Managing operations across the supply chain free book download

In this way a project team is merely the recipient of those relationships and how they develop both within the project team and with those who are externally feeding into the project.

However, relationships are also managed. It is clear, however, that the discussion of SCM needs to be preceded by a definition of partnering.

Bovis now Bovis Lend Lease is credited as being the first construction organisation to be involved in a partnering arrangement Loraine, in UK. The characteristics of these partnering arrangements appear to have been long term relationships between manufacturers and key suppliers, and often included maintenance as well as initial installation similar in concept to the operation of the lift installation sector of the UK construction industry. The process of selecting a contractor on the basis of lowest competitive tender is at the heart of what Winch describes as the professional system.

Winch identifies the way that activities facing the highest uncertainty in the design stages are insulated from the market by the employment of a consultant, reimbursed on a non-performance related fee basis. The industry has seen the evolution of control actors quantity surveyors and clerks of works principally whose role it was to regulate the activities that remained subject to market forces Winch, The motivation for the introduction of partnering, in this case, was related to the need to drive down costs in order to exploit resources that would otherwise have been unprofi table.

Barlow et al. Others have emphasised the common goals aspect and partnering as an aid to collaboration. The unique division of labour operating in the construction industry involving designers, contractors and materials suppliers has been cited as a central theme and a focus for reform see Higgin and Jessop, ; Cherns and Bryant, ; and Bresnen, , for example.

The construction project coalition is a temporary coalition of firms see Winch, and Each fi rm represents a discrete contractually defined role, and when these roles work together, we hope that partnering will modify the roles and the relationships between them. We might, therefore, regard the construction project as a role system Simon, A number of the perceived benefits from partnering arise from the ability of this system of roles to improve organisational learning.

There are also varying views about the precise role that contracts and charters play in partnering. One group notably Quick, ; ACTIVE, ; Green and McDermott, ; cited in Bresnen, asserts that partnering agreements prevail over the building contract conditions, because of the improved understanding arising out of cross-disciplinary communications.

Others notably Loraine, , referred to above and Roe, , cited in Bresnen, regard contractual forms of governance as an essential safety net in the event that partnering might fail. The move towards informality in the governance of construction projects — the move away from contract management towards relationship management, has bought with it a demand for methods of effectively managing these new types of linkages between project actors.

One of these initiatives was supply chain management. Partnering in its most simple form asks little more of the project actors other than co- operation. Howell et al. This realignment should focus upon the needs of a concurrent design and productionprocess.

In order to achieve an output, this re-engineered process must include the management of the various actors in the product supply chain. Views differ as to the nature of this supply chain and it is arguable whether a complex network of organisations working together in a number of non-trade related clusters, are best described as chains and this was referred to at the beginning of this chapter. Figure 1. The term supply chain management tends to be used to refer to management processes as well as structures of organisations.

If we replace the words development supply chain with project, we have a description of what all developers must be doing to remain competitive and satisfy their clients. The relevance of SCM to construction Pryke, lies not in the existence of supply chains, but in their exploitation.

The management of a supply chain by a developer or contractor, implies the management of actors far removed from the dyadic contractual relationships inherent in construction contracts. Traditional pre PPC forms of contract are based on the premise that, as an actor, one is in a relationship with another actor that instructs, pays, has control of a range of performance incentives and therefore manages ones activities.

Each actor therefore is managed by the actor above in the supply chain, and in turn manages the actor or tier of actors below. Exploiting the supply chain involves communication with other actors that have been artificially separated from us by inhibiting contractual conditions. This leads us towards the concept of centrality and SCM. In order to successfully manage any supply chain we need a single actor with the authority to deal with all actors within the supply chain. It is argued that this management process becomes supply chain management when it is carried out within a partnering context.

Stevens , offers us a model of the transition of the firm from stand-alone organisation to supply chain partners. Much of the literature dealing with the subject of SCM, including Stevens , is not related to construction.

Relating the four categories of transition to the current construction industry is disconcerting. It is argued that the vast majority of the industry falls fi rmly into the baseline category. Even those construction organisations where SCM is fi rmly on the agenda, show only very limited integration of disparate internal functions.

In particular, cross-functional management within the organisation and the use of supplier networking groups, are particularly difficult to observe. Applying the principles of lean production to construction must move the location of the leadership in design from the relevant consultant to the most appropriate subcontractor, supplier or group of same.

SCM articulates a process of design and financial management, the need for which must always have been present. But management of any process or system requires some focal point from which the manager can operate. The division of labour within the construction industry has meant previously that management of the whole process has been fragmented. Design, site production and component manufacture have each been managed separately. The management of these sectors have been poorly coordinated and this is partly because the conditions of contract have traditionally distinguished and separated these sectors.

In terms of capacity and authority, this actor would need to be either the client or the contractor. SCM introduces a fundamental shift in focus of responsibility and authority within the overall network of project roles.

This system of evolving project roles sits within a context of competing and perhaps conflicting governance patterns. A dynamic exists between formal, contractual relationships which initially define roles and relationships and the less structured and formalised project management policies, such as partnering and work clusters which both ultimately shape project roles and the way in which they are connected.

These managerial approaches have a fundamental affect on actor roles and the nature and patterns of interactions between these roles. There is a plethora of material exploring the importance and application of project management to construction projects. Increasingly, there is emphasis upon managing programmes of projects. Many would argue that integration of process, innovation and radical change in cost and value are only possible through a focus upon the activities of the supply chain.

Characteristics of Construction Industry The construction industry exhibits characteristics that differentiate it from other industrial sectors. Competitive pressures from within the industry, as well as external political, economic and other considerations are forcing the industry to re-examine and improve its performance An analysis of the key characteristics of the construction industry indicates that the problems facing construction can be categorised into the following five broad areas.

Fragmentation The construction industry has long been recognised as having problems in its structure, particularly with fragmentation, which has resulted in poor performance Latham, ; Egan, Uniqueness see also below , immobility and variety are three distinctive features of construction output that fl ow from the fragmentation in construction.

These features, it is argued, are factors in the tendency of the construction industry towards low productivity, poor value for money and mediocre overall client satisfaction Latham, , especially when compared with other industry sectors. As a consequence of the uncertainty for the main contractor in obtaining continuous work, with the need to accommodate the different features and requirements of each project, subcontracting has been adopted as the dominant approach Cox and Townsend , p.

Adversarial relationships The construction supply chain has become increasingly fragmented for the reasons outlined above. Increased fragmentation brings increased transaction volumes at lower average values and inevitably higher levels of opportunism, particularly in the context of low barriers to entry.

The industry had become less trusting, more self-interested and adversarial. The adversarial attitude of the UK construction industry has been recognised problem for many years Cox and Townsend , p. Performance and innovation in construction are significantly hindered by adversarial relationships and fragmented processes. This way of thinking has resulted in an industry structure with various interfaces, which are points of tension and confl ict, which eventually leads to increased cost and reduced effi ciency Cox and Townsend , p.

Source: Cox and Townsend , p. Part A Project Uniqueness The construction industry with the possible exception of some responsive repairs is a project-based industry.

The characteristics of a specific project, and hence its degree of uniqueness, is determined by a number of factors. Consequently, the assessment of these project features determines the resources needed for a project, and selection of the most appropriate supply chains needed to deliver clusters Gray, of resources and services for the project as a whole.

Projects involve assembling materials and components designed and produced by a multitude of suppliers, working in a diversity of disciplines and technologies in order to produce a product for particular client. In addition, with the increasing shift from on-site to off-site production, managing construction projects involves integrating diverse and complex supply systems in which a growing amount of value of the product is added Jones and Saad ,p. Separation of design and production One of the main problems in construction is the extent to which the industry separates design from production.

This particular characteristic of the industry is still common in spite of the deficiencies of traditional procurement and the benefits offered by newer and more flexible approaches Cooke and Williams , p. It is an anomaly that design and production are commonly separated at the highest tier of the supply chain main contractor but commonly integrated in the tiers below this. Competitive tendering In most countries, construction companies are selected to undertake construction projects and the price for their work is established by competition Griffith et al.

Unlike manufacturing, construction projects are not priced and advertised for sale manufactured speculatively, without prior orders from customers , but instead uniquely priced after a negotiation or bidding process. Since the mid s joint government and construction industry initiatives Latham ; Egan have encouraged construction clients to adopt different strategies to procure work. By far the dominant strategy adopted is the traditional design-bid-build approach with the lowest bidder winning the work RICS There is no doubt that competition used in this way serves to drive down prices.

Alternatives do exist, but require attitude change within the construction sector and its professions. Need of SCM in Construction Industry SCM has a critical role to play in improving overall performance in construction, but remains at a very early stage of development Jones and Saad , p.

However, the industry is becoming increasingly aware of the necessity to change current working practices and the attitudes they represent Pearson A number of organisations for example; Balfour Beatty and Tarmac within the construction industry and their clients have developed SCM techniques to rationalise their supplier base.

Unlike in the construction industry, SCM has been practised widely for many years in other industries, particularly in the manufacturing sector.

Effective SCM has helped numerous industry sectors to improve their competitiveness in an increasingly global market place. The SCM in these industries encompasses all those activities associated with processing from raw materials to completion of the end product for the client or customer. It is usually an on-going process focused upon specific products that are repeatedly manufactured or purchased.

Unlike the manufacturing industry, the construction industry lacks standardisation. Through the use of standard parts and components, the manufacturing industry has been successfully generating greater levels of productivity and quality control.

The construction site is effectively an ad hoc factory, temporarily created to manufacture a prototype product Cox and Townsend , p. To what extent the construction industry can standardise its product is essential to the development of effective SCM. Processes, activities and organisational structures are not based on horizontal processes, while process performance is unpredictable.

SCM costs are high, customer satisfaction is low, functional cooperation is also low. SCM costs remain high, customer satisfaction has improved, but is still low. SCM costs begin decreasing and customer satisfaction begins to show a marked improvement.

Advanced SCM practices, like collaborative forecasting with other members of a supply chain, form. As a consequence, SCM costs are dramatically reduced. Collaboration between companies is on the highest level, multi-firm SCM teams with common processes, goals and broad authority form. The five stages of maturity show the progression of activities toward effective SCM and process maturity.

Each level contains characteristics associated with process maturity such as predictability, capability, control, effectiveness and efficiency. This basically can be attributed to the one-off nature of construction projects coupled with discontinuous demand.

It can be argued that this type of traditional supply network is unlikely to maximise the value for parties involved in the supply chain. The traditional construction project supply chain can be described as a series of sequential operations by groups of people who have limited concern about other stakeholders. Most construction projects are procured through a method by which a defined project forms the focus for a building process carried out by a contractor, who traditionally obtains the work by bidding the lowest price for carrying out the project.

The appointed contractor will outsource or subcontract the majority of the work to a number of relatively small subcontractors who will usually win the work on exactly the same basis. The number of subcontractors will vary with the complexity and nature of the project.

These contractors and subcontractors typically focus upon meeting their contractual requirements for the lowest possible cost. As a consequence, the traditional supply chains in a construction project are complex and temporary, involving participants who may not contribute, other than to complete their small, often isolated, part of a one-off project.

A team culture focused on the particular needs of the client or the project rarely exists. Different approaches to managing such a supply chain are therefore required if the potential benefits are to be achieved. The culture within which SCM can be developed may not exist in traditional procurement methods, but can be created if the value of such change can be shown to be significant.

Levels of implementation are not mutually exclusive, and in fact, they are often pursued jointly and the descriptions below paraphrase them. One or several supply chain SC participants could lead each level of implementation. The primary concern, therefore, is to establish a reliable flow of materials and labour to the site. The application of SCM to the construction industry requires a huge effort. It entails developing vertical integration in the design and production process and operations to link the process into a chain focusing on maximizing opportunities to add value while minimising total cost.

As this application requires a significant shift in the mind-set of the participants towards collaboration, teamwork and mutual benefits, it is hardly surprising that only few sophisticated applications have been reported in the construction industry Saad et al.

The extent to which any supply chain performs its functions depends very much on its nature, and the market in which it operates. Hoekstra and Romme , p. Products are manufactured and distributed to stock points, which are spread out and located close to the customer.

End products are made and held in stock at the end of the production process and from there are sent directly to customers who are scattered geographically. Only system elements or subsystems are held in stock in the manufacturing centre, and the final assembly takes place on the basis of a specific customer order. Only raw materials and components are kept in stock and each order for a customer is a specific project.

No stocks are kept at all, and purchasing takes place on the basis of the specific customer order; furthermore, the whole project is carried out for one specific customer. According to Anumba et al. As a consequence to this, the structure of the company will necessarily have to adapt to these priorities.

For example, the large supermarket chains in the UK, in general, have a much larger proportion of resources devoted to supply and forecasting, as opposed to product development, whereas engineering companies in the construction industry have a much larger proportion of resources devoted to engineering and project management. There is a tendency for some construction professionals, and in particular contractors, to focus on capital or initial construction cost and it is this focus which underpins and dominates the strategies adopted in managing the existing supply chain.

Whilst capital cost is not irrelevant, most clients usually focus upon the value of their project in terms of the business case. It is this value which will form the key success factor for the project.

The value may relate to the performance of the new facility in terms of its function or its worth as an asset. Additionally, it may have a value in the market place at a particular time or over many years. There is a tendency for the long-term objectives of project worth or value to become refocused on the short-term objectives of cost and time once the project or strategic brief has been established for a discussion on this see Ashworth and Hogg In SCM, real competition is not between organisations but rather between supply chains.

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