The construction industry has long been a barometer for the health of the wider UK economy and the government’s renewed focus on infrastructure and housebuilding has left long-term prospects for the sector looking distinctly positive.
There are, however, several industry-wide logistical challenges on the horizon which will inevitably impact on the way construction businesses and their supply chains do business.
The rising challenge of a falling pound
Last year’s depreciation in the value of the pound has led to rising costs for importing construction materials and other goods. Whilst this may pose a challenge to some construction businesses, it also offers an opportunity to appraise existing logistics solutions and identify cost saving efficiencies across the supply chain.
One possible consequence may be that supply chain models, based on importing building materials, will be challenged and new, more cost-effective material sourcing solutions could take their place.
An evolving regulatory environment
Increasingly stringent standards are being placed on the industry and these will have a lasting impact on ways of working and bottom lines.
In London, poor air quality is a mounting political issue and construction businesses face a growing logistical challenge from strict new emissions legislation. From September 2020, all heavy goods vehicles (HGVs) entering the existing Congestion Charging Zone will also be required to meet stringent emission standards or face substantial daily charges (in addition to the Congestion Charge already in place). London Mayor, Sadiq Khan, also recently proposed a “zero emission zone” for Hammersmith town centre and the implementation of an Emissions Surcharge for older, more polluting vehicles on London roads.
The safety of vulnerable road users is also high on the political agenda. Last month the Mayor formally commenced efforts to ban over 35,000 HGVs that don’t enable drivers to have “direct vision” of other road users from their cabs. Under these proposals, older model HGVs with smaller windscreens and limited side-cab visibility will not be compliant.
There’s every chance similar policy measures will be rolled-out across the UK’s other major urban areas, particularly as new elected “Metro-Mayors” begin to take power, as part of the devolution revolution.
Again, the full impact of this challenge is yet to be felt by the industry, but what’s clear is that vehicles servicing sites need be fit for market. Failure to comply will have a significant impact on margins and the costs for construction businesses of ensuring all their vehicles meet these new standards will be high.
Sustainability is key…
While these regulatory interventions are hugely important, there’s no denying that overall project sustainability is a growing priority for all stakeholders.
Construction businesses need to be thinking about how else they can limit financial, social and environmental risks, meet obligations and exploit opportunities, both in the short and long-term. Demonstrating how these considerations will be met is now a standard part of winning, and maintaining business.
However, construction projects are undoubtedly becoming more complex as the trend towards wide-scale use of sub-contracting and tiered transactional interfaces becomes more commonplace. Many major infrastructure projects now have specific procurement policies to promote more opportunities for small and medium-sized enterprise suppliers. HS2, for instance, expects 60% of contracts to be awarded to SMEs.1
Needless to say, increasing the number of suppliers raises the logistical challenge for major infrastructure projects and managing all this complexity, whilst retaining flexibility, is key to project success.
It’s time for construction to target a smarter, more joined-up way of working and building the logistics strategy into a project at the concept stage is the way forward. Unfortunately, too often logistics solutions are added on at a later stage, almost as an afterthought. Having a single provider overseeing logistics from the very start of a project can make all the difference to sustainability in all its guises.
3PLs and logistics solutions
Business leaders need to be planning now to ensure they’re not on the backfoot when these challenges start to bite.
It’s clear the industry needs innovative logistics solutions that meet changing regulatory standards, demonstrate business value, minimise environmental impacts and help the industry take full advantage of the opportunities that lie ahead. This is where third-party logistics (3PLs) providers can really add value.
I lead a team responsible for delivering more than 400,000 loads to construction and building sites across the UK every year. We deliver everything from bricks and mortar to heavy machinery and tools. We regard the safety of our vehicles, both for our drivers and for the general public, as a key priority in all our operations and regularly invest to renew our fleet to ensure we’re running the latest models.
My role isn’t just limited to construction, however, I also oversee logistics operations across industrial, manufacturing, energy and defence industries. What we’re increasingly seeing, across all sectors, is that collaboration is the answer to many shared logistical challenges.
By working across a wide range of businesses and sectors, 3PLs are ideally placed to facilitate collaboration and integration across supply chains. We’re also an increasingly valued source of guidance for our customers; helping them to improve the cost to serve and implement new, more advantageous supply chain practices. One way we can do this is by identifying customers that can benefit from sharing assets – even if those customers are competitors.
Ultimately, the concept of a construction business owning high levels of its own fleet, resourced to peak, is being challenged. Whilst many construction businesses maintain a core fleet of their own, our customers increasingly expect the costs and scale of their logistics solution to be able to flex in-line with demand.
That’s exactly what our offering facilitates; be that through use of our shared-user network of specialist vehicles, such as Mechanical Off-loader (MOL) and Ready-mix Cement fleets, or through our consolidation service which overseas inbound logistics on major projects. These offer a faster, smarter, greener way of working with multiple suppliers, providing a centrally located facility that manages the delivery and fulfilment of building materials to nearby sites on a ‘just in time’ basis.
There are huge benefits to a collaborative approach in construction logistics, not least of all by addressing periods of equipment under-utilisation caused by inevitable variations in market demand.
By working together to deliver flexible logistics solutions, 3PLs can help construction businesses meet increasingly stringent regulations, surpass environmental performance KPIs, increase the profitability of operations and face the future with confidence.
By Chris Fenton, Managing Director of Industrial and Transport, Wincanton PLC
