Alpaca VC
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Alpaca VC

New Alpaca Field Study: Construction Material Procurement & Logistics

Authors: Daniel Fetner, Rhea Advani

As millennials take over purchasing power, online experiences are no longer a luxury, but rather an expectation. This holds true for the construction space as well, yet most material suppliers in North America are not powered by any e-commerce or digital ordering experience.

Why? On the demand side, contractors are managing 10+ supplier relationships for a given project due to the high level of fragmentation, and each supplier and material has its unique nuances and logistics. Delayed material delivery drives up to a ~30% increase in construction material costs, while a lack of transparency results in companies overpaying by up to 15%, according to McKinsey. These issues plague both small and large organizations alike, with central procurement proving to be a challenging undertaking given the hyperlocal nature of construction.

On the supply side, a lack of technology adoption results in an inability to provide accurate delivery estimates, streamlined ordering and invoicing workflows to customers. Fulfilling deliveries is challenging, and most suppliers are unable to fulfill same-day orders. Further, fulfilling large orders often requires financing, which increases the time required to fulfill orders.

We believe this materials distribution is ripe for disruption by a marketplace given the information asymmetry (and consequent opportunity to drive transparency) and associated high cost of these goods (and corresponding opportunity to build trust). This is why we’re conducting a Field Study in “Construction Material Procurement & Logistics Marketplaces,” where we hope to learn more. We look forward to engaging with founders, investors and thought leaders over the next few months.

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