Keeping track of what’s coming and going on a construction site is a full-time job. But the view upstream has always been murky, and managing a supply chain and logistics can seem more like an art than a science. Technology firms tackling this problem have struggled to build complete systems to run it all, but new ideas and research point to more sensible ways of cultivating true digital supply chains.

As with many persistent challenges in construction, the first thought is to find some kind of technological point solution to address the problem. With supply chain issues, this can bring in a wide range of tools, from RFID tags on every piece of material to GPS tracking of deliveries. Yet many of the companies developing and offering these technologies have found the real hurdle is the way the industry manages the responsibility and risk for ensuring that materials get fabricated and brought to the site on time. With the COVID-19 pandemic driving greater digitization of construction processes in general, industry firms are having to consider whether it’s now the time to shift to a more digital supply chain.

While project materials typically make up about 40% to 50% of a project’s cost, “80% of project costs are driven by the extended supply chain,” explains Stephen Mulva, director of the Construction Industry Institute at the University of Texas at Austin. CII recently completed a study looking at supply chain issues in construction. The report, titled RT-363, found that significant work is needed in order for construction supply chains to see the benefits of project delivery methods such as advanced work packaging. Suppliers will have to be engaged earlier on, and any digital tools used to improve those collaborations are going to require oversight and a clear framework for risk management.

“If you want to improve the overall performance of the supply chain, don’t go after individual pieces—to really improve the project you need to invest in front-end planning,” Mulva says. Under the umbrella of its Operating System 2.0 (OS2) research program, CII has been looking at new technologies to improve delivery of capital projects. While that has included investigations into technologies such as RFID and blockchain, much of the research centers around changing a culture of construction that is resistant to being more transparent in project delivery.

“The ability for suppliers to get more directly involved has been limited by a contractual nature, but technology has democratized that to a great extent,” says Mulva. As project team members are forced to work remotely and adjust their responsibilities due to the COVID-19 pandemic, Mulva sees an opportunity to consider how the supply chain could be brought into these emerging digital workflows. “COVID has been a catalyst, and it’s definitely moving us in the industry to digitalize faster.”

The lack of consistent data management and the relatively siloed worlds of enterprise resource planning software, 5D planning, and suppliers’ own systems would appear an easy target for technology firms aiming to tie them all together. But the market for digital supply-chain management tools is not particularly crowded, says John Walker, vice president of strategic services for Jovix.

Jovix captures material locations with its Atlas RFID system, where RFID tags are affixed to construction materials, ideally before they arrive on site. This lets Jovix monitor not only incoming deliveries but help locate and manage materials across sprawling jobsites. Workers on site or drones in the sky can scan and confirm material locations. “We’ve never really had within our space a giant pool of competitors—there’s probably 10 or less doing what we do, ” says Walker.

Walker notes the technologies for tracking materials coming to the jobsite are largely a solved problem. Four years ago, Jovix began switching from high-energy “active RFID” tags, which could cost up to $20 apiece, to low-energy “passive RFID” tags that could be had for less than 50¢ each. Barcodes on the tags also allow any smartphone user to quickly scan them in as well. While this has helped Jovix better saturate jobsites and laydown yards with tracking tags, Walker says what’s really changed in recent years is the attitudes of contractors and owners. “When we first got started selling these RFID tags it was like selling witchcraft. But there’s been a tremendous gain in awareness over the years in the value of tracking everything.”

“In the last four to five years, the concept of the digital supply chain has come up, and it’s a real hot topic across the industry right now,” he adds. Walker participated in CII’s RT-363 study, and some of the things he unearthed there lined up with what he’s seen in his day job. “As we get into track and trace, and peel back the layers of onion, we find we can tag [these materials], but the real value of a digital supply chain is identifying all these materials before we ship them.”

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Culture Clash Seen in Logistics

Voyage Control runs a digital platform to manage delivery logistics in construction and other industries. “Some GCs are better at this than others, but what I’m seeing is a fragmentation of the supply chain,” says James Swanston, the firm’s CEO. “Someone once described it to me as construction companies being franchises—each project manager does it their own way—and some of that will have to change for us to have a really coherent supply chain.”

Voyage Control offers a logistics software platform for maintaining a live database of incoming materials and scheduling deliveries to a site. Users can quickly identify what is coming and going from a site, with data logged through mobile apps right at the gate. While Voyage Control has an established footprint in managing logistical deliveries for operating stadiums, convention centers and other event spaces, construction has been a steady growth sector for the company in recent years.

“When we first started selling these RFID tags, it was like selling witchcraft. But there’s been a tremendous gain in awareness.”

– John Walker, Vice President of Strategic Services, Jovix

But after previously working in Australia and the U.K., Swanston says he wasn’t initially prepared for the way procurement, risk and supply-chain responsibilities were handled in the North American construction market. “In the U.S., each project director does their own thing. It’s totally fragmented, not something we see in other parts of the world.”

Still, Voyage Control has found customers in the U.S. construction market for its delivery coordination service. Swanston says it’s often a matter of finding those willing to take on the responsibility for the logistics, and to learn lessons from similar past projects. “A lot of change is needed to have a really coherent supply chain,” he says. “I hear this perspective that every construction project is unique and needs to be managed differently. No, it’s mostly the same. Too many people do a project and then throw everything they learned away once it is completed.”

Recognizing the repeatable nature of many types of construction—and how these project metrics are quantifiable and comparable—has been an uphill battle, but Swanston says contractors and owners are coming around. “We’re starting to give customers key performance indicators on their logistics,” he says. “Five years ago, no one was collecting this level of logistics data. It was lost on a whiteboard or on a piece of paper.” And getting support from both the project teams and the C-suite is critical, otherwise investments in logistical technology will fail to catch on, he adds. “If you don’t get that buy-in, it can just become marketing spin [for the project].”

The popular belief in construction that every project is unique has become a major hurdle to adopting digital supply chain management processes common in other industries, says consultant Jeff Houtz. Houtz previously worked at Fluor as director within its supply chain leadership group, and now advises EPCs and other contractors on their logistical and sourcing issues with his company, Constructing Supply Change.

Houtz says “the supply chain is more than just procurement and delivery,” it’s ultimately about trust. A lack of transparency in project procurement and bidding can leave suppliers frustrated, and a wave of late change orders can erase earlier gains in the schedule and budget, he says. “It should be easy to know the date that something has to be at a jobsite, but it can be almost impossible on a real project. That haze is real: no one trusts a schedule anymore, since everyone suspects everyone else of padding things out. It all adds to the cost of doing business.”

Houtz also contributed to the CII research project RT-363, and says the supply chain issues he worked on at Fluor were also present in the other operations that CII studied. “Actually bringing a supplier into the field-management process is huge for efficiencies. We’ve seen it proven on real projects: If it takes five minutes to find a pipe spool instead of an hour after it got moved, that is huge on a big project.”

While he sees promise in greater use of RFID and other tracking technologies, Houtz says there really isn’t a software or hardware platform out there yet that can serve as the central hub for supply chain management, despite the claims of some startups. “There are companies working on it, but right now it’s dozens and dozens of systems with weak interfaces, fraught with GIGO [garbage in, garbage out], and too much focus on large cost components and heavy equipment.” Houtz says the real difference will be in the finer management of the many small things in the supply chain. “For me it’s fabricated steel, pipe and bolts—problems with those will kill a project every time.”

Supply Chain on the Blockchain

Managing all the nuts and bolts on larger projects can seem overwhelming, but there is work underway to automate some of that process. One of the pillars of CII’s OS2 program is an investigation into how blockchain technologies might benefit project delivery. Technology firm Data Gumbo has been trying to tackle the issue of trust and lack of transparency in the supply chain. It promises faster payments for suppliers and subcontractors as its main lure to get companies to offer up their data. The firm is one of the partner companies working with CII on the OS2 initiative, and already is using its blockchain technology to help clients in the oil and gas sector pay their suppliers and subcontractors more promptly.

“It’s about getting companies to take that leap and start doing these touchless transactions,” says Michael Matthews, senior vice president, Data Gumbo. The blockchain Data Gumbo uses is private, and it isn’t maintained by a large pool of users like the ones used for Bitcoin or other cryptocurrencies. Instead, it serves as an immutable digital ledger for transactions among suppliers, contractors and owners, providing quick confirmations so payments can be issued faster. “Existing systems are set up so a human can look at it and say, ‘OK, 30 days from now I’ll pay for it.’ Now the transaction happens right at the point of transfer, verified by data sources that were agreed upon,” explains Matthews. “We’re not endlessly relitigating things from 35 days ago—it’s a different way of thinking.”

“Five years ago, no one was collecting this level of logistics data. It was lost on a whiteboard or on a piece of paper.”

– James Swanston, CEO, Voyage Control

Data Gumbo’s smart contracts can ingest data points from a variety of sources, whether it’s an automated scan at a jobsite gate or a worker checking off an item on a digital punch list. Once the contractual data points are confirmed, the transaction is approved, payments are made, and it’s all recorded on the private blockchain where it can be called up and reviewed as needed. “We are very careful in how we present this technology—this is about automating the process, we are not replacing anything,” says Matthews.

In one project for a large oil services firm, Data Gumbo’s blockchain is being used to track the providence and quality control of materials, in addition to delivery payments. Pipe fabrication, inspections, certifications and welding inspections were all captured on the blockchain, in an effort to root out counterfeit or defective materials. Jovix RFID tags were used for the physical tracking of the pipes, sending another data point. “We have open APIs to pull data in, from the pipe fabricator to the company doing the coatings to the EPC receiving and installing the pipe on site. It’s all smart contracts capturing the data,” says Matthews.

While some contractors and owners are beginning to embrace these kinds of digitized supply chains, the pace is still slow, says CII’s Mulva. “Everybody wants to be a fast follower: No one wants to be first, they would rather leverage the best practices someone else has developed,” he says. But while owners and contractors feel pressured to drive down costs, some are seeing value in investing a little more up front in procurement and logistics. “People keep trying to get contracts that are about stealing that last nickel, but as contractors, we need to say, ‘That nickel is needed to improve the supply chain,’ ” he says.