KnowRisk: how disconnected supply chains are preventing digitalisation in construction
Posted 21 Mar 2022
For the construction industry, the risks, challenges and barriers to the adoption of technology stem from a root cause in the supply chain.
Lorraine During, Lead for Market Research, Digital Catapult
Lack of communication and a disconnected supply chain have been identified as key barriers to the digitalisation of the construction industry.
These findings came from policy engagement sessions held to gain insight for the KnowRisk project, a solution that uses advanced digital technologies to protect against supply chain risks and disruption.
Key stakeholders in the UK construction industry, along with government departments, industry bodies and technical advisers, attended these sessions, allowing peers to share their thoughts and ideas, examine risks within the construction supply chain and identify barriers to the introduction of new technologies.
In March 2020, the impact on supply chains caused by COVID-19 was recognised as the biggest disruption to the construction industry, leading to an immediate 40% decline in growth.
As the construction industry is heavily dependent on supply chains, any change can have a significant impact. Recently, COVID-19, The UK’s departure from the European Union and the Suez Canal blockade have all contributed to considerable disruption to UK supply chains. To some extent the industry predicted some of these risks but could not foresee the extent, nor the full and lasting consequences.
Through the KnowRisk project, Digital Catapult is part of a consortium that aims to reduce the risk and impact of supply chain disruption.
For the KnowRisk project to provide a beneficial solution for supply chains, it was important for attendees to examine the risks facing the construction industry, which they identified as:
Contracts and procurement: In a large proportion of supply chains there is limited visibility among the many parties comprising the chain. Contractually, it is almost impossible to organise the supply chain effectively from end to end.
Payment practices: This issue is particularly concerning, as it restricts construction growth. Late payments are particularly damaging to small and medium-sized enterprises (SMEs), which may be forced to pay their suppliers late, cannot meet planned investment targets and often have to take up bank loans to control cash flow.
Late completion of projects: The negative effects of late completions can be felt across the industry, often leading to delays in other projects, cost overruns and additional problems that are not always covered by compensation.
Although the KnowRisk solution has been proposed to mitigate risks, the engagement sessions also revealed many barriers to digitalisation in the construction sector, which have been categorised as follows:
- culture, knowledge and skills
- the gatekeeping of industry relationships
- fears about return on investment
- the current technology and innovation landscape
- business capacity
However, backed by governmental policy and interventions , the construction industry is beginning to increase its openness to advanced technologies and the benefits for supply chains.
How KnowRisk can benefit the construction industry
Although the session attendees agree that a disconnected supply chain remains the key barrier to adopting advanced digital technologies within the construction industry, the group concluded that the proposed KnowRisk solution could improve this disconnect and offer the following benefits:
Visibility: The KnowRisk solution could provide greater visibility of the supply chain.
Collaboration: The KnowRisk advanced technology solution would increase collaboration within industry and address the disconnect between various parts of the supply chain.
Expectation Management: KnowRisk could offer parties an improved overview of supply chain operations and strengthen expectation management.
Sustainability: KnowRisk could identify new ways to increase sustainability across supply chains.
To kickstart transformative change, it is important that all players throughout the construction industry make a collaborative effort to successfully exploit the high technological capabilities that the UK has to offer, so that it can become a leading economy, strengthened by a construction industry that embraces innovation and efficiency.
To find out more, download the KnowRisk report here.
