In recent years, the global supply chain has faced unprecedented disruption. Throughout every project phase, from estimating to construction, MEP contractors must address supply chain disruptions, unstable commodity prices and general global economic conditions that threaten to drive up costs and jeopardize project timelines.
Navigating these challenges is even more difficult for contractors who rely on disconnected technology and manual processes and must manage material and labor costs without complete, up-to-date item-level information.
Technology offers a reliable path to more productive and profitable supply chain management by connecting people, processes, information and applications, leading many contractors to adopt a fully digitized procurement process that synchronizes product information between them and their suppliers.
Digital Pricing and Procurement
Improving supply chain productivity relies heavily on standardized information flowing freely from one project phase to the next. Creating quotes and orders using a bill of materials (BOM) generated from a fully managed materials database with material codes, descriptions and prices enables accurate and speedy material sourcing, reduces confusion and errors in procurement, and can even boost accounts payable tracking and processing capabilities.
With workflows becoming increasingly digital, Miller Mechanical, a Georgia-based contractor, saw an opportunity to reduce waste and friction in the company's supply chain operations. "We needed to streamline our process," said the company's general manager, Chad Baxter. "It was very cumbersome."
Miller Mechanical began using Supplier Xchange, Trimble's digital pricing and procurement solution with its local supplier, Ferguson. Today, Supplier Xchange provides Miller Mechanical with real-time pricing directly from Ferguson. This is made possible by a digital connection built on a common data environment that supports better collaboration between contractors and their preferred suppliers.
Digital connections between Miller Mechanical and its distributors automated the exchange of material information, transforming quotes and orders into a fully digital workflow.
Through a direct connection with its main supplier, Ferguson, Miller Mechanical can access up-to-date contracted pricing information. "Pricing is live and up-to-date, and we've cross-referenced around 900,000 SKUs that have a direct match or a one-to-one correlation," said JD Abrams, director of construction services and technology at Ferguson. "The efficiency gains are a game changer."
Supplier Xchange turns contracted pricing information into a purchase order (PO) that flows into Miller Mechanical's ERP, immediately placing the order while simultaneously accounting for it financially. Automatic syncing of the PO saves time and reduces errors by eliminating manual entry. "It creates a closed-loop system for receiving and accounts payable," said Baxter. "We've moved from going between multiple digital and manual systems to just one that seamlessly syncs with the others, making us faster and more accurate."
Optimizing the Supply Chain and Material Procurement Process
A digital supply chain may initially feel daunting, but contractors can avoid common pitfalls and succeed with the proper knowledge. A solid strategy must address two main problems—disconnected technology and a lack of standardized data.
Connected Systems
As mentioned earlier, one of the primary reasons for the slow pace of digitization in the MEP sector is the use of disparate software solutions from multiple vendors. Often, these systems lack standard integration, creating information silos that hinder the smooth flow of data. Siloed data leads to downstream inefficiencies for project teams, making managing and tracking procurement activities difficult.
As the construction industry evolves, it's moving toward a connected technology ecosystem in which conceptual design can inform estimates, detailed designs, fabrication activities, bid management, project management and procurement. The same is true with supply chain and material procurement activities.
Instead of multiple software vendors to address single problems, software should integrate with other technologies, stakeholders and teams across the preconstruction and construction phases.
Fragmented technology and disparate data go hand in hand. When preconstruction or construction applications do not communicate with other technologies, teams or project stakeholders, data is disconnected, locked away and unable to inform other parts of the workflow. Additionally, as contractors switch from one software application to another, translating the data consumes resources and increases the potential for errors.
Standardized Data
A significant barrier to effective information flow is the absence of a common data environment. When contractors and suppliers rely on a fully managed material database to generate quotes and orders, they can streamline their workflow with standardized product information, including material codes, descriptions and prices. This approach ensures accurate and efficient material sourcing, minimizes procurement errors and enhances accounts payable tracking capabilities.
However, many contractors still manage purchase orders without material codes. According to a Trimble Viewpoint and Carnegie Mellon University survey, 60% of MEP contractors in North America do not use standardized material codes in their procure-to-pay process. This lack of standardization further complicates the procurement process and inhibits productivity.
Suppliers and contractors must align on material sourcing, which is only possible when contributing to a common data environment. A common data environment populated with data from multiple preconstruction and construction technologies allows information based on standardized definitions to be shared freely across teams. In this case, the estimating team can pull pricing from connected suppliers 24/7, ensuring the most up-to-date pricing in estimates. Project team members can create a BOM, which becomes instantly available to other team members responsible for purchasing, who can then submit purchase orders directly to their connected distributors.
With this automatic, digitized information exchange, the risk of miscommunication or inaccurate pricing drops significantly.
The Inevitable and Critical Path to Digitization
Adopting a digitized approach to material sourcing offers significant opportunities for improving efficiency and data collection for critical reporting and tracking functions. Contractors can achieve more seamless and connected construction processes by utilizing a common data environment, connected systems and electronic information exchange with suppliers. This transformation will enhance information flow for improved efficiency, reduced errors and enhanced productivity throughout the supply chain.
Melissa Dixon is a senior product manager for the Construction Supply Chain Division within Trimble MEP.