Published on September 26th, 2017 | by Donato Masi0
There’s no need to reinvent the wheel! The key to smarter more efficient supply chains
We have all experienced first-hand how easy it is to perform a routine task rather than a new one. The repetition allows us to gain all the skills needed to accomplish it, and the opportunity to learn smarter ways to complete it. Looking for similarities and addressing them in the same way is a simple form of resource management. Companies could apply the same principle to increase productivity too, but they often miss the opportunity.
The Infrastructure industry is a good example. Infrastructure companies build the fundamental facilities and systems serving countries. They operate by projects, and for each one they have to perform a set of repetitive activities such as design, purchase of material, and construction. Each project is considered unique, and therefore these companies repeat the same each time to recreate supply chains or purchase a set of materials. Doing this can result in project overruns and low productivity. What these companies haven’t recognised is that there is a simple underlying, repetitive level of demand within each project. Therefore, they should look for similarities and address them in the same way to save time and effort.
In conjunction with Innovate UK, Costain and Concentra we have explored ways in which the effectiveness and efficiency of infrastructure portfolios could be improved. The objectives were to identify the repetitive and predictable levels of demand in projects, and the development of tailored supply chain strategies.
Our work focused on water infrastructure firms. The UK water industry plans to invest at least £5 billion a year for the next five years. When analysing the demand of a portfolio of projects (for the water infrastructure) for repeatability and predictability, it turns out that very few projects (less than 5% analysed) are in the “difficult box.” The “difficult box” identifies those that are seen as being both unpredictable and unrepeatable. Instead a significant number of projects (more than 40% analysed in this study) are both repeatable and predictable.
The amount of effort needed to manage many projects separately can be drastically reduced if companies were to bring those with similar characteristics together. The projects could be managed as a programme using the same approach to deal with similar tasks. Identifying these repeatable and predictable projects can also improve the delivery of innovative and non-repetitive projects. For instance a big innovative project can be split into a set of smaller repetitive components that use the use the same approach.
Identifying predictable projects allows planning over a longer period and provides stability through the supply chain. This brings multiple benefits including improved efficiency in the purchases.
The study also shows that companies can fully exploit the potential by identifying the repetitive level of demand if they promote a cultural change within their firm. This change includes a broader implementation of the key supply chain management principles, good supply chain integration, and a move away from the old tendering culture that characterises the industry.
Looking for similarities across multiple projects and addressing them in the same way can save crucial amounts of time and effort in construction supply chains. In turn by adopting this way of working we may see a transition to levels of efficiency comparable to the ones of manufacturing supply chains.
Early in the year we held a Supply Chains in Practice (SCiP) event that also explored some of the key issues identified in this blog. More information can be found here.