Venture Funding in Construction Tech (Part 4 of 4)

The construction supply chain is different to other industries and must find unique solutions and concepts for improving performance and efficiency. It is important to distinguish what has hindered digitisation of the supply chain and how start-ups are creating immediate value.

Unique characteristics of construction supply chain

Converging Supply Chain
The construction supply chain directs all materials to the construction site where the project is assembled from incoming materials. The “construction factory” is set up around the single product, in contrast to manufacturing systems where multiple products pass through the factory and are distributed to many customers.

Made-to-order
Construction projects are all made-to-order meaning no two projects are alike. Even if you are dealing with the exact same contractors and building, the sites and the weather will be different — two factors which can completely change how a project is executed.

Separation between design and construction
One of the main differences in the construction supply chain is the extent to which the industry separates design from production. Failure of design professionals to consider how a contractor will construct the design can result in scheduling problems, delays, jand disputes during the construction process.

Complex transaction process
When a load of materials arrives at the job site, it is not an official transaction until the inspector certifies it is the right material, or possibly even with a 28 day delay when a lab technician certifies the materials.

Supply chain optimisation through mobile tracking and deliveries

Understanding the logistical function of suppliers in relation to the limited logistical capability of contractors brings an opportunity for innovation. Analysing the supply chain there are three key areas prime for innovation:

Location Analysis
Production facilities in construction, such as construction sites, are mobile. As a result, demand points (consumer locations) are largely unknown while logistics networks are highly unstable. This has a direct negative effect on logistics efficiency and makes optimum location of suppliers’ distribution centres virtually impossible. Furthermore, high transportation costs force suppliers not to service remote delivery locations prompting contractors to switch to local market providers. While temporary business with local suppliers seems to be more effective from a cost-benefit analysis perspective, benefits associated with long term supply chain relationships are lost.

Inventory Analysis
A contractor’s ability to carry inventory is often limited or even absent, mainly due to the restricted storage capacity on site. Consequently, suppliers need to plan for sufficient inventory to satisfy demand. Generally, inventory planning is based on future demand forecasts flowing upstream from the supply chain.

However, in construction, efficient inventory planning is hindered by the fact that contractors are not aware and thus, cannot communicate demand prior to contract nomination. The resultant inefficiencies, such as backlogs, capacity mismatch, unavailability of materials, are critical to the performance of the whole supply chain. Further consequences are evident at construction sites where ordering and delivery practices result in delays due to lack of materials and additional costs caused by express deliveries.

Transportation Analysis
In construction, transportation costs account for over 66% of logistics costs since materials and raw components are generally high volume and low value. [5] High fluctuations of demand can result in a sporadic delivery service that can defeat the effort to integrate transport capability into a logistical system. When these costs are combined with the energy consumed for the transportation of materials then it is clear that transportation is an area of research ripe for change.

Carbon reduction through transportation efficiencies

With the high volume of raw materials moved for construction projects, there are huge opportunities for carbon emission reductions through more efficient and deduction in transportation needed. More precise and predictable inventory needs will lead to batched and planned delivery with a deduction in sporadic transport for last-minute needs.

Modular construction is praised as greener potential for construction due to its ability to send blueprints and plans for modular components to local manufacturers (usually under 100 miles between factory and final site) and more accurately construct parts or kits, and manage transportation logistics.

Additionally, integrated transportation capability in larger logistical systems can further decrease carbon emissions as construction projects can benefit from established logistic networks and efficiencies.

Emerging collaboration solutions

Schuttflix is an ordering and delivery marketplace for the bulk goods, materials such as sand and gravel. As of April 2020, Schuttflix achieves over €500k a month with the growth supported by over 900 partners with more than 2,000 vehicles, which are directly connected to customers via the app.

GoFor, an Uber for construction materials, delivers small to big and bulky materials, locally within three hours. The Express, Same-Day or Scheduled on-demand service helps North American businesses of all sizes get their products into the hands of customers fast.

TommyRun is an app-based and web-interface platform that connects our driver network to the construction & building material supply chain. For builders and contractors, they are a on-demand construction & building material runner.

RenoRun delivers lumber, drywall, screws, and any other building materials, straight to the jobsite within two hours. The app helps the construction Industry maximise productivity, saving contractors wasted run-around hours.

Note: Snapshot of start-ups as of May 2021 — not conclusive of all start-ups in the industry or RHV pipeline.

ConTech is still an emerging area and has a huge potential impact on the industry

Construction is a very traditional and complicated industry with many players and moving parts. Technology has only just begun to change the industry through tools to manage communication, organisation between different parties, and the supply chain and logistics. As minimal percentage improvements still yield massive time and cost savings, ConTech’s potential impact is massive and will be one to keep an eye on as the technology in the space matures and grows into more areas.

5. Bowersox