1/14/2018 Supply Chain Management in Construction Industry | Chain 2 Excellence

Chain 2 Excellence

NITIE's Supply Chain & Operations Interest Group

Supply Chain Management in Construction

Industry

January 4, 2014 · by c2xnitie · in Supply Chain updates. ·

Supply Chain Management in Construction Industry

Supply chain management (SCM) is a concept that has flourished in manufacturing, originating from
Just-In-Time (JIT) production and logistics. Today, SCM represents an autonomous managerial
concept, although still largely dominated by logistics. All issues are viewed and resolved in a supply
chain perspective, taking into account the interdependency in the supply chain. SCM offers a
methodology to relieve the myopic control in the supply chain that has been reinforcing waste and
problems. Construction supply chains are still full of waste and problems caused by myopic control.

The typical supply chain for any given construction project could include architects and engineers,
prime contractors, specialty subcontractors, and material suppliers that come together one time to
build a single project for a specific owner. This complex supply chain is characterized by adversarial
short-term relationships driven by the competitive bidding process.

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Fig: Horizon Construction Supply Chain

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Construction Supply Chain Management focuses on strategies for Lean construction including just-in-
time purchasing, supplier evaluation, subcontractor selection, subcontractor relationship
management, equipment acquisition, information sharing, and project quality management.

To be included / excluded from the supply chain:

(h ps://c2xnitie.files.wordpress.com/2014/01/13.png)

Currently most organizations operate within a one-dimensional view of the Supply Chain in that only
‘surface’ level relationships are considered. A 3- dimensional view is needed to fully understand and
absorb the varying interests and requirements from within the supply chain when considered in a
holistic manner. Any party that ‘adds value’ should be regarded as being within the Supply Chain.
However the context of this approach should be considered within a long-term view rather than the
current short-term a itude. What issues surrounding what happens after the ‘construction phase’ of
the project is completed must be considered.

Too many parties that are involved in a Supply Chain are ‘excluded’ from power / decision processes
due to a range of political, historical and other varied reasons. In particular, Government bodies, JV
companies, ‘Supplier’ groups and ‘Suppliers to the Supplier’ groups should be involved as a ma er of
course. However, it was noted that the Supply Chain might become overly complicated through the
inclusion of parties that could be regarded as being peripheral to the ‘core’ chain.Therefore, Supply
Chain and its membership should be chosen carefully with potentially a ‘Main chain’ structure and a
series of ‘Contributory chains’ used to identify areas of input of ‘value’ into the Supply Chain.

What potential savings can be raised from removal of wastage and improvement of supply chain
management?

Key issues include the following:

• Decisions should be made on a ‘cost’ and not a ‘price’ basis (developing a more holistic
understanding of the Supply Chain).

• Where possible, products / materials should be modularized in order to ‘standardize and simplify’
the Supply Chain.

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• All process activity should be evaluated and where possible simplified / improved.

Generally the construction industry does not utilize ‘best practice’ and ‘lessons learnt’ from other
sectors. Where culture, process, people change has taken place successfully in other sectors, these
lessons should be identified and applied to Construction industry organizations.

(h ps://c2xnitie.files.wordpress.com/2014/01/15.png)

Fig:Problem Analysis of composite façade element

How can we improve supply chain performance?

(h ps://c2xnitie.files.wordpress.com/2014/01/17.png)

All parties involved in the supply chain must look to

drive change through all areas of the Chain through:

• Education process • Cultural change • An

understanding that all parties will benefit / profit • Open
and shared approach to the dissection of the ‘associated
benefits’ of improved supply chain performance • An
a itude of ‘if you’re in, you win’ with regard to enhanced
approach to Supply Chain participation • Pre-planning
and visibility opportunities provided by a visible client
forward workload well into the future that is shared by
the Supply Chain ‘family’ • Where possible freeze expectations but include change where necessary
through joint agreement through the use of contingency plans.

More effective management of subcontractors through

• Regard the subcontractor as being part of the supply chain (key to the value add process)

• Sharing a full picture of the project

• Sharing the values that are required by the Supply Chain

• Inviting input where the subcontractor can add value

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Conclusion
(h ps://c2xnitie.files.wordpress.com/2014/01/18.png)

SCM can play major roles in construction. The SCM offers

general guidelines that can be used to analyze, reengineer,
properly coordinate, and constantly improve virtually the
complete construction supply chain, resolving basic problems
and the myopic control that have been plaguing the supply
chain. This would be practically impossible to realize in the
short term. Therefore, initially, the SCM methodology is
properly deployed on a lower scale, addressing partial supply
chain problems, involving a limited number of supply chain
actors. Due to its recurring character, the SCM methodology
implies a continuous improvement process of which the scope
can be enlarged over time, involving an increasing number of areas of application.

Some areas of application, which may be, and to a certain extent have been subjected to SCM,
include the reduction of costs (especially logistical costs), lead-time and inventory in the supply chain.
Therefore a construction Supply chain, if applied properly not only maximizes the value for project
owner but also all the supply chain members creating high quality construction projects.

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