PURCHASING STRATEGY

Purchasing Strategy

Abstract

It is argued that due to construction peculiarities, supply chain management has four specific roles in construction. Practical initiatives in each role to advance the construction supply chain are analysed. The present status of construction supply chains is investigated by means of case studies and a comparison with previous research. Three main conclusions are drawn regarding the present status. Firstly, even in normal situations the construction supply chain has a large quantity of waste and problems. Secondly, most of these are caused in another stage of the construction supply chain than when detected. Thirdly, waste and problems are largely caused by obsolete, myopic control of the construction supply chain. These results concur with the findings made on make-to-order supply chains in general. Finally, the subjective and objective limitations of the four roles are analysed, this being based on empirical findings and the generic theory of supply chain management.

Purchasing Strategy

Introduction

Two issues invite a discussion about construction supply chains: lagging productivity development and increased economic weight of the supply chain. The productivity increase in building construction has been slow. In Finland, for example, the annual increase has only been approximately 1% since 1975 (Vainio, 1999). In the Netherlands, this figure has been approximately 3% ( Jansen, 1996). This is still not enough, however, to compensate for the average increase in labour costs. Statistical figures show that, in relative terms, main contractors have been purchasing increasing amounts of labour and material. Nowadays, these represent about 75% of main contractors' turnover (e.g. Scholman, 1997). As a consequence, main contractors have become increasingly reliant on other actors in the construction supply chain (e.g. suppliers and subcontractors). The traditional approach to the control of the construction supply chain is not adequate any more, and a shift of methods for managing the supply chain is needed.

Discussion

From the end of the 1980s, the construction industry has seen the launch of a number of supply chain management (SCM) initiatives. However, until now these have been scattered and partial. Thus, the goal of this paper is to clarify the roles and possibilities of SCM in the construction industry. Using the lessons learnt from SCM in manufacturing as a starting point, there is a definition of the four roles of SCM in the construction industry, and an analysis of three case studies of present supply chains in the construction industry. There is a comparison between the conclusions from the case studies and both the findings in prior research and the most common problems previously observed in make-to-order supply chains in manufacturing. Finally, there is a discussion of the limitations of the four roles of SCM in the construction industry, and a presentation of recommendations for SCM in construction.

Supply chain management in manufacturing

Origin of supply chain management

SCM is a concept that originated and flourished in the manufacturing industry. The first visible signs of SCM were in the JIT delivery system, as part of the Toyota Production System (Shingo, 1988). This system aimed to regulate supplies to the Toyota motor factory ...