Mitigating Supply Chain Disruptions by Design

By Jessyca Henderson, Esq., Owner, The Law Office of Jessyca L. Henderson LLC

June 7, 2022

Since March 2020 when COVID-19 was deemed a global pandemic by the World Health Organization, every industry has experienced disruptions in supply chains (Illustrated here in a New York Times interactive flow chart). According to sources quoted by The New York Times, the subsequent disruptions throughout the following two years started with a shortage of shipping containers in China relating to demand for the personal protective equipment.

The resulting confusion and delays at ports – where many shipments sat unclaimed – ostensibly upset the intricate web of global supply and demand, leaving the design and construction industry with more questions than answers. Kermit Baker, AIA’s Chief Economist, offered additional nuance and an alternative explanation in a recent interview, stating that the situation stems from long-brewing supply chain issues particular to the nature of globalism,  just lying in wait for a pandemic or another major event to serve as a catalyst for crisis.

Regardless of the underlying factors, the “Great Supply Chain Disruption” represents perhaps the largest coincident event of the pandemic, and has profoundly impacted design and construction. As also reported in the New York Times in February of this year, the end to the supply chain turmoil is not yet in sight and may not have an “end” as such, but rather an evolution. Indeed, perhaps the disruptions resulting from the pandemic are best viewed as a warning for the future, and as strong argument for completely rethinking how the industry sources its materials.

Disruption Mitigation Strategies by Design

Given the likelihood of future pandemics, and the certainty of more frequent major weather events and public health crises related to climate change, the recent supply disruptions can be viewed as a stark warning for continued stresses on the global system.  In that vein, major manufacturers and technology companies aren’t waiting to find out what the future holds, rather, they are adjusting course.

In the largest manufacturers, supply chains are already largely managed with support from sophisticated software intended to streamline sources and minimize delays. IBM and other major technology companies use words like “agility” and “resilience” to describe their AI-based platforms that promise to see around corners. While this terminology is de rigueur in today’s marketplace, the issues are perhaps more nuanced than what might be normally managed by such platforms at a grand scale. “Even when we have the product produced and ready to go, we’ll run into issues like shipping label adhesive not being available,” said Amanda Darley, director of marketing at Mannington Commercial, quoted in Interior Design Magazine.

Within design firms, the first line of defense may be found in specifications and contracts that enable the use of substitutions and reasonable contingencies.  Re-selection of materials and products is a major source of strain for design professionals, resulting in client frustration and a strain on design services budgets, but it may need to be recognized as an unavoidable condition in the design business.

The flow of supply chain information between source and end user – and all points in between – is also a major factor in management of a supply crisis. Design professionals and (by extension their clients) would benefit from greater transparency in the system: accurate, real-time information and projections on product availability should be made accessible, along with the technical product data typically incorporated by the design professional in making selections.

Local sourcing, deconstruction, reuse and recycling are well known sustainable design strategies naturally aligned with avoiding supply chain disruptions.  But can they be scaled to meet the needs of the largest projects? Perhaps only with some significant regulatory changes providing meaningful support. (Deconstruction ordinances are apparently on the rise.) Is there a future where deconstruction, reuse and recycling of building materials and components may be deployed at a massive scale, reducing strain in measurable ways on an already strained system?  In a world full of rapidly aging commercial buildings, expansion of the practice at a much larger scale could address both environmental and business continuity objectives.

Immediate Risk Mitigation Strategies

Even without the Great Supply Chain Disruption, some supply chain delays and failures are inevitable, and have been a fact of life for a long time.  For many businesses and industries, insurance has filled the gap. Ironically, maritime insurance is the oldest form of insurance — covering the risks associated with the long-haul ocean voyages centuries ago that ultimately formed, the modern system of global trade.   Commercial enterprises are already typically covered for supply chain disruptions to some degree, and the insurance industry has responded to the current situation by reminding their insureds to gather intelligence, simplify, and remember that contingent business interruption cover is not an open-and-shut issue, and it has been left to courts to decide whether the cover remains valid. In other words, supply chain risk is old hat, but we’re in uncharted territory.

Creating contingencies in project specifications and diversifying sources — choosing two, three or more acceptable alternatives in advance may help. Auditing sources for availability prior to specification may be necessary.  For contractors, building inventory and stockpiling may be a growing trend to avoid future delays. Contingencies should be reflected thoughtfully in project contract documents, with careful attention to the interplay between the various project agreements.

No matter what the future holds, supply chains have always been and will continue to be an important focus for design and construction as the lifeblood of projects. It is no surprise in an industry full of tenacious creativity and ingenuity that design professionals have been finding ways to keep projects moving forward in the face of an ever-changing, multi-faceted global challenge.

Jessyca Henderson, Esq., AIA, CPHC, NOMA, CSI is an attorney and architect based in Maryland, providing legal services related to sustainable design, building science, and environment.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.