What Trump’s tariffs mean for the construction industry
With the US imposing 25% tariffs on foreign steel and aluminium, it’s fair to say that the construction industry is facing geopolitical change. The various consequences for construction in the UK will certainly need to be managed. As we’ve learned many times this decade, from extreme occurrences like Covid-19 and climate change events, the most effective antidote for uncertainty is resilience and agility.
As UK construction gears up for this shift, staying agile and sharp in managing material costs and uncertainties will be crucial. Matt Smart, Delivery Director at Barkers Commercial Consultancy, explores what the new tariffs could mean for the industry.
State of affairs
The backbone of agility and resilience in construction is procurement. The function’s leaders, Chief Procurement Officers (CPOs), are at the heart of the supply chain, where agility is most essential.
However, procurement operates in a complex landscape where dependencies, operational challenges, and layers of suppliers can paralyse on-demand buying and necessary pivots.
Two critical dependencies are materials and labour. In addition to metals, the availability of generic yet core materials like sand and bricks is often uncertain. The labour market is equally volatile, with specialist availability and rates varying by region.
Additionally, procurement teams face daily challenges, chief among them being on-time delivery. Ensuring timely delivery is tough, and delays can carry penalties. Teams also navigate supply chain disruptions and operational hurdles like meeting quality standards. Here, balancing cost and quality is crucial, as unmanaged challenges can damage impact and credibility.
Additionally, procurement teams must manage tiered supplier networks through distributors, rarely with a single point of contact. This complicates communication and stops procurement from pivoting quickly, affecting the entire organization.
Window of opportunity
Given the function’s complexity and businesses’ need to respond to geopolitical changes, CPOs have an opportunity: step up and reform procurement to be as strong as possible. This way, their organisations can respond to change.
The concern, however, is that already swamped procurement teams might not have the luxury of time to take up the mantle. That said, stepping into an enabler role will make their businesses so much more robust. Procurement can facilitate seamless supply chains that unlock complete agility, really positioning their organisations to navigate change. Additionally, they can boost profitability.
Helping profit is necessary because various dependencies, challenges, and the tiered supplier networks in which procurement operates cause margins to shrink. Ultimately, these variables delay jobs and allow for missed staffing opportunities.
Complexities also cause late deliveries due to issues like material dependencies or quality concerns. This can harm project impact, incur fines, and damage reputations across the industry.
Given the economic and reputational risks construction already faces against the evolving geopolitical landscape, something needs to change. The time has come for CPOs to connect the supply chain through end-to-end construction.
Making it happen
When executed effectively, CPOs can masterfully orchestrate crucial elements, dependencies, variables, and supplier layers, laying the groundwork to impress customers, optimise profits, and pivot swiftly when needed.
Here’s how CPOs can make this a reality:
- Integrate: Secure a seat at the decision-making table. CPOs play a vital role in integrating material strategies and designing processes that enhance profitability and reputation. Procurement can proactively solve problems, such as leading sustainability efforts and empowering decarbonisation processes. The aim is to integrate procurement with the business to facilitate the most profitable and efficient processes.
- Digitise: Prioritise fully digitised procurement teams and quality data. This enables process automation and better communication with suppliers. Further, improved data tracking and reporting lead to continuous improvement.
- Simplify: Collaborate effectively with suppliers. Ensure timely and complete deliveries by leveraging spend data to negotiate mutually beneficial terms. Keep things simple, be specific about business needs, and maintain transparency to foster trust. This allows teams to work with suppliers, forecast and plan, making the supply chain robust.
CPOs who lead this charge can make a significant impact. By strengthening their functions through integration, digitisation, and supplier collaboration, they can streamline the supply chain.
Ultimately, a coherent supply chain unlocks agility across the business – enabling quick decision-making and action. With this achieved, leaders can steer through volatility and into stability.