Chapter 2 CONSTRUCTION SUPPLY CHAIN 2.1 Introduction Construction is one of the most complex and information dependent industries. Construction projects involve a large number of people in different disciplines working on instructions passed on by others. Therefore, controlling and managing a construction project effectively and efficiently are extremely difficult owing to the high fragmentation and involvement of numerous participants. In recent years, the application of supply chain management (SCM) philosophy has been widely investigated as an effective and efficient measure to improving the performance of the construction industry. SCM is a concept that originates from the automotive manufacturing industry (Toyota Manufacturing Plant). The implementation of SCM technique in manufacturing environments has resulted in an increased value of production while improving customer service. The distribution industry has also been successful in adopting SCM in their operations. Following the example of these sectors of the economy, a small but increasing number of construction organisations are now beginning to adopt SCM in the hope of achieving similar benefits. This is further encouraged by the rapid developments in the information and communication technologies (ICT), which means that timely and accurate information will be available to support an organisation’s services to achieve its client’s objectives of high value-added product. This chapter reviews the concept of construction supply chain management, management problems and barriers that have been studied by numerous known researchers and construction industry experts. Established procurement methods are also briefly discussed in order to determine the communication path in the supply chain management network. The review also highlights the limitations and barriers of ICT implementation in the construction supply chain management.
35
Embed
Chapter 2 CONSTRUCTION SUPPLY CHAIN · 2017-08-15 · This chapter reviews the concept of construction supply chain management, management problems and barriers that have been studied
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Chapter 2
CONSTRUCTION SUPPLY CHAIN
2.1 Introduction
Construction is one of the most complex and information dependent industries.
Construction projects involve a large number of people in different disciplines working on
instructions passed on by others. Therefore, controlling and managing a construction
project effectively and efficiently are extremely difficult owing to the high fragmentation
and involvement of numerous participants. In recent years, the application of supply chain
management (SCM) philosophy has been widely investigated as an effective and efficient
measure to improving the performance of the construction industry. SCM is a concept that
originates from the automotive manufacturing industry (Toyota Manufacturing Plant). The
implementation of SCM technique in manufacturing environments has resulted in an
increased value of production while improving customer service. The distribution industry
has also been successful in adopting SCM in their operations. Following the example of
these sectors of the economy, a small but increasing number of construction organisations
are now beginning to adopt SCM in the hope of achieving similar benefits. This is further
encouraged by the rapid developments in the information and communication technologies
(ICT), which means that timely and accurate information will be available to support an
organisation’s services to achieve its client’s objectives of high value-added product.
This chapter reviews the concept of construction supply chain management, management
problems and barriers that have been studied by numerous known researchers and
construction industry experts. Established procurement methods are also briefly discussed
in order to determine the communication path in the supply chain management network.
The review also highlights the limitations and barriers of ICT implementation in the
construction supply chain management.
Context-Aware Services Delivery in the Construction Supply Chain
14
2.2 Overview of the UK Construction Industry
The construction industry has fundamentally been characterised as high fragmented, low
productivity, full of conflicts and disputes and poor in managing cost and time (Whicker et
al., 2006; Xue et al., 2007). However, in the UK there is a growing awareness of the need
for changes within this industry, in particular with managing its current business processes.
This is mainly as a result of three previous government sponsored reports in the UK
Construction, i.e. Latham (1994), Egan (1998) and Strategic Forum for Construction
(2000) which have drawn attention to the problems of the industry’s supply chain, calling
for greater integration of key processes to ensure that better value can be delivered to the
clients. In an effort to address this issue, several construction organisations have started to
emulate the most appropriate supply chain model from other industries to be successful in
managing their businesses. However, according to Flanagan (2002), the construction sector
has not been good at applying technologies from other industries and consequently
duplication of effort occurs.
The construction industry has a major influence on the UK economy through the
construction of facilities such as offices, schools, hospitals, factories and road
infrastructure. Globally, the UK construction industry plays an important role in economic
development and has the capability of delivering the most difficult and innovative projects
in the world. As one of the pillars in the domestic economy in the UK which produced an
output of around £58 billion in 1998, i.e. equivalent to 10% of Gross Domestic Product,
the report of the Construction Task Force (Egan, 1998) made to the UK government had
stressed various important key drivers to modernise the construction sector. Hence, the
awareness of the need for changes in managing their supply chain networks within this
industry in the UK has increased.
A report for the New Construction Innovation and Strategy Panel (nCRISP) produced by
Rigby et al. (2005) had stressed that the diffusion of ICT into the construction industry is
likely to drive improvements in the productivity of the industry and also provide
opportunities to improve the supply chain and logistics operations. This is because the
current ICT enables the integration of various engineering and communication software
which cannot previously be done.
Context-Aware Services Delivery in the Construction Supply Chain
15
2.3 Generic Supply Chain Management Definition
The aim of supply chain management is to coordinate planning and control of each process
to meet the needs of the end customer. The concept of supply chain management has been
practiced for many years in the manufacturing sector that originates from an innovative
philosophy by Toyota production plant. Previously known as Just-in-time (JIT), it then
merged with the concept of Total Quality Management (TQM) and Quality Control (QC)
to form the concept of supply chain (Vrijhoef and Koskela, 2000). Referring to Harrison
and White (2006), the analogy of ‘flow of water in a river’ is often used to describe
organisations near the source as upstream and those near the end customer as downstream.
The analogy shows how important it is for each member in a supply chain to interact with
each other like water molecules in order to collectively transform materials into finished
product. According to Harrison and White (2006), the definitions of supply chain and
supply chain management can be described respectively as follows:
“A supply chain is a group of partners who collectively convert a basic commodity
(upstream) into a finished product (downstream) that is valued by end customers,
and who manage returns at each stage.”
“Planning and controlling all of the processes that link partners in a supply chain
together in order to serve needs of the end customer.”
From both definitions and Fig. 2-1, the supply chain can be seen as a network that consists
of a group of people and processes that extend across organisational boundaries where
each member in a supply chain group is responsible for transforming the inputs (materials)
and information into outputs (value-added product). Specifically, supply chain
management involves two important operations, namely: planning and controlling. The
process of planning can be referred to as an operation to make a plan that defines how
much raw materials should be bought, made, distributed and sold. Meanwhile, the process
of controlling is an operation that keeps the process as planned. This can be seen in
aerospace industry where the concept of supply chain management is well-established due
to the strict business needs, i.e. requires highly-skilled workers, high-tolerance products,
time constraint and well-established strategic partnership with government (known also as
political driven business group).
Context-Aware Services Delivery in the Construction Supply Chain
16
2.4 Construction Supply Chain Definition
To be specific towards the construction industry supply chain operations, Xue et al. (2007)
had given the meaning for both Construction Supply Chain (CSC) and Construction
Supply Chain Management (CSCM) as follows:
“CSC consists of all the construction business processes, from the demands by the
client, conceptual, design and construction to maintenance, replacement and
eventual decommission of building, and organisations which are involved in the
construction process, such as client/owner, designer, general contractor,
subcontractor, supplier and consultant.”
“CSCM is the integration of key construction business processes, from the demands
of client, design to construction and key members of construction supply chain
including client/owner, designer, contractor, subcontractor and supplier.”
Referring to Fig. 2-2, it can be said that CSC is a network of multiple organisations that
involves a system of activities that links people, consists of operations of information,
building components services and funds between client, consultant team, main contractor,
subcontractors and suppliers (Azambuja and O'Brien, 2009; Formoso and Isatto, 2009).
Meanwhile, the concept of CSCM addresses business processes that involve the managing
Suppliers Manufacturers Assemblers
Retailers Customers
Sales Use or
Consumption
Products
Assembly
Parts
Manufacture
Materials
Material flow (supplies, production, deliveries, schedules, forecast)
Information flow (orders, schedules, forecast)
Upstream Downstream
Fig. 2-1: The Generic Configuration of Supply Chain in Manufacturing
(reproduced from Vrijhoef and Koskela (1999))
Context-Aware Services Delivery in the Construction Supply Chain
17
of both planning and controlling of human resources and utilise suppliers’ resources,
infrastructures and services in order to serve the client’s demand.
2.5 Characteristics and Roles of Construction Supply Chains
Management
Traditionally, a construction team is a temporary organisation that has been formed to run
a specific project within a specific time period. This formation consists of different groups
of companies and practices background which may not have a previous strategic
partnership and are tied to the project team by means of varying contractual arrangements
(Xue et al., 2007). The contractual arrangements depend on the procurement route or
method of a particular project. Procurement methods are discussed further in section 2.9.
In terms of structure and function, the CSC can be characterised as follows (Vrijhoef and
Koskela, 1999):
Fig. 2-2: Construction Supply Chain (adapted from Vaidyanathan (2009))
Subcontractor 3
Subcontractor 1 Subcontractor 2
Structural
Consultant
M&E
Consultant
Architect General (Main)
Contractor
Customer
Component
Manufacturer 1
Component
Manufacturer 2
Component
Manufacturer 3
Flow of building components
Flow of funds
Information flow
Context-Aware Services Delivery in the Construction Supply Chain
18
All materials and services are focused to the point of use, i.e. construction site
where the object is building from incoming sources.
One-off project involving multiple background sectors in the supply chain which
focus on short-term businesses, resulting in instability and fragmentation in the
industry.
The business concept is based on make-to-order with every project creating a new
product.
Meanwhile, the impact CSCM has an on management depends on the role it plays; whether
it focuses on the supply chain, the construction site or both. There are four main roles that
had been established by Vrijhoef and Koskela (2000) and they are as follows:
Focus on the impacts of the supply chain on site activities. The goal is to reduce
costs and duration of site activities.
Focus on the supply chain itself, with the goal of reducing costs, especially those
relating to logistics, lead-time and inventory.
Focus on transferring activities from the site to earlier stages of the supply chain.
The goal is to avoid the basic inferior conditions on site which is not possible with
site construction with its many technical dependencies.
Focus on the integrated management and improvement of the supply chain and the
site production.
2.6 Supply Chain Management in Construction
A construction project supply chain network can be a complex web of systems, sub-
systems, operations or activities and their relationships to one another. These belong to
various members of the supply chain namely: suppliers, carriers, manufacturing plants,
distribution centres, retailers and consumers. The design, modelling and implementation of
such a system, therefore, can be difficult unless some parts of it are cohesively integrated.
In connection to this, the concept of supply chain management is about managing
coordinated information and material flows, plant operations and logistics through a
common set of principles, strategies, policies and performance metrics throughout its
developmental life cycle (Lee et al., 1993). In CSC, coordination is achieved within
Context-Aware Services Delivery in the Construction Supply Chain
19
temporary organisations formed of firms or stakeholders to provide specific productive
capacity for a given project to satisfy client’s demands.
2.6.1 Common Problems
The construction and its supply chain integration is always quoted as fragile by numerous
researchers due to failure to understand the methodologies of design, material/component
selections, processes and procurement routes adopted (Briscoe and Dainty, 2005). Vrijhoef
et al. (2001) had revealed that the major problems in construction supply chain originate at
the interfaces of stages in the network as shown in Fig. 2-3. This is agreed by Ballal (1999)
who recommended that past construction knowledge and expertise to be extracted and used
in early design decisions for better integration of design and construction stages. In
addition to that, Green et al. (2005) also found that the decades long of work culture is the
hardest barrier to overcome. The reluctance to change is made worse by poor
understanding of the relationship between time and cost that eventually results in delay,
increased costs, defects and contractual conflict of the construction project (Whicker et al.,
2006).
Fawcett et al. (2008) had revealed that failure in recognising the importance of technology
and the role of information is a major barrier towards successful supply chain
collaboration. Most construction organisations are technologically conservative
organisations. They are unwilling to invest in new, costly and unproven technology due to
the lack of belief of its potential benefits. The lack of awareness among top management
and lack of client enforcement are among the reasons why construction organisations do
not adopt the SCM model for their businesses. Xue et al. (2007) and Kim et al. (2008) had
revealed that high fragmentation and poor coordination added with inefficient
communications, inaccurate information transfer and wrong deliveries within the supply
chain networks eventually degrade the overall performance of construction organisations.
The information intensive nature of construction projects requires the parties involved to
have on-demand access to construction information such as project plans, logistics,
schedules, budgets and workforces. The rapid development in ICT coupled with the
advancement in wireless technologies offers a solution for construction organisations to
address the aforementioned issues. Consequently, ICT is one of the drivers for construction
organisations to address the key factors for radical change to achieve long-term benefits.
Context-Aware Services Delivery in the Construction Supply Chain
20
Fig. 2-3: Generic problems in the construction process (Vrijhoef et al., 2001)
2.7 Information and Communication Technologies in Construction
The amount of project data and information generated during design/construction periods
are enormous and uncontrolled due to the fragmented nature of the construction industry.
Despite the fast development in ICT emerging as a driving force for construction
companies to be more efficient and productive (Ribeiro and Lopes, 2001; Ahuja and Yang,
2005), the traditional communication and information method is still being practiced. This
is mainly due to a number of factors such as high investment in ICT infrastructure capital
cost and insufficient supporting interoperability between hardware–software within
construction organisations. However, the issue of interconnectivity is being actively
explored to overcome critical unresolved problems. The emergence of interconnectivity
between different communication networks over the internet are encouraging many
construction organisations to seek an alternative method of processing and transferring
data (Aziz et al., 2005; Aziz et al., 2006; Lu et al., 2006; Zhou and Benton Jr., 2007; Leung
et al., 2008). The use of Information Technology (IT) and learning from other industries
were part of the action plans recommendation by the Strategic Forum committee (2000) for
better construction logistics services. Jang et al. (2003) and Rebolj et al. (2008) also
suggested that an information delivery system and services must focus on improving the
construction logistics in order to achieve better productivity, avoiding delays and reducing
waste in a construction project.
Context-Aware Services Delivery in the Construction Supply Chain
21
The internet is bringing a major contribution to the evolving field of supply chain
management and this can be seen through the introduction of e-commerce which is able to
reduce ‘clerical’ transaction costs such as those involving contracting, ordering,
confirming, invoicing and settlement. Information moved via the internet has a number of
characteristics that can change the way in which construction supply chains are configured
and managed. However, it is a great challenge to identify which ICT package is capable of
solving such issues in order to deliver various jobs or tasks within the context (Egan, 1998).
In addition, Aziz et al. (2006) had revealed that the current state-of-the-art in mobile
communications in the construction industry has some underlined limitations due to factors
such as lack of cohesion with existing ICT infrastructure and little attention given towards
developing automation in the construction industry. Consequently, it is another great
challenge to implement powerful wireless and web technologies to support and improve
the construction information and communication flow in supporting project team to access
in real-time different corporate back-end systems and multiple inter-enterprise data
resources collaboration and integration. Fortunately, the growth in number and
sophistication of web services means that, increasingly, useful applications will be
available on the internet that can be invoked directly from the construction supply chain
management systems. These invocations can be triggered by changes in the context of the
users or the project and can significantly enhance the effectiveness of construction supply
chain interactions. This provides enhanced capabilities for interoperation between a variety
of services and applications that are essential for intelligent collaboration and information
exchange within the supply chain management network. Intelligent Wireless Web (IWW)
as shown in Fig. 2-4 represents the next generation of ICT application to construction
supply chain management. This intelligent system uses artificial agents and has the
potential of serving and improving the construction supply chain through access to context-
specific data, information and services. Due to the nature of construction activities, agent-
based systems could offer some additional benefits in enhancing the supply chain
management (Cutting-Decelle et al., 2007):
System Flexibility – A supply chain is a domain which is frequently subjected to
structural changes. This gives a robust system that can undergo continuous
adoption to the changes in the environment without the degradation of performance
often met in other types of systems. Automated procedures can be developed to
Context-Aware Services Delivery in the Construction Supply Chain
22
deal with the adding and removing of agents to the system and changes within an
agent will not affect other agents.
Integration and Coordination – A multi-agent system facilitates both multi-plant
and general coordination. An example would be when an agent is planning
production. The agent may be planning for one site in a supply chain, but
information can be passed to and received from other sites, allowing a coordinated
production planning.
Responsive and Speed – A multi-agent system would also allow a high degree of
reactivity to unforeseen events. The occurrence of an unexpected event, e.g. an
order cancellation, can be communicated to every concerned entity in a matter of a
few minutes. One important consequence of this is that customers could be
informed of changes in delivery times caused by unexpected events.
Referring to Aziz et al. (2004) and Anumba and Aziz (2006), IWW architecture system
includes Semantic Web (to provide a framework for shared definitions of terms, resources
Fig. 2-4: Intelligent Agent Roles in IWW System Deployment in Construction Supply
Chain Delivery Services (Aziz et al., 2004; Anumba and Aziz, 2006)
Context-Aware Services Delivery in the Construction Supply Chain
23
and relationships), Web Services (to provide dynamic discovery and integration) and
multi-agent technologies (to help mobile worker accomplish a particular task such as
purchasing parts from suppliers) to support intelligent mobile collaboration. In conjunction
to this, context-aware application is seen as an additional layer on top of IWW which could
provide the ability to intelligently interpret the user context and deliver data and services to
a project team member based on the user’s context. The context-aware technology
application is reviewed in Chapter 3.
2.7.1 Information Delivery Issue in Construction Supply Chain
The information intensive nature of construction projects requires that the parties involved
have on-demand access to construction information such as project plans, schedules,
budgets, workforces and logistics. The construction supply chain is complex and difficult
to manage because it involves operations or activities of multi-disciplined groups. The
operations and activities involved in construction projects are temporary and organisations
are formed to work together to manage and build a specific project (Vrijhoef and Koskela,
2000). According to Xue et al. (2007), CSC is not only a business to business (B2B) chain
relationship but it is also a network of multiple organisations that are related to activities
that involve the flow of information, flow of materials, services or products and the flow of
funds between client, designer, contractor and supplier. In reality, information flow is
usually not as smooth as planned due to uncertainty existing between the supply source and
subcontractors caused by lack of information sharing and sometimes due to wrong
information delivered to the supply chain members. Harrison and White (2006) had
stressed on the importance of each member in a supply chain to interact with each other in
order to be collectively responsible for transforming materials and information into value-
added products and services.
2.8 Construction Supply Chain Services Model Framework
A vital understanding of the supply chain components and activities to be mapped-out in
an operation is critical because services performance or value-added is measured at every
stage along the supply chain. According to Azambuja and O’Brien (2009), reviews on
other researchers’ supply chain model indicate that to-date there are no clear model
capable of supporting the overall operations of the different construction procurement
Context-Aware Services Delivery in the Construction Supply Chain
24
routes effectively. Existing models such as Value Stream Mapping (VSM) lack support in
wide-scale analysis of operational decisions for specific supply chain process. For a more
strategic and operational decision to be made effectively along the construction supply
chain, Azambuja and O’Brien, (2009) had presented a conceptual framework to model a
construction supply chain activities and services from start to the finished product. Five
sequential steps have been established for the model development as follows: