The adoption of supply chain management within the architecture, engineering, and construction (AEC) industry is most clearly defined by lean methodologies. Lean concepts eliminate waste, focus on value, and are most often associated with the manufacturing industry. Toyota in particular is often cited in reference to lean practices, as the company is largely credited with creating 5S Methodology. However, when it comes to supply chain management, there's likely a better example to follow. Let's consider how Amazon disrupted the retail industry and what it would take to apply that thinking to AEC.
Is there any doubt that Amazon disrupted the consumer retail space? Amazon created an ever-evolving platform that lets it massively scale marketplaces, procurement, and distribution systems for just about anything you can buy in a store. Everything you purchase in a store has to be viewed, stocked, and delivered. Amazon captures this workflow and logistics with even greater efficiency. According to Business Insider, Amazon's revenue nearly tripled between 2010 and 2014, and is forecast to almost triple again by 2017 to an estimated $160 billion. While some see it as a negative, it has been called a "model of efficiency" largely due to its ability to serve more goods to more customers with fewer staff members. If we consider that materials account for about one third of construction costs, such efficiency in the $1 trillion AEC market would certainly result in significant reduction of overall building costs.
So what's preventing Amazon from jumping into the construction industry on a massive scale? Here are three big issues that will need to be overcome for such an overhaul to transpire.
1. Form Factors for Automated Warehousing
Amazon started out with books shipped in boxes, and most of their products continue to be shipped in boxes to this day. Construction has form factors that are typically larger than books and not always contained in boxes. Amazon uses a complex warehousing system to change the dynamics of procurement – essentially storing materials from vendors so they are ready to be shipped to consumers. To be able to work in construction, Amazon needs to adjust this form factor away from small sizes and be able to abstract it to the form factors we use in construction.
2. Added Value in Delivery
Delivering materials to a jobsite is not a simple task, and the current distributors of building materials and products have integrated into jobsites. Often the same drivers deliver the materials every day, so they know when they can deliver and how and where to offload. In retail, Fedex or UPS tries to deliver during a set timeframe, but if they can't make the delivery, they come back another time. That wouldn't work in construction. Amazon would need to figure out the "last mile" problem – how to get materials from a distribution center to a jobsite in an effective way.
If you order a pair of Nikes from Amazon, there's some specialization that comes with your shoes. They are a certain model, color, and size. Construction materials and products are a bit different. If you've ever done a submittal review for a boiler, you know that there are many configurations and each parameter can be very important. Here's an example: A model 201 Parker Industrial Hot Water Boiler has a size range of between 300,000 and 6,800,000 BTUs. BTU output would be only one of perhaps ten parameters that would be very important to the performance of this boiler. Amazon would have to figure out how to manage this specialization so there was no doubt that the boiler being ordered was correct. After all, it's much harder to return a boiler than a pair of Nikes.
In summary, when we think of supply chain management, it's time to start thinking about Amazon over Toyota. Toyota deals with closed networks of known suppliers whereas Amazon created a platform that manages a workflow across a large, tumultuous industry. It's only a matter of time before a company like Amazon pivots into construction and brings greater order and efficiency to the products and materials that stream onto our jobsites.
Make sure to check out the work we’re doing in computational BIM and the automation of MEP modeling. BuildingSP is at the forefront of the application of generative design to AEC, and we look forward to better tools changing how we specify BIM on projects. You can contact us at firstname.lastname@example.org.