Big 5 InFocus | Edition 8

The secret to supply chain resilience and completing projects on time

“I'll start with an example. During the COVID-19 pandemic, most construction projects had significant delays. Yet, some developers still completed on time despite the challenges. We call the ones who managed to do this resilient companies. Resilience, to me, means that when you face adversity, you can still deliver as promised.”

- Dr. Sreejith Balasumbramanian, Associate Professor, Chair, Office of Research, Head & Founder: Centre for Supply Chain Excellence, Middlesex University Dubai

Hello, and welcome to the next issue of Big5 InFocus!?

The construction industry is grappling with significant pressures on both local and global supply chains. With megaprojects in countries like Saudi Arabia and the UAE driving up demand, coupled with economic and geopolitical changes worldwide, the supply chain has faced a number of challenges in recent times, such as the Suez Canal blockage in 2021, along with the Red Sea attacks from the end of 2023 until present day. According to the International Monetary Fund (IMF), the latter has affected trade routes and supply chain resilience in the following ways:

• Trade has been diverted from the Suez Canal to the Cape of Good Hope, thereby increasing delivery times by at least 10 days.
• In the first two months of 2024, trade volumes through the Suez Canal dropped by 50% year-over-year.

As this crisis continues, freight prices have risen all over the world.?

To learn more about the pressures facing the construction industry’s supply chain and the best practices you must follow to strengthen it, we chat with Dr. Sreejith Balasubramanian , an expert in supply chain resilience and sustainability from Middlesex University Dubai, who also heads up the university’s Centre for Supply Chain Excellence.

What are the challenges facing the construction industry’s supply chain?

Dr. Sreejith Balasubramanian says resilience is of particular importance in the Middle East, where megaprojects and gigaprojects are simultaneously underway across multiple countries, intensifying the pressure on supply chains. According to the international construction market survey (ICMS) 2024 report from Turner & Townsend, while these gigaprojects are attracting global talent, they are also stretching supply chain capacity.

The report also showed that rising demand, particularly in Saudi Arabia, is pushing up construction costs. According to the most recent market intelligence report from JLL’s, the Kingdom leads the Middle East & North Africa (MENA) region's construction project pipeline, holding 39% of the region’s projects worth $1.5 trillion. Projects of note include NEOM which will encompass different sites within its space, from smart city The Line to Oxagon, which will be a hub for innovation and technology. Hospitality and tourism destination the Red Sea Project, is an ambitious regenerative tourism development, while Qiddiya Entertainment City is meant to be the world’s largest entertainment destination when completed. All of these also mean extensive infrastructure construction – from roads to railways – which need to be executed to deliver the projects on time.

These developments have resulted in the following pressures on the supply chain:

• Material shortages
• Price volatility
• Shipping delays

What is the solution for construction companies and their suppliers?

Dr. Sreejith Balasubramanian says the industry must continue to practise the integration of sustainability and technology.

Sustainability through local sourcing

For a sustainable supply chain, one pivotal strategy Dr. Sreejith Balasubramanian strongly advocates for is local sourcing. The UAE, for instance, has made notable strides in promoting local suppliers, particularly in steel, cement and glass, he says. This is in line with the Make it in the Emirates initiative, part of the Operation 300bn Industrial Strategy, which aims to establish the UAE as a global industrial hub and reduce its reliance on imports.

Saudi Arabia has also got its eye on bolstering supply chain investments under its Vision 2030 plan. Some developments on this front include:

• The Made in Saudi program, an initiative by the National Industrial Development and Logistics Program (NIDLP) and led by the Saudi Export Development Authority (Saudi Exports), aims to support local businesses by promoting locally made products to domestic consumers and increasing the Kingdom’s exports.
• In 2022, the Kingdom launched its Global Supply Chain Resilience Initiative, a National Investment Strategy Initiative, to attract strategic supply chains to Saudi Arabia.
• In 2023, the Public Investment Fund (PIF) invested $1.3bn in four local construction contractors – AlBawani Holding Company, Almabani General Contractors Company, ElSeif Engineering Contracting Company and Nesma & Partners Contracting Company – to improve the local supply chain.

Dr. Sreejith Balasubramanian cautions that challenges remain: “Because of the importance of sustainability, developers, consultants and contractors are more open to pick local suppliers that offer similar quality to foreign suppliers. Having said that, there is still a long way to go especially with regards to volume – bearing in mind the megaprojects.”

Technological innovations driving supply chain resilience

The adoption of technology and digitalization in the construction industry has increased manifold over the last decade and has reshaped the way projects are completed.

According to Dr. Sreejith Balasubramanian , some key technological advancements that have found success in the region include:

1. Automation and robotics: Reducing dependence on manual labour and enhancing productivity and efficiency.

2. 3D Printing: Prefabricating components off-site, which are then assembled on-site, significantly reducing construction time and material wastage. Dubai Municipality has worked on 3D printing construction projects and has most recently used the technology to manufacture and install 40 public benches in Uptown Mirdiff and Al Khazzan Parks, partnering with Avenco Robotics and AC3D, who specialize in 3D Printing.?

3. Building Information Modelling (BIM): Enabling better planning and coordination during the design phase, leading to more efficient project execution. For example, Dubai’s Museum of the Future relied on BIM technology and parametric design as a fundamental part of its construction.

4. Artificial Intelligence (AI): Using Generative AI extensively in the design stages not only helps optimise aesthetic and structural elements but also helps with creating digital twins for simulating construction environments and processes. It’s worth noting here that according to the 2023 Future of Jobs report by the World Economic Forum, Saudi Arabia is set to rise in labour churn for AI and machine learning specialists, with AI and big data core skills for the labour force.

5. Blockchain and smart contracts: Enabling end-to-end supply chain tracking through blockchain tech, while smart contracts can help with automating payment processes.

How can we continue to build supply chain resilience?

Dr. Sreejith Balasubramanian reiterates the importance of following best practices such as diversifying suppliers as was seen with the Expo 2020 Dubai project or the Riyadh Metro project, and practising effective inventory management as is being followed in the case of Saudi Arabia’s gigaprojects to avoid bottlenecks. He adds, “Trust is crucial. In the construction industry, relationships with suppliers are often transactional. However, trust is very important. Moving forward, we'll see more collaboration and fewer transactional relationships. Long-term relationships with suppliers will help build resilience in the construction industry.”

It’s clear that the supply chain remains one of the most vulnerable elements of any industry in general, and the construction industry in particular, making conversations on how to mitigate its challenges essential.

At Big 5 Global, where local and international suppliers converge, these discussions take center stage, including at key sessions at the Global Leaders’ Summit, such as ‘Optimizing the Supply Chain: Resource Management in Competitive Conditions’. That session will delve into:

• improving resource management,?
• adapting to increased demand,?
• investing in innovation and technology,?
• exploring alternatives to traditional procurement methods; and,
• collaborating to overcome global disruptions and economic pressures.?

Don’t miss the chance to join these crucial conversations and explore how to make our supply chain more resilient.

Moreover, there will be a focus on new construction technology at the dedicated technology areas at Big 5 Global including Digital Construction World, Start-Up City and Big 5 FutureTech Summit – learn from global experts about the latest innovations and disruptive technologies that can allow you to achieve better efficiency and higher profit margins.

Save the date: Big 5 Global and its co-located events will take place from 26 - 29 November 2024. We look forward to seeing you there and strengthening our industry’s supply chain together.?

Bye for now. ?? Thank you for reading!

EVENT UPDATE:

Big 5 Global is transitioning to a paid event this year bringing together a highly relevant crowd, offering exclusive networking opportunities you won't find anywhere else.

For a limited time only, you will have a chance to secure your ticket at no cost. More information to be shared in the next edition.