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Why Earlier Is Better for Large-Scale Projects


Kent Danforth
Chief Procurement Officer and Senior Vice President

Two S&B construction workers reviewing construction plans

2023 remains a year of uncertainty as companies face recession prospects, inflation concerns and supply chain challenges. Yet, companies expect capital spending and new large-scale project activity to boom. According to a recent CNBC survey, corporate capital spending will forge ahead in 2023, with more than one-third of respondents saying their company's capital spending will increase over the next 12 months.

To navigate uncertainty and deliver for our customers S&B, builds supply chain resiliency into preliminary planning, estimating and execution. Supply disruption, transportation delay and vendor availability have become the norm and integrated planning and execution have made a difference for our customers.

Why is earlier better?

Companies historically focused on cost efficiency have now turned their attention to increasing the resilience of supply chains—a smart move. Integrated EPC firms work with owners to plan and buy bulk materials and equipment early for known pricing and securing the available materials. Purchasing ahead (even months in advance) will ensure the supplies are ready when needed, saving significant time and possibly money in the long run. We recommend customers lock in not only their EPC partner, but the prices and delivery of materials and equipment as soon as possible to avoid supply chain disruptions and cost growth.

While early buying of even raw materials remains one of the easiest ways to beat supply chain woes, commodity prices remain unclear in the post-pandemic world. For example, at the time of this post, the cost of copper skyrocketed by 6% in less than two weeks. S&B's procurement team studies the markets to optimize the pricing of outside products and services to create value to the project.

Rely less on just-in-time inventory systems

In recent years, many companies adopted just-in-time (JIT) inventory systems, with a minimum quantity of materials on hand, to optimize cash use and boost liquidity. A JIT strategy became problematic during the pandemic when global supply chains came to a screeching halt. For instance, heightened product demand or an unexpected supplier shortage can disrupt the entire supply chain and stall a project schedule because no backup options exist. As a result, procurement teams practicing JIT will not have the extra stock to manage unexpected challenges, resulting in project delays and lost revenue.

Great supplier relationships

Integrated EPC firms provide increased value through the strong relationships with suppliers. For example, S&B's procurement team partners with thousands of trusted suppliers with fairness, transparency and respect. S&B has worked with the same suppliers serving various industries for decades.

EPC firms must work closely with suppliers to manage inventory storage because materials may sit in a warehouse for up to six months. Storage remains a critical factor for the early procurement of materials like volatile-priced equipment such as electrical cables. Having the project's materials and equipment on hand outweighs the risk of inventory going unsold and sitting in the warehouse. Integrated planning and key supplier relationships are the anecdote to disruption.

The right EPC partner

Decades ago, purchasing an industrial project's raw materials and equipment from the lowest-cost supplier only weeks in advance made sense. However, that approach no longer works in today's supply chain uncertainty, making a case for earlier involvement of procurement and its key suppliers for speedy bulk material and equipment purchases. Partnering with the right integrated EPC partner like S&B ensures preferred shop space, competitive pricing and timely delivery of materials to keep projects on track despite the ongoing global supply chain challenges.

S&B Engineers and Constructors keep these projects on track by managing and being alert to the ever-changing ongoing supply chain disruptions. S&B handles materials management, warehousing, purchasing, expediting, source inspection, logistics, field buying, third-party rentals and management for large-scale projects. Learn more about S&B's procurement team.

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