Demand uncertainty in construction supply chains: a discrete event simulation study

The delivery of construction projects is typically an assembly operation involving a high number of subassemblies and materials brought on site by the supply chain. However, although supply chain management in construction has attracted significant attention, paradoxically little focus has been placed on construction supply networks and operations. This paper places emphasis on supply chain operations by looking at the logistics function of construction material suppliers. Specifically, the paper examines the impact of demand uncertainty on supply chain performance in order to assess the capacity of material distribution companies to provide a timely and cost‐efficient service to the construction industry. The study adopts a discrete event simulation approach to assess the impact of demand fluctuations on two crucial logistics performance measures; lead time and cost efficiency. The results show that lead times are particularly sensitive to fluctuations under conditions of low demand. The findings also reveal that, although transport is a significant cost element for lower demand levels, higher inventory costs result in a negative exponential relationship between increasing demand and cost efficiency.