The global population is predicted to hit 9 billion by 2050 and two out of every three of these people will be living in cities. The story in Australia is much the same – 40 million people and two-thirds of us in the cities. Little wonder, then, that construction is already one of Australia’s, and the world’s, largest sectors, and it is only going to get bigger. But that presents a massive logistics challenge.
On the surface, construction looks simple. Just bring in what you need to the site – trades, materials, local authorities, clients, architects, engineers, geologists… Hang on, this is already getting complicated! Then add to the mix the complexities of the project itself such as the location, traffic, and the fact that we are not talking about one supply chain but, potentially, hundreds of supply chains that have to be coordinated and complement each other and, all of a sudden, this has become very complicated indeed.
The amazing thing about all of this is that despite the obvious need for some serious logistics planning, when it comes to construction, logistics is something of a poor relation compared to the strategically critical role it plays in many other industries. This is slowly changing, but it is going to have to change a lot faster if our construction industry is going to meet the challenges that population growth is setting.
In the past, construction thought of logistics as a term that only applied to site services such as cleaning and facilities for the workforce, like portaloos. Then it got a little more sophisticated and started to consider materials handling and storage. Some construction companies have even got as far as thinking about managing deliveries and the infamous ‘last mile’. But what construction needs to consider is the wider, global supply chain. The materials in a project typically represent up to 60 percent of a project’s value and skilled construction workers can spend more than 50 percent of their time on logistics related tasks. You only have to watch any of those reality renovation or building TV shows to see how quickly logistics failures blow out budgets and blow away productivity. So, if construction is going to improve its productivity and maintain profitability in a world where margins are being attacked every day, it is going to need a much stronger focus on the thing that undermines those efforts most – logistics.
The Construction Owners Association of America study found that 63 percent of the direct labour time on large construction projects is spent waiting for materials and equipment, travel, taking unscheduled breaks and planning how to do the work. Other studies have found that as little as only 30 percent of construction budgets are delivered on budget and only 15 percent completed on time. The 2015 KPMG Global Construction Survey found that more than half of all construction companies experienced one or more underperforming projects in the previous year.
This is a problem screaming out for a solution and logistics providers should be scrambling to find one for the construction industry. More to the point, the construction industry needs to get as serious about logistics as it is about engineering.
I believe we are at a major turning point for the industry. Digital technologies offer huge opportunities for construction to get their logistical act together and it is inevitable that digitisation of the construction industry will help address the logistics issues of delivery, labour, materials and compliance. Those construction companies that make these moves first are the ones that will be able to fully take advantage of the population growth coming our way.
Those logistics providers that have the foresight to provide logistics solutions for the problems facing construction will become leaders in one of the world’s largest sectors.