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Analysts urge constructors to step up supply-chain risk analysis

Don Wall
Analysts urge constructors to step up supply-chain risk analysis

Risk specialists addressing a recent Ontario construction webinar said the COVID-19 pandemic has introduced a new layer of risk concerns to project planning and delivery and thus constructors need to significantly upgrade their analysis of supply-chains as the sector takes the next steps into recovery.

Chris Snider, head of risk services for Zurich Canada, warned members of the Ontario chapter of the Canadian Association of Women in Construction (CAWIC) watching the association’s Risk Insights webinar June 24 that surveys showed many managers were woefully unprepared to undertake sophisticated supply-chain analysis even before COVID-19 hit.

“A third of organizations were not analyzing their supply-chains in order to be able determine where sources of interruption came from,” he said. “If we don’t know where they come from, we can’t fix them or help mitigate risk.

“Then, moving into 2020, let’s put a pandemic on top of all this.”

The results of a supply-chain disruption can be disastrous in an industry like construction, Snider said, where there is a lot of just-in-time delivery of supplies and work proceeds sequentially.

“A lot of times working in the construction industry, if you are working on a highrise, if you don’t have that next piece of supply handy, there could be areas shutdown and it could be just one small area but it could shutdown the entire project,” he remarked.

The three foundational pillars of supply-chain operational management are inventory control, capacity and flexibility, Snider said. Planning to procure alternative supplies should entail consideration of such factors as determining their impact on the final product, undertaking product testing and obtaining approvals.

Transportation logistics must be assessed and a region by region analysis of market recoveries must also be undertaken — a supply market that looked to be sailing along into recovery might be shut back down if a second wave of the pandemic emerges, he suggested.

As for flexibility, Snider said, new supply-chain arrangements must ensure there can be quick pivots and the ability to adjust on the fly. Questions should include: Will the impact of new supplies on jobsites be seamless? Is there enough flexibility embedded to withstand another shock?

The other panellist at the CAWIC webinar was Jennifer Fortunato, Chicago-based risk engineering manager specializing in construction for the Zurich Services Corporation. She said a new COVID-era supply-chain risk-management strategy requires attention to possible insolvencies, currency fluctuations, performance impairment, changes in regulations and political instability, property risks and transport problems.

The pandemic has created growing concerns of insolvencies among not only suppliers but also contractors, suppliers and investors, Fortunato said. A new level of diligence must be adopted to ensure partners won’t bail on projects.

“I want people to start thinking of the impact on the value chain or the supply-chain, depending on your situation, that insolvency and currency have. I like to look at these together,” she remarked. “Knowing the critical contractors, suppliers and materials that a project needs is so important.

“Construction companies work on cash flow. COVID-19 has greatly impacted this. Unfortunately, many companies have gone out of business. Many projects have not been able to restart.”

The Canadian dollar suffered in the early days of the pandemic, which affected costs, Fortunato said, with prices estimated to have spiked 15 per cent at one point.

Both panellists stressed the importance of recognizing the role that the construction workforce plays in a supply-chain.

Even prior to the pandemic, Fortunato said, finding skilled labourers was a challenge. Now it is even more so with their health and safety a concern and getting workers to sites more challenging, including remote workplaces.

“The workforce is a really critical component of anyone’s supply-chain,” said Fortunato.

Snider stressed that human factors are increasing in importance, with HR and managers needing to step up to accommodate the needs of a firm’s workers. Workers need to feel safe and be safe, and managers should work hard to anticipate needs and solicit ideas from staff.

Success will come from the passion, loyalty and pride of the staff, Snider said.

“Making sure that they are safe is obviously paramount,” he stated.

 

Follow the author on Twitter @DonWall_DCN.

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