Construction and Supply Risk: An Accident Waiting to Happen? (Part 1)

My dear stepfather is an old-school litigator at a law firm that’s older than many colleges and universities. He’s an academic and curious sort – more “professor” than lawyer when you talk to him – and the various conversations we’ve had over the years about liability in the construction supply chain (one of his specialty areas) are absolutely fascinating. If I had known him as a child, I might have gone into law, because the business and supply chain issues he deals with are exponentially more fascinating than dealing with most finance-related matters – which led me initially to consulting.

But I digress. My stepfather will attest to the fact that few companies, builders, and primes are aware of all of the risks lurking in their building supply chains. In fact, much of his practice is built on arbitrating and litigating cases where risk was not carefully considered up-front – from design/architectural risk factors to the effective management of sub-tier suppliers. This perspective is echoed in a recent story in a UK building/construct trades publication that was based on a survey of “directors, procurement managers and buyers within 131 large UK businesses boasting over 250 employees” sponsored by Achilles, the venerable supplier management BPO that few know about outside its customer base (but should)!

According to the survey results, many construction companies “do not know who their suppliers’ suppliers are, yet remain ‘confident’ about their ability to manage supply chain risks.” Ha! The survey, part of a broader industry study, found that the “construction sector was the least confident that its data about suppliers was robust and verifiable … In total, 60% of construction companies had doubts, or were dissatisfied, about the ability of their supply chain to mitigate against potential risks. And more than half of them were aware of a supplier failing to meet compliance requirements.”

Just remember that next time you head into a lift!

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