What a difference a year makes. Last November, executives from all segments of the Heavy Building Materials (HBM) ecosystem got together at the inaugural Leadership Roundtable meeting organized by Command Alkon (a Talking Logistics sponsor) to discuss a couple of simple questions:
Are there opportunities to elevate the performance of the HBM industry? Is there interest in collaborating together to pursue these opportunities?
As I shared in my write-up of the meeting last year, the attendees walked away with three key learnings from that initial gathering:
- We are part of an ecosystem, where all participants impact – and are impacted by – each other;
- There are opportunities to improve data quality across the HBM ecosystem (timeliness, accuracy, completeness);
- There’s shared interest and benefits to pursuing these opportunities.
A second meeting held this past spring moved the conversation forward, focusing on two timely and important questions:
Why is digital transformation important for the heavy building materials industry? How do we get ready for this journey?
The answer to the first question is clear when you consider the following sobering statistics about the industry:
- According to the McKinsey Global Institute, the world will need to spend $57 trillion on infrastructure by 2030 just to keep up with GDP growth.
- And the Global Infrastructure Hub, a G20 initiative, estimates the world will invest about $79 trillion on infrastructure projects through 2040, although the actual need is $94 trillion — a gap of $15 trillion!
- The HBM industry has to overcome the inefficiencies that today result in large projects typically taking 20 percent longer to finish than scheduled and cost up to 80 percent more than budgeted.
- According to a McKinsey Global Institute study, the construction industry is among the least digitized, ranking 21 out of 22 industries (only Agriculture and hunting ranked lower).
- As reported in MarketWatch, “The global construction industry has a chronic productivity problem. Over the past 20 years, productivity has grown at only 1% annually, only around one-third the rate of the world economy and only around one-quarter of the rate in manufacturing.”
Simply put, digital transformation matters because it’s the only way the HBM industry will be able to meet — both cost-effectively and on time — the large need for infrastructure investments around the world. It also matters because federal and state agencies and competitive pressures will also demand it (see, for example, the Federal Highway Administration’s e-Construction and Partnering initiative).
Getting Started with Digital Transformation
Therefore, it’s not surprising that the question at the forefront of the most recent Leadership Roundtable meeting (held last month at the Command Alkon ELEVATE 2018 conference) was, How do we get started?
I had the opportunity to once again moderate this year’s meeting and I answered that question by quoting Mark Twain:
The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small manageable tasks, and then starting on the first one.
Funny enough, that is the same advice I get from supply chain and logistics executives who are already making progress on a digital transformation journey. “Just get started,” they tell me. “You can spend weeks and months talking and overthinking and overanalyzing everything, and the next thing you know, a year has gone by and you haven’t done anything except fall further behind the competition.”
Digital transformation is a long journey, so trying to sprint through it is a recipe for failure (as many companies have painfully learned with “Big Bang” ERP implementations). What the leaders have done is focus on achieving quick wins — that is, they have identified opportunities to eliminate waste or replace manual processes with technology that are low risk and require minimal time, cost, and resources to achieve.
Business Cases and Success Stories
Most of the Leadership Roundtable meeting, therefore, was spent sharing and discussing various business cases, with several Command Alkon customers sharing their success stories. I don’t have the time or space to go into all of them here, but they generally showcased different processes across the construction/heavy building materials supply chain and how all trading partners can achieve significant benefits (cost reduction, productivity improvement, enhanced customer experience) by working more collaboratively together. This involves moving away from manual and paper-based processes and leveraging network-based business intelligence, optimization, and analytics tools to convert data into actionable intelligence.
One case study, for example, highlighted how a hauler, cement supplier, and ready-mix production plant were able to transform and streamline the supply management process. By monitoring inventory levels in real time and forecasting material usage based on actual ready mix demand (using Command Alkon’s supplyConnect solution), the hauler coordinates the cement replenishment process between the supplier and plant. The benefits to date include better asset utilization for the hauler, more optimized inventory levels for the plant (along with less labor hours spent on order management), and better capacity utilization for the supplier. It was essentially a “vendor managed inventory” case study, but while VMI is common in other industries, it’s relatively new and uncommon in the heavy building materials industry.
Another business case focused on BuildIT, a relatively new solution that Command Alkon introduced earlier this year “that allows Contractors, Haulers and Suppliers to interact and work together by streamlining their order through goods acceptance processes.” As described in the press release from April 2018:
Companies can order, receive, and account for materials being delivered to the job site – all on a centralized platform that integrates with virtually any Ticketing software. Information can be digitally shared across the entire HBM ecosystem, transforming the way that trading partners communicate with one another.
As I wrote after last year’s conference, Command Alkon has the opportunity to become a supply chain operating network (SCON) for the heavy building materials industry, which would not only provide the company with new avenues for growth, but would also help the entire HBM ecosystem reach higher levels of supply chain performance. BuildIT is essentially a SCON for the industry. The solution has already been used in 100+ projects, with more than 100 suppliers connected and over 13 million tickets tracked. As more trading partners connect to the platform and more functionality is added (such as mobile capabilities), BuildIT aims to become “the single source of truth” for all trading partners working on a project.
The secret of getting ahead is getting started. You don’t need to have everything figured out before you start; not everything is going to go smoothly or perfectly along the way; there are still pieces missing from the technology puzzle. But it’s clear from the business cases presented at the meeting that those companies that got started on their digital transformation journey are in a better place today than they were a year ago.
For additional insights and advice on digital transformation in the construction and heavy building materials industry, I encourage you to download a research e-book we wrote on the topic — “Construction Is Lagging In Digitization LET’S GET UNSTUCK.” The e-book provides a practical definition of digital transformation, discusses how to get started and get buy-in from senior management and trading partners, and provides recommendations for how companies in the HBM industry can move up the digital transformation maturity curve.