Three ways technology is changing construction’s supply chain

Digitalisation is advantageous for contractors but it can also change the supply chain - increased transparency, more market power for IT service providers, and fewer independent architects, according to multinational banking and financial services, ING.

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Despite the fact that digitalisation can increase efficiency it’s still not something the built environment has embraced. The construction sector is still behind other sectors but the growth rate has been higher in the last 25 years with the value of software having quadrupled during this period.

When contractors and other supply chain partners digitalise their processes, ING believes that there are opportunities for three main changes in the supply chain.

Supply chain transparency

Digitalisation leads to construction companies exchanging data more easily and therefore transparency increases.

Due to many firms using different software, incompatibility issues mean data cannot be properly distributed in the supply chain. ING proposes that if IT systems were to be linked then the data would be unlocked and can be used by many.

The lack of digital standards means that not every company is operating on the same level digitally. This can result in problems with exchanging data and mean companies are more reliant on main supply chain partners as they have set up a protocol with them to exchange building process data.

More dominant ICT companies

With digitalisation, market power will change says ING. The shift to more powerful IT companies has already occurred in other sectors that have digitalised whereas construction companies become more dependent on information and communications technology (ICT) service providers from which they purchase software and other IT services.

Particularly, if construction companies opt to purchase external software rather than develop their own. The benefit is that the costs of purchasing digital tools is relatively limited but unfortunately cannot accommodate the specific needs of a company.

Eventually, ING believes that the construction industry will become increasingly digital over the coming years - architects will favour digital designs and suppliers/subcontractors will want to exchange digital data. The move to digitalisation is imminent.

Moving in-house

Digitalisation is often the first step towards industrial construction and the position of the architect and constructor will likewise change when industrialisation increases.

A designer has to know exactly what the industrialised construction company can and cannot process – with different systems and the industry not having fully embraced digitalisation this can be difficult.

The design will therefore more often be done in-house at the construction firm instead of at an independent architecture firm, as that is where the knowledge of the standardised industrial building options are known. In doing so, ING recognises that the architect becomes more of an industrial designer.

Construction companies can of course choose not to go digital, says ING, these companies can instead focus on niches where personal contact, customisation for their clients, and less standardisation is required.

This may perhaps work in the short run but these companies must take into account that the construction sector will continue to digitalise, even if it is at a slightly slower rate.