Removing barriers in the value chain
The construction supply chain can greatly benefit from the application of supply chain management
As the oil economies of the Gulf continue their rapid transition from growth driven by state-backed capital projects into more competitive, private sector-led markets, the focus increasingly is on finding ways to be more productive and reducing waste.
For the construction industry in the UAE, one of the biggest opportunities for driving efficiency is to streamline the way it buys the products and services it needs to deliver projects.
The construction industry in the UAE is highly fragmented and prone to overruns and disputes. Its supply chain involves complex networks of people, companies, processes and products and is riddled with the potential for costly clashes and delays. These risks are exacerbated by the traditional model for buying services, which is centred on lowest-price wins competitions for works contracts.
The traditional model of competitive tendering for contracts means that almost every product or service is being purchased as if for the first time, even when the companies and services are well established and repeated again and again across countless projects.
There is immense opportunity for the construction industry to streamline these processes by adopting some of the practices used in other industries such as manufacturing, oil and gas and defense. These sectors are characterised by a smaller pool of project spenders, who tend to procure services on a repeat basis, and who prefer to use formal models of supply chain management to ensure they get more value for every dollar that they spend.
Done properly, supply chain management encourages greater collaboration between companies by removing the barriers of direct competition. This can enable higher levels of quality, time savings and reduce conflict through more honest pricing. Supply chain management can also allow project owners to introduce a broader range of objectives into its project procurement processes. These might be used to promote environmental sustainability criteria, better working conditions or local sourcing.
One of the challenges for the effective roll out of supply chain management across the UAE construction industry is the fragmentation of a market that features thousands of one-off clients. There is a role for government to play to provide a national construction supply chain of qualified contractors, consultants and suppliers.
Further efficiencies can be introduced into the construction supply chain through more adventurous use of innovative technologies such as building information modelling (BIM), 3D printing and cloud-based data management systems. These new digital data processes open up the possibility of virtual warehousing, local manufacturing and genuine full project lifecycle management.
Removing Barriers takes a detailed look at the opportunities and challenges for improvement in the construction supply chain in the UAE. It is the ninth report produced by the MEED Mashreq Construction Partnership, and it is our hope that this report, together with its predecessors can help stimulate new ideas and practices that will help deliver a better construction industry in the UAE.
Download your copy of the report here.
*Follow Mashreq Corporate and Investment Banking Group on LinkedIn for regular updates, thorough market knowledge, and insights.
