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By 2040, nearly US$100 trillion should be going towards infrastructure each year. Even if all that money can be found, the big question is whether the world will have the capacity to deliver it.
Demand for new infrastructure continues to grow. So, too, does demand for other construction — new housing, offices, distribution centers, data centers — the list goes on. The problem is that they are all competing for the same resources and capacity. And they are finding there is not enough capacity to go around.
Globally, we are seeing two trends converging. On the one side, there's a talent gap. Infrastructure owners and contractors are having a difficult time finding and developing talent, particularly roles where the time to competence is long — overhead line workers, for example, or commissioning engineers.
On the other side are supply chain challenges. Volatility in the price of key raw materials is causing problems while supplies of specialist kit are increasingly hard to find. For high-demand items, particularly things like electricity cables, generators and transformers, lead times have shifted from months to years. The supply of experienced contractors is also drying up as demand shifts the power from the buyer to the seller, with many contractors becoming more selective about the jobs they choose to bid.
We are working with owners to conduct some rigorous long-term supply chain planning, mapping their needs on a range of key components out 10 years or more to better understand their future pinch points.
The impact of these two trends converging is already creating waves across the infrastructure and construction sectors. In some cases, project owners are putting out tenders but are getting few, or even no, bids. Many job roles are taking a long time to fill. Some supplies simply aren't showing up on time. Increasingly, we are seeing projects get delayed for lack of capacity.
Reset 2025
This year, expect to see public and private infrastructure portfolio owners really start to focus in on their supply chains. Facing growing capacity restrictions and pinch points, many leaders will likely feel compelled to get much closer to their suppliers, both to better understand their capacity and to build stronger relationships. And not just their top-tier suppliers; we're helping owners build long-term relationships with second and third tier suppliers in their network, particularly those supplying scarce goods or services.
At the same time, we are working with owners to conduct some rigorous long-term supply chain planning, mapping their needs on a range of key components out 10 years or more to better understand their future pinch points. That is helping them schedule and sequence their ordering of key materials and understand where they need to diversify their supply network. It is also allowing their suppliers to build 10-year investment plans that align to their client's future needs.
Talent has also become a key pinch point for owners. A growing number are trying to get much closer to talent and talent development. Where possible, they are looking for opportunities to retrain existing talent from other functions or companies. Upskilling and development of existing talent is ongoing and we are working with many organizations to implement technology to augment their teams and automate routine activities.
For some roles, like Project Managers or Finance Clerks where skills can often be transferable, that strategy may help bridge the gap. But other roles, particularly in high demand areas like renewables, require much more time to competence and formal, focused training. Training Academies have been around for some time in places like the UK; expect to see them proliferate as sectors and governments come together to build national capacity.
Our predictions and advice
The days when you could just put out a tender and get a handful of bids are over. Leaders will need to become much more active in the management of their supply chains. That means a lot more work on understanding it and collecting data around it. It means building long-term relationships and long-term order books. It means focusing on the resilience of your supply chain and monitoring the right indicators to identify risks early.
The first step should be to understand your bank of work and identify what you are going to need both from a skills and a components and materials perspective. Then sit down with your suppliers to see what they can commit to (taking the time to verify their capacity with some smart market analysis). That should allow you to identify where your future pinch points will be so you can start developing an action plan to widen them.
Leaders will need to become much more active in the management of their supply chains.
Digitization and technology-enablement can help create significant value, both by helping broaden and deepen the relationship with suppliers through data-sharing and integration, as well as by helping to make supply chain operations more efficient overall. It will help reduce the need to hire as many FTEs as some of the more manual and mundane tasks can be automated.
Throughout, creativity will be important. Rather than simply building more redundancy into your supply chain, think about the outcomes you are trying to achieve and whether there might be more creative ways to go about delivering them. New ideas and approaches will likely be key.
One thing is clear: delivering the future infrastructure pipeline will require a complete reset of global construction and delivery capabilities. Until that happens, be prepared for disruption.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
