As the construction industry continues to evolve toward greater efficiency, a pivotal transformation is unfolding. The Industrialization of Construction^® — once a concept confined to hypothesis and theory — is now materializing, driven by the need for smarter workflows, integrated supply chains, and predictive planning. At the heart of this shift is a reimagined role for distributors, who are evolving from suppliers into strategic partners.

This article explores the evolving role of distributors in streamlining supply chains and enhancing efficiency through Agile Distribution^® and highlights how predictive planning and strategic partnerships are shaping the future of construction. Additionally, a case study of Crescent Electric’s experience helps illustrate how its transformation into an Agile Distributor™ is reducing costs and improving productivity, paving the way for broader industrialization.

Where Is the Industry Now? The State of Industrialization in Construction

Recent industry-wide polling (Exhibit 1) reveals that the industry is on the verge of moving from traditional to transitional workflows. Despite growing interest in leveraging data for project management, both at the GC and trade contractor level, many challenges remain common, even on large-scale megaprojects:

• Why are so many resources in building information modeling (BIM) needed — can’t you get your labor onsite and just start working?
• Why didn’t you warn that this job was going to lose money (although labor fade was predicted six months in advance)?
• Our distributor can assist in project planning, but they still need a counter for our technicians to grab parts at the last minute.
• Contracts are being drafted without clear ramifications for scope changes, effort, and timelines.
• Forepersons often say their most critical role is onsite cleanup/housekeeping and protection of finishes; secondary to that is managing off-site work, like keeping plans updated with ongoing changes and externalizing tasks (e.g., prefabrication).

This way of thinking and operating is holding the industry back. And, as Exhibit 2 highlights, most decisions are still made in the field where integration risks are highest.

To fully realize industrialization, decision-making must move upstream, away from the point of installation.

Getting there requires shifting decision-making into more controlled environments and relying on data-driven insights from those outside the jobsite (e.g., prefabrication, BIM, project controls, vendors, and manufacturers).

At the core of this shift is the Work Breakdown Structure (WBS), which should serve as the central plan for installation based on the knowledge and skill of the trades. All planning efforts should stem from here, with an ongoing focus to reduce cost at each juncture.

By externalizing more work and involving off-site resources earlier, we can optimize project outcomes, minimize risks, and truly transition to a more industrialized construction process.

From Parts to Partnerships: Shifting the role of Distributors in Construction

For the construction megacenter concept to become a reality, the role of a distributor needs to shift from buying, representing, and selling parts to that of connecting construction consumers with construction producers (i.e., a dealership).

As more production leads to faster consumption, buffers shift from the producer to the consumer during step 2 of Industrialization (Management of Work). Buffers become less necessary as the inputs and outcomes become more predictable.

In the current material supply channel, the contractor serves as the safety valve of the pipeline. As the accuracy of the following factors improve, the contractor’s role in reducing the impact of these risks will be diminished.

The contractor acts as the final buffer protecting owners and users, ensuring correct installation despite many variables impacting the jobsites, such as:

• Engineering
• Drawings
• Timing
• Schedule
• Delivery
• Coordination among the trades
• Human resource risks and variation
• Safety
• Weather
• Inspections/government regulations
• Building operation, maintenance, and usage
• Project dysfunction (e.g., conditions/overall oversight, you don’t know until you get to it)
• Qualified workforce¹

Reducing Cost With a Systematic Approach

Distributors in any industry have traditionally survived with one basic formula: buy low, sell high. Gross margin on product sales is the primary metric measured and managed.

Increasing volume has often been seen as the easiest way to improve profit, as it brings more gross margin dollars to the bottom line. However, this incentive doesn’t necessarily align with lowest installed cost. While it may help contractors get a volume discount, it does nothing to reduce their labor cost, most specifically the cost of material handling.

The costs below the gross margin line are not as visible or easy to manage for a distributor, and, therefore, few focus systematically on improving them. Agile Distribution^® turns this approach upside down by aligning customer buying habits with distributors’ operations in sales, warehouse, and delivery operations to reduce the cost of processing orders. As an example, the Crescent Electric Supply Company Case Study below shows how the company redeveloped itself as an Agile Distributor™.

As shown in Exhibit 3, each of the four pillars of Agile Distribution^® plays a part in delivering better value through the distributor’s role in construction outcomes. Crescent Electric initially focused on the first two pillars, helping the company improve its internal capacity from sales through delivery, which in turn reduces operational cost.

Rather than passing their transactional costs to customers, Agile Distributors™ create opportunities for cost reduction by:

• Reducing internal waste to:
  • Lower the transactional cost to contractors, hence reducing their prices
  • Improve the quality of delivery and enhance the overall experience
  • Minimize waste at jobsites
• Improving communication by:
  • Enhancing the customer point of entry
  • Participating in competitive bidding on major material/equipment packages (e.g., gear and lighting)
  • Using feedback from jobsites to boost labor productivity
• Creating strategic alliances with their contractors to:
  • Ensure material is ready when, where, and how contractors want it
  • Manage jobsite inventory to reduce labor time spent on ordering
  • Reduce the cost and time of product returns resulting from inadequate communication on bidding, takeoffs, and jobsite materials logistics and returns
  • Actively participate in the contractors’ job planning, WBS, and scheduling

Within one year of this transformation, Crescent Electric improved its capacity by studying customer buying behaviors and realigning its internal operations accordingly. Exhibit 4 shows how it has reduced its time to pick by over 50%, freeing up capacity for double the amount of material to be moved with the same resources. This direct link from customer, to operations, and to cost reduction is the goal of Agile Distribution^® and a key to making the dealership model a reality that doesn’t just pass on cost or add buffers to the supply chain.

The various steps and processes involved in getting an order from the customer (as an inquiry) into the warehouse (as an order) for pick, pack, and ship operations due is complex, potentially convoluted, and likely inefficient (think spaghetti on a plate). The various departments, systems, and manual steps of the order fulfillment process may include:

• Customer inquiry: initial contact from the customer
• Order entry: capturing and processing the order details
• Credit check: verifying customer creditworthiness
• Inventory check: confirming product availability
• Production/purchasing: initiating production or purchasing orders
• Shipping: preparing and shipping the order
• Invoicing: generating and sending invoices
• Payment processing: handling customer payments

The complexity of this process suggests potential challenges in tracking orders, identifying bottlenecks, and ensuring timely delivery.

By studying and quantifying the current state, Crescent Electric’s Process Implementation Team built solutions to improve the information flow from inquiry to order all the way through to customer delivery, saving time and reducing errors throughout the process to result in better productivity and labor efficiency on the jobsite.

As we look to the future, the dealership model presents the next evolution of this transformation.