NECA TransmissionsNotes from the front lines of the electrical contracting industry

Theory Vs. Practice

Posted on Apr 29, 2014 by John M Grau

Question: What do the beer supply chain and construction scheduling have in common?

Answer: In theory, a lot; in practice, not so much.

I attended a management workshop a number of years ago where one of the exercises was playing a game that simulated the beer supply chain. Each player assumed the role of one link in the chain: brewery production manager, beer wholesaler, distributor, sales outlet and consumer. We all sat in line along a table and passed notes to each other to convey supply, demand and price information.

The only information each player had was the slip of paper that he received from the player next to him. Meaning the production manager at the brewery only knew what the wholesaler ordered, but not how much the consumer was buying at the store.

As long as supply and demand were steady, everything went well. But during the course of the game, the instructor threw in some curve balls, like a rapid drop in sales at the beer depot or a big increase in production at the brewery.

And everything fell apart. There was either too much or too little product in the supply chain. Prices became volatile, and nobody made a profit. In short, it was complete chaos.

The lesson from the game was that better information up and down the supply chain could alleviate the problem. If the brewer knew how much the consumer was buying, he had a better chance of producing the right amount rather than relying on the wholesaler for his demand information.

I recalled this exercise when I heard that the Construction Users Roundtable is releasing its “Labor Supply/Demand Forecasting Model.” I’ve been involved in meetings over the years where we tried to address the boom-or-bust labor supply problem.

Construction users and construction contractors want an abundant supply of skilled manpower. When a big job comes to town, no one wants to scramble to find qualified workers or rely on travelers with dubious work habits. On the other hand, it’s hard to recruit and train new workers when a third of the local is sitting on the bench.

Speaking from the labor supply side, we’ve asked owners to provide us with more information on upcoming projects – when and where they will be built. In theory, that’s getting information from the source to alleviate supply chain hiccups. Some have gone so far as to ask the owners to spread out their projects so that the demand doesn’t peak at the same time. That’s where theory and practice diverge.

Construction users want their projects built when they want and need them. They have many other considerations, such as financing, consumer demand, new product launching, besides the availability of the construction workforce. To expect an owner to defer a project until the contractors are ready to serve him is unrealistic.

So some good ideas are just blue-sky concepts that aren’t very practical in the real world. I hope CURT’s new construction labor supply/demand forecasting model is a success. Personally, I’m going to stick with beer.

 

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NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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