More than half of companies still use paper and spreadsheets to manage supply chain risk
A recent survey by independent survey firm Verdantix of environmental health and safety (EHS), procurement, operations and risk management executives in six global countries indicates a growing concern about how best to manage multiple contractors. The survey of 161 executives in nine heavy industry sectors finds more than half of the company representatives said they still use a mix of spreadsheets and paper to coordinate contractor prequalification and other vital records, which could lead to safety issues.
The survey was conducted in the U.S., Australia, Canada, France, Germany and UK by Verdantix and commissioned by Avetta. The results of the survey indicate the problems currently experienced will expand as only 12% of respondents believe contractor use will diminish during the next two years, while 38% expect growth, with 18% expecting greater than 10 percent growth in using contractors.
Managing contractors effectively is impacted by several challenges, including:
- Multiple contractors performing simultaneous activities – more than 80% of respondents believe this is ‘a very significant’ or ‘significant’ management issue.
- Myriad safety practices across an organization or industry – the chain of command related to safety is often unclear, 65% find this lack of clarity a significant challenge.
- Multiple business unit involvement – 66% of respondents believe the likelihood of contractor information becoming siloed, and thus unusable to other business units, is a ‘very significant’ to ‘significant’ challenge.
- High turnover rate among contractors – the result of high contractor churn can be a loss of visibility into how many workers are actually onsite, making it harder to manage their projects.
Old methodologies don’t fit the new world of contractor management
The survey further finds nearly half of respondents use spreadsheets for contractor reporting and analysis and 45% use them for job hazard analysis. Approximately 27% are using paper-based systems, making contractor information more likely to be lost or misplaced. Additionally, these methods do not capture standardized data for analysis and decision-making processes. Without a real-time view into contractor data, companies do not have the ability to use the information to drive better safety and compliance outcomes for their businesses.
A respondent in the oil/gas industry commented, “We lack centralization of the contractor data, which makes quantifying tough. Some use spreadsheets, some use databases. There is no central place for the data that we get.”
The survey finds 41% believe digital technology is valuable for managing contractors, while an additional 20% believe these new technologies are essential to the success of supply chain risk management.
Since March 2019 when ISO 45001 went into effect, employers are required to manage risk across the entire supply chain by expanding ‘workers’ to include both employees and contractors. The interviews show 69% of the executives support proper contractor certification to stay in compliance with these new rules.
The executives are also finding value in digital technology solutions for increasing overall visibility into performance metrics (83%) and eliminating administrative costs (62%).
A construction firm executive noted that “we established a soft ‘scorecard’ system to measure and track metrics of individual contractors…these were paper-based and consolidating every individual scorecard became a massive administrative burden. Paper systems don’t work.”
Technology solutions deliver greater efficiency
A total of 61% of executives believe digital technology is either valuable or essential to successful contractor management, with 21% of respondents saying they use it widely within their organization. The key drivers for investment in contractor management technology are:
- Desire/requirement to avoid serious accidents and fatalities
- Ability to identify and remediate issues in the case of a compliance failure
- Ability to consolidate disparate IT systems across the organization
A telecommunications firm executive said, “The benefit of software is that it allows you to automate and improve the data collection process. The software is a repository of all the different contractor information. We have better data now.”
Securing a budget can be problematic
While the drivers behind companies choosing to invest in contractor management technology solutions are clear, the survey shows a significant barrier to acquiring a budget for it stems from the difficulty in building a business case. This barrier is largely financial, and executives should consider quantifying several areas of potential savings, including:
- Value of cost savings from lowered administrative requirements
- Cost of lost revenue or downtime associated with contractor management failures
- Potential cost of fines and penalties deriving from contractor safety non-compliance
- Potential cost of contractor workers’ compensation and/or legal fees
- Potential business growth driven by improved brand reputation and productivity
Other barriers to funding range from lack of executive support to a general lack of knowledge about various technology providers.
“Companies know the significant value of supply chain risk management, but they aren’t implementing it,” said Malavika Tohani, principal analyst at Verdantix. “It’s time for companies to accelerate moving to new technologies like supply chain risk management software to improve their contractor safety processes to prevent future safety incidents.”
The Verdantix survey methodology included phone interviews with executives and asked the respondents about the challenges and risks associated with using contractors, as well as the tools currently in use, projected spending plans for contractor management software and the biggest barriers to investment.
Malavika Tohani, Verdantix’s principal analyst, and Danny Shields, Senior Director of Industry Relations at Avetta, will discuss the survey results at a webinar on Sept. 19 at noon eastern time.