Materials management and inventory control are concepts that have been around for centuries, and what started as highly manual practices have evolved into processes that are largely digitized.
Efficiently tracking the materials needed for a construction project is critical to the project’s success. Bar coding, RFID, and Bluetooth Low-Energy are just a few examples of unique ID technologies being used today in the digital materials management process.
In the construction industry, specifically in the engineer-procure-construct (EPC) space, the way upstream materials tracking and tracing is handled for capital projects depends on many factors, including the project size and scope of work. There are a variety of ways to manage inventories, but one thing that’s certain is that visibility into the supply chain every step along the way is vital.
Companies regularly import parts from foreign countries, and location status is often murky, which can result in project delays. To combat this, businesses will store large quantities of some materials, significantly reducing available working capital and decreasing the ability to stay flexible if changes occur.
Effective integration and clear communication between suppliers, lead contractors, and subcontractors is essential for all projects with massive supply chains. The objective should be to create a flexible supply chain that can react quickly to any circumstance, including supply shortages.
According to the Construction Industry Institute (CII), properly designed and implemented materials management programs result in many benefits, including a 6% improvement in craft labor productivity with just basic systems. This can increase an additional 4-6% in craft labor savings when more sophisticated materials management systems are utilized.
Materials management is difficult under relatively normal circumstances and especially complicated when markets are volatile. Raw material prices are still seeing fluctuations, and although prices for materials such as diesel fuel, natural gas, copper and steel are not as high as they were, they are mostly still well above their pre-pandemic levels. Additionally, the construction industry is experiencing a labor shortage and the Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS and Science Act are resulting in an increased demand for materials that are already difficult to obtain. When taken as a whole, these factors continue to cause global supply chain disruptions, which have a negative impact on production and delivery schedules.
The playbook on how to manage supply chains needs to be thrown out and reimagined because what worked in the past doesn’t work anymore due to massive resource constraints across all industries.
Bringing Order to Upstream Materials Tracking and Tracing
In addition to material traceability for quality control purposes, being aware of regulatory obligations and being able to track inventory sustainability information is just as important as knowing how much of a specific product is on hand. During an era when environmental, social and governance data (ESG) is increasingly being considered when making business decisions, material handlers must be aware of the traceability of the materials used on a project in order to address any issues that may result from using counterfeit, defective or environmentally unfriendly materials.
Construction work processes depend on data timeliness and accuracy, yet data requirements are not subject to an industrywide standard. While GS1 has identified large parts of the construction industry supply chain as a gap in their identification standards and CII has established a research team to investigate upstream materials tracking and tracing in a quest to make the process more standardized, it is unlikely this standardization will be universally adopted anytime soon. In the meantime, there are tools available that make materials management more manageable today.
Digitalization and emergent technologies are helping architecture, engineering and construction (AEC) firms collect data, establish trends and make better supply chain and business decisions. This technology includes everything from increased Internet of Things sensors in the field and within networks to the usage of distributed ledger technology like blockchain. Putting it all together in ways that optimize the supply chain while keeping projects on time and within budget is critical.
Advanced digital materials tracing allows AEC firms to access and share supply and production information, greatly improving supply chain visibility, waste reduction, construction efficiency, labor productivity and project communication.
In this age of digitalization, industrywide, the way of managing materials in the future will be different.
With the click of a mouse or scan of a QR code, a highly customized, fully digital materials management tracking and tracing solution will allow individuals working on projects to obtain all the information needed about given project components. Fact sheets will be easily accessible and will contain a wealth of information, including what the procurement package is, who the supplier is, a raw materials breakdown, when the item was first manufactured and ordered, what it looked like when it was loaded on a truck by the manufacturer, what quality records and testing reports reveal, and more.
This method of materials management will provide a myriad of data points on items that are designed, bought, installed, constructed, commissioned and ultimately turned over to project owners. One of the most immediate benefits of a solution such as this on the capital expenditure side is that there will be a single, easily auditable digital paper trail that documents every piece of relevant historical information about assets.
From conceptual design and estimating through fabrication, shipping and installation, broad-based tracking systems such as this will lead to reduced costs, better scheduling and increased accountability across the supply chain. This ultimately will allow materials and equipment to be installed in the safest, most responsible way and be in operation for the longest possible time at the lowest possible cost.
Across industries, markets, companies and projects, the more visibility and data points available throughout the supply chain, the better-informed companies will be, the faster they can make decisions and the more likely they’ll be to meet project expectations. Refining the materials management process and embracing digitalization is the key to getting there.
Project success depends on a variety of factors including efficient supply chain management and seamless integration of EPC capabilities.
Editor’s note: This post was originally published Oct. 18, 2022, and has been updated for context and accuracy.