Supply Chain Security Mitigates a Sovereign Wealth Fund’s Construction Disruptions
Developing a supply chain “early warning system” increased transparency and flexibility for the fund’s large construction projects
A leading global sovereign wealth fund was preparing for a massive surge in the country’s construction spending. Proposed megaprojects would boost the annual construction spending to twice the historical average as part of the plan to transform the country. However, supply chain disruptions triggered by the effects of Covid-19 and conflicts in Eastern Europe decreased the availability of critical construction materials and services. Along with a steep rise in inflation, these factors also led to price increases, rendering previous budget forecasts inaccurate. With annual demand projected to grow significantly and local suppliers unable to keep pace, the demand-supply imbalance would only get worse.
FundCo* realized that to keep its projects running smoothly, it needed transparency on global construction supply chains to anticipate potential supply shortages and price increases. We supported the company in developing systems to heighten transparency and help mitigate risks related to the supply and price of construction materials and services.
The most significant facet of this engagement was collaborating on the development and implementation of a supply chain security early warning system. This system was designed to instill ongoing transparency and alert the organization to possible supply chain disruptions related to supply shortages or price hikes. This analytically advanced model forecasted demand, supply, and price movements for individual construction materials and services. It projected 95% of the country’s and the organization’s construction spending across different scenarios, regions, demand centers, and real estate types for the next 10 years. The model also included forecasts for the local production of crucial construction materials and services to provide a regional point of view.
FundCo then designed a tailored operating model to enable effective governance and communication between internal and external stakeholders, which included government ministries and other key government entities. This kept stakeholders informed, provided consistent updates, and monitored the accuracy of the supply chain early warning system.
The establishment of a methodology to assess inflation’s impact on the organization’s real estate portfolio kept all parties apprised of the persistent financial reverberations. Finally, a mechanism linking signals from the supply chain early warning system to distinct mitigation strategies allowed FundCo to foresee issues and take preemptive action. Together we identified more than 100 construction material- and service-specific mitigation strategies to alleviate potential supply chain disruptions.
Increased supply chain visibility makes it possible to anticipate and adapt swiftly to any global events, shortages, or price movements affecting the construction of its megaprojects. With the establishment of a supply chain early warning system, as well as enhanced communication between key stakeholders, FundCo stands poised for success, tackling projects of epic proportions.