Robin Proctor, group supply chain director at Travis Perkins, says the supply chain in the buildings and construction sector is underdeveloped compared with other areas.
”In the construction industry, many of the supply chain pieces that are commonplace in other areas are not yet developed,” he says. ”There is very little centralisation. Often, the product type doesn’t lend itself because of size and scale to this sort of approach. There’s little development of ordering and replenishment activities or of collaborative sharing of information: and where there is, it tends to be led more by commercial considerations than by costs and supply chain operational efficiencies.”
The industry, says Proctor, is characterised by the complexity of multiple customers and customer types.
”For example, there is a client responsible for building, say, an office block, a managing contractor, main contractors for aspects like groundworks, and they have their own sub-contractor chain down to individual tradesmen. These multiple levels all have to take their profits out of the supply chain in different ways. If we try to manage the flows differently, one of the challenges is that this directly impacts different businesses’ profit streams.
”So as soon as we get into planning changes in the supply chain, we have to realise sets of incentives for our customers or even for elements in our own business – our people are incentivised as traders, not necessarily as part of an overall supply chain – and with multiple supply chains, the incentives have to be different for different types of customers.
”An obvious one is to improve the way product is ordered. If you improve availability, everyone benefits. We ought to be able to push availability performance into the high 90s in percentage terms. In construction, typically the figure is the low 90s, or even below that. That would give us real opportunities in sales, reductions in lost working time and improved productivity.”
But for real change and improvement, deeper solutions may be required. There is a lot of work in the industry on consolidation centres.
”You could have four contractors, all using the same grade of plasterboard, all putting the material through a consolidation centre,” says Proctor. ”This makes sense but so far, we haven’t seen anyone stand up to take all the orders and consolidate them.”
Who could take this role? Merchants such as Travis Perkins are an obvious answer.
”We already consolidate, but in lots of small batches,” says Proctor. ”There’s an opportunity for merchants to offer the ordering, the product knowledge and the distribution skill sets so we could lead the industry. After all, at our branch level we effectively do this albeit on a smaller scale. For tradesmen, we are the local warehouse. Shouldn’t merchants be offering similar skills in larger contracts?”
Surely though, there is something anti-competitive about such suggestions? Proctor thinks not.
”The materials costs of many builds are relatively low compared with the costs of land,” he says. ”That is a reason why the effort hasn’t been put into developing stronger materials supply chains. We could offer the best supply chains in the world but find that nobody uses them.”
On the other hand, most construction materials are heavily commoditised. It isn’t as though an individual contractor is likely to get much of a competitive advantage through buying, stocking and delivering his own steel, cement or bricks.
The drivers towards consolidation are largely defensive – a response to increased environmental regulation for example. Proctor firmly believes that a consolidation model would offer attractive benefits at all levels in the contractual network. These could range from reductions in lost time through non-availability of materials to reducing the extent to which competing contractors bid prices up for material, even though they are working on aspects of the same project. It happens.
But says Proctor, the market has a long way to go.
”We don’t measure things well,’ he says. ”We’ve got to be able to measure what is going on, to decide which products suit the consolidation model and how to arrange the order process. But we need the measures. If we can’t see the problem, we can’t incentivise all the parties to join in.”
Robin Proctor started his career as a management trainee at supermarket Sainsbury’s and continued in a variety of supply chain roles at Iceland, then MFI, Howden Joinery, and latterly Travis Perkins.
Travis Perkins also owns DIY chain Wickes so unlike some of its merchant competitors, already has some exposure to retail philosophies.
Msc from Cranfield
Proctor has an MSc in supply chain management from Cranfield