A Q&A with ABC’s Industry Engagement Manager Dr Tony Eccott
Question 1 : In what context has ABC had the opportunity to work around any supply chain challenges of the last 24 months?
Tony: ABC is a centre of excellence working to accelerate the UK’s drive towards net zero carbon by transforming the way buildings are powered and heated. To this end, our mission has always been to identify and integrate the best materials, design and equipment for building homes, workplaces and communities that actively combat climate change. We have procured a wide range of commodities from suppliers throughout the UK and Europe, which has led to a number of complex disruptions.
These disruptions can be broadly split into three categories:
- component/commodity availability
- skills gap/labour shortfall
- escalating costs.
Question 2: You organised the ABC Supplier Engagement Forum held at Berkeley during the summer of 2022. Can you tell us what specific challenges you had the chance to discuss with industry colleagues?
Tony: Widespread feedback we had, was that our supply chains are under unprecedented pressure. The coronavirus pandemic, labour shortages, the energy crisis, the war in Ukraine and wider inflationary pressures have meant that costs are constantly fluctuating and are more unpredictable than ever before. Organisations across the built environment must collaborate in order to overcome big issues like component availability, labour shortfall and escalating costs.
Question 3: Can you give us some examples from your work of the issues you have just identified?
Tony: Sure. If we take the first one, about component/commodity availability, we have seen a huge variation in what can be procured easily and what can’t. For example, boiler manufacturers, who usually gave a three-day lead time prior to the pandemic, now ask for three months. Another good example is that of the global microchip shortage: in the case of ABC, many components within the heat network have chips in their controllers such as pumps, boilers, heat meters and actuators. The global shortage has led to delays in acquiring the components and as a consequent rearranging of the programme build schedule to minimise the impact of the delay.
A further challenge facing the net zero sector is one brought on by a skills gap and labour shortage, both of which are having a significant impact. Skills gaps can be seen across all major industries as the labour market simultaneously recovers from the pandemic and faces the consequences of persistently high inflation for the first time in decades. Put simply, this is leading to businesses being unable to staff their operations properly.
We have directly been affected by this problem. Key suppliers have been inundated with general requests for tenders. However, they are only able to take on about 15% of the additional work that is available on the market, due to the skills gap and labour shortage. This puts added pressure on suppliers with high rates of staff mobility as people look for improved pay, which also prevents expansion to support the market.
Question 4: You also mentioned escalating costs. What impact has this had on ABC projects?
Tony: The cost of materials has had a significant impact on several projects. Predominantly, this impact has been financial, though it has also led to quality concerns and availability issues as alternative options were sought. For example:
- Wood, one of the principal building materials is an example of this. Since the first lockdown in March 2020, demand for wood has been high due to an increased interest in DIY, with a number of countries reporting their lowest stock levels for over two decades. This has also been exacerbated by the supply route complexities following Brexit.
- Battery energy storage systems, essential to enable energy from renewables to be stored and then used by the customer when required, have also been hit by global metal price increases. Lithium, nickel, copper and steel prices have undergone unprecedented rises, and this has affected the resulting supply chain.
However, we have seen examples of good supply chain management which has meant that projects have progressed consistently and as predicted. A project for ABC, supplied and managed by Spirax Sarco, was the steam battery. Despite the difficulties faced by much of the supply chain as described earlier, the steam battery project remained stable.
Question 5: What was the success due to, in your opinion?
Tony: Good programme management within ABC and key suppliers. The main contributors behind this success being:
- ARCI chart (i.e. Accountability, Responsibility, Consulted, Informed), an important tool in programme management
- the prioritisation of long lead-time items and managing delivery effectively
- realistic lead times in the supply chain reflected in the overall timing plan, and
- the in-house manufacture of some key components to ensure supplier autonomy.
Question 6: What are your recommendations for the future?
Tony: Ultimately, of course, the challenges discussed are symptoms of the broader issues mentioned and there is no easy solution for these. However, it was evident from our experiences and conversations with partners, that collaboration and good programme management put suppliers in the strongest possible place to overcome these challenges.
A smarter approach is required, and the following should be taken into account when considering future business:
- workforce retention and re-skilling
- supply chain visibility
- supply chain resilience
- material escalators
- extended lead times to allow products and skills availability
- commodity supply routes.
In a nutshell, there are many organisations contributing towards the net zero goal. However, no matter how good the technology is, collaboration and integration are essential to achieve success. Forward planning, teamwork, robust networks and flexibility in programme management are paramount within the supply chain to provide maximum efficiency during these unprecedented times.
ABC can support your business with advice and expert consultancy on these issues. Come and have a chat with us, if you would like to find out more email us [email protected]