other suppliers following suit, such as concrete plants and manufacturers like JCB, the supply chain is going to become overstretched and risk lacking depth in the future.

Much like Specialist Contractors, the supply chain are some of the real heroes of the industry, often providing round the clock service, short term (low cost / free) storage when Contractors / Developers cannot permit deliveries and most importantly provide the industry with huge lines of credit and payment terms which can feel “dirty” to a good honest Specialist Contractor. Without these suppliers being so flexible with the Specialists, particularly in terms of delivery costs / re-delivery costs and credit facilities, the Trade Contractors will likely find themselves short of cash to undertake projects on the prices and terms being demanded by the construction employers and contractors.

As an industry, we cant afford to neglect the supply chain during this period, they are the leaders of material and product innovation and without a doubt the leaders in construction credit, more commonly providing bigger credit facilities than any bank or bondsman will offer to a Specialist Contractor. It is therefore critical that the employers, main contractors and developers take note of this call and take action to secure the supply chain. Easy measures can be implemented to help bolster the all important supply chain. It is obvious to all that improved payment terms will make a significant impact, but this has always been the case. The construction industry is looking to drive down costs in order to keep building, the accumulation of credit through the supply chain is an instantly evident opportunity for efficiency. Credit comes at a cost and so it would seem an easy win to the entire supply chain would be to reduce the credit facilities required with improved payment practices. There are many options available to facilitate this, from 14-28 day payments from month end to Project Bank Accounts. Pre-payment of long lead materials will help suppliers produce goods in the knowledge that their employers will take delivery and run less risk of insolvency prior to delivery.

There are many options available to support the supply chain, financial help by way of fair and reasonable payment practices is only the first and most simple step. What is clear is that without the supply chain or with a reduced supply chain, the industry will struggle to service itself. The construction employers out there must consider this before they screw people down to prices barely above overhead, they will only be limiting themselves in the long run in terms of breadth of the supply chain, proximity or service. If something is worth having, then it is worth paying for. Lets protect the supply chain and allow it to flourish to serve our specialist contractors and continue to innovate and feed the industry.

If you want to discuss supply chains further or are having issues with payment or credit facilities, drop me an email and we can discuss further.