The four roles of supply chain management in construction

*Corresponding author. Tel.: #31-15-2695228; fax: #31-15-2695335.

E-mail addresses: [email protected] (R. Vrijhoef), lauri.ko-skela@vtt." (L. Koskela).

European Journal of Purchasing & Supply Management 6 (2000) 169}178

The four roles of supply chain management in construction

Ruben Vrijhoef!,*, Lauri Koskela"!TNO Building and Construction Research, Department of Strategic Studies, Quality Assurance and Building Regulations,

P.O. Box 49, NL-2600 AA Delft, The Netherlands"VTT Building Technology, Concurrent Engineering, P.O. Box 1801, FIN-02044 VTT, Finland

Abstract

It is argued that due to construction peculiarities, supply chain management has four speci"c roles in construction. Practicalinitiatives in each role to advance the construction supply chain are analysed. The present status of construction supply chains isinvestigated by means of case studies and a comparison with previous research. Three main conclusions are drawn regarding thepresent 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 arelargely caused by obsolete, myopic control of the construction supply chain. These results concur with the "ndings made onmake-to-order supply chains in general. Finally, the subjective and objective limitations of the four roles are analysed, this being basedon empirical "ndings and the generic theory of supply chain management. ( 2000 Elsevier Science Ltd. All rights reserved.

Keywords: Supply chain management; Construction supply chain; Roles and limitations

1. Introduction

Two issues invite a discussion about construction sup-ply chains: lagging productivity development and in-creased economic weight of the supply chain. Theproductivity increase in building construction has beenslow. In Finland, for example, the annual increase hasonly been approximately 1% since 1975 (Vainio, 1999).In the Netherlands, this "gure has been approximately3% (Jansen, 1996). This is still not enough, however, tocompensate for the average increase in labour costs.Statistical "gures show that, in relative terms, main con-tractors have been purchasing increasing amounts oflabour and material. Nowadays, these represent about75% of main contractors' turnover (e.g. Scholman, 1997).As a consequence, main contractors have become in-creasingly reliant on other actors in the constructionsupply chain (e.g. suppliers and subcontractors). Thetraditional approach to the control of the constructionsupply chain is not adequate any more, and a shift ofmethods for managing the supply chain is needed.

From the end of the 1980s, the construction industryhas seen the launch of a number of supply chain manage-ment (SCM) initiatives. However, until now these havebeen scattered and partial. Thus, the goal of this paper isto clarify the roles and possibilities of SCM in the con-struction industry. Using the lessons learnt from SCM inmanufacturing as a starting point, there is a de"nition ofthe four roles of SCM in the construction industry, andan analysis of three case studies of present supply chainsin the construction industry. There is a comparison be-tween the conclusions from the case studies and both the"ndings in prior research and the most common prob-lems previously observed in make-to-order supply chainsin manufacturing. Finally, there is a discussion of thelimitations of the four roles of SCM in the constructionindustry, and a presentation of recommendations forSCM in construction.

2. Supply chain management in manufacturing

2.1. Origin of supply chain management

SCM is a concept that originated and #ourished in themanufacturing industry. The "rst visible signs of SCMwere in the JIT delivery system, as part of the ToyotaProduction System (Shingo, 1988). This system aimed to

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Table 1Characteristic di!erences between traditional ways of managing the supply chain and SCM (Cooper and Ellram, 1993)!

Element Traditional management Supply chain management

Inventory management approach Independent e!orts Joint reduction of channelinventories

Total cost approach Minimise "rm costs Channel-wide cost e$cienciesTime horizon Short term Long termAmount of information sharing and monitoring Limited to needs of current transaction As required for planning and

monitoring proessesAmount of co-ordination of multiplelevels in the channel

Single contact for the transactionbetween channel pairs

Multiple contacts between levelsin "rms and levels of channel

Joint planning Transaction-based OngoingCompatibility of corporate philosophies Not relevent Compatibility at least for key

relationshipsBreadth of supplier base Large to increase competition and spread risks Small to increase co-ordinationChannel leadership Not needed Needed for co-ordination focusAmount of sharing risks and rewards Each treated separately Risks and rewards shared

over the long termSpeed of operations, information andinventory levels

`Warehousea orientation (storage, safety stock)interrupted by barriers to #ows; localisedto channel pairs

`Distribution centrea orientation(inventory velocity) interconnecting#ows; JIT, quick response acrossthe channel

!Reproduced by permission of TNO Building and Construction Research, Delft.

Fig. 1. Generic con"guration of a supply chain in manufacturing.

regulate supplies to the Toyota motor factory just in theright* small* amount, just in the right time. The maingoal of this system was to drastically decrease invento-ries, and to e!ectively regulate the suppliers' interactionwith the production line. Another stimulus for SCMoriginated in the "eld of quality control. As early as 1950,in an address to Japanese industrial leaders, Demingsuggested that working with the supplier as a partner ina long-term relationship of loyalty and trust would im-prove the quality and decrease the costs of production(Deming, 1982).

After its emergence in the Japanese automotive indus-try as part of a production system, the conceptual evolu-tion of SCM has resulted in an autonomous status of theconcept in industrial management theory, and a distinctsubject of scienti"c research, as discussed in literature onSCM (e.g. Bechtel and Yayaram, 1997; Cooper et al.,1997). In addition to the Japanese in#uence, Westernscholars like Burbridge and Forrester provided earlycontributions to the understanding of supply chains(Towill, 1992). Along with original SCM approaches,other management concepts (e.g. value chain, extendedenterprise) have in#uenced its conceptual evolution,which has led to the present understanding of SCM.

2.2. Concept of supply chain management

The supply chain has been de"ned as `the network oforganisations that are involved, through upstream anddownstream linkages, in the di!erent processes and activ-ities that produce value in the form of products andservices in the hands of the ultimate customera (Chris-topher, 1992).

SCM views the entire supply chain (Fig. 1), rather thanjust the next part or level, and aims to increase transpar-ency and alignment of the supply chain's co-ordinationand con"guration, regardless of functional or corporateboundaries (Cooper and Ellram, 1993). The basic idea ofSCM is to recognise the interdependency in the supplychain, and thereby improve its con"guration and controlbased on such factors as integration of business pro-cesses. According to some authors (e.g. Cooper and El-lram, 1993), the shift from traditional ways of managingthe supply chain towards SCM includes particular ele-ments. These are shown in Table 1.

There are also other illuminating typologies of SCM.First, there are development issues of SCM, includingorder information transparency, reduction in variability,synchronising of material #ows, management of criticalresources and con"guration of the supply chain (Lin andShaw, 1998). Second, there are strategies for SCM includ-ing establishment of stable partnerships, modular out-sourcing of components, design for suitability formanufacture, #exible manufacturing technologies, evolu-tion of the supply chain with the product life cycle, andinformation acquisition and sharing (Lin and Shaw,1998). Third, there are levels of SCM that can be distin-guished, including initial partnership (e.g. building good

170 R. Vrijhoef, L. Koskela / European Journal of Purchasing & Supply Management 6 (2000) 169}178

Fig. 2. The four roles of supply chain management in construction.

relations with suppliers and distributors), logistics man-agement (e.g. implementing and controlling the #ow in-volving all actors in the chain), and `genuine SCMa (e.g.continuous improvement of all aspects of the entirechain) (Giunipero and Brand, 1996).

2.3. Underlying theory of supply chain management

Even if rarely acknowledged in literature on SCM, it iseasy to see that its emergence is due to the same shift intheoretical concepts as the emergence of JIT and leanproduction. The traditional way of managing the supplychain (as presented in Table 1) is based, to a large extent,on a transformation view of production, whereas SCM isprimarily based on a yow view of production. The trans-formation view suggests an independent control of eachstage of production, whereas the #ow view suggests a fo-cus on the control of the total #ow of production (Ko-skela, 1992, 1999). Related to this is the concept that thesupply chain can be seen as a `logical factorya. Thus, thesame principles and methods that have been used todevelop factories can also be used to improve supplychains (Luhtala et al., 1994). On the other hand, practicesparticular to quality control in SCM have a third basicconceptual basis, which is the view of production as valuegeneration (Koskela, 2000).

3. The roles of supply chain management in construction

3.1. Characteristics of construction supply chains

In terms of structure and function, the constructionsupply chain is characterised by the following elements:

f It is a converging supply chain directing all materialsto the construction site where the object is assembledfrom incoming materials. The `construction factorya isset up around the single product, in contrast to manu-facturing systems where multiple products passthrough the factory, and are distributed to many cus-tomers.

f It is, apart from rare exceptions, a temporary supplychain producing one-o! construction projects throughrepeated recon"guration of project organisations. Asa result, the construction supply chain is typi"ed byinstability, fragmentation, and especially by the separ-ation between the design and the construction of thebuilt object.

f It is a typical make-to-order supply chain, with everyproject creating a new product or prototype. There islittle repetition, again with minor exceptions. The pro-cess can be very similar, however, for projects of a par-ticular kind.

3.2. Introducing the four roles of supply chain managementin construction

The characteristics discussed above also have an im-pact on the management of supply chains. Four majorroles of SCM in construction can be recognised, depen-dent on whether the focus is on the supply chain, theconstruction site, or both. Fig. 2 shows these four areas offocus, which are also examined below.

Firstly, the focus may be on the impacts of the supplychain on site activities. The goal is to reduce costs andduration of site activities. In this case, the primary con-sideration is to ensure dependable material and labour#ows to the site to avoid disruption to the work#ow. Thismay be achieved by simply focusing on the relationshipbetween the site and direct suppliers. The contractor,whose main interest is in site activities, is in the bestposition to adopt this focus.

Secondly, the focus may be on the supply chain itself,with the goal of reducing costs, especially those relatingto logistics, lead-time and inventory. Material and com-ponent suppliers may also adopt this focus.

Thirdly, the focus may be on transferring activitiesfrom the site to earlier stages of the supply chain. Thisrationale may simply be to avoid the basically inferiorconditions on site, or to achieve wider concurrency be-tween activities, which is not possible with site construc-tion with its many technical dependencies. The goal isagain to reduce the total costs and duration. Suppliers orcontractors may initiate this focus.

Fourthly, the focus may be on the integrated manage-ment and improvement of the supply chain and the siteproduction. Thus, site production is subsumed intoSCM. Clients, suppliers or contractors may initiate thisfocus.

It should be noted that the roles as identi"ed above arenot mutually exclusive, but are often used jointly.

This paper's focus is the supply chain of a main con-tractor. However, there is a "fth important role that liesbeyond the scope of this paper, namely management of

R. Vrijhoef, L. Koskela / European Journal of Purchasing & Supply Management 6 (2000) 169}178 171

the construction supply chain by facility, or real estateowners. They may well drive the management and devel-opment of the construction supply chain on which theyare reliant for the continuation of their business, forinstance when they exploit a number of facilities thatneed frequent new development and refurbishment. Anexample of this is the wide-ranging construction-relatedprogramme of BAA Ltd (Duncombe, 1997). Here, prac-tically all the four roles of SCM are simultaneouslyapplied in order to improve both the e$ciency and thee!ectiveness of the supply chain. Indeed, this exampleshows that in addition to contractors, clients who havesu$cient construction volume are able to initiate majorimprovements in the construction supply chain.

3.3. Practical initiatives to advance constructionsupply chains

The following section discusses practical initiatives toadvance construction supply chains in each of the fourroles.

Role 1: Improving the interface between site activitiesand the supply chain: The clearest initiatives of SCM inconstruction have been in the "eld of logistics (e.g. As-plund and Danielson, 1991; Wegelius-Lehtonen andPahkala, 1998). Here, there has been a focus on theco-operation between suppliers and contractors for im-proving the total #ow of material, whereas traditionaltreatment of construction logistics and material handlinghas predominantly concentrated on activities occurringon site (Johnston, 1981).

Role 2: Improving the supply chain: This topic includesinitiatives aimed at the development of speci"c supplychains, such as prefabricated concrete elements (Laitinen,1993) or elevators (Luhtala et al., 1994). In-depth costand time analyses are important for identifying potentialimprovement and for developing supply chains(Wegelius-Lehtonen, 1995). When developing the supplychain, the trade-o! between transportation, inventoryand production costs should be borne in mind in order toachieve global improvement. Productivity and supplychain performance is decreased by the following factors:uncertainty in the supply chain, varying site conditionsand varying capacity conditions (O'Brien, 1995, 1998).

Role 3: Transferring activities from the site to the supplychain: Another group of initiatives aims at the redesign ofthe supply chain transferring on-site activities o! site.Industrialisation, especially prefabrication, can be re-garded as a structural means for eliminating on-site ac-tivities from the total production chain (Warszaswki,1990). Thus, the earlier, and still actual initiatives to-wards industrialisation of construction must also be seenas a form of SCM concentrating on the design of thesupply chain (Sarja, 1998).

Role 4: Integration of site and supply chain: New alter-natives have been suggested for the integrated manage-

ment of the supply chain and the construction site. Theseinclude open building (Van Randen, 1990) and sequentialprocedure (Bobro! and Campagnac, 1987). From a pro-duction point of view, the basic bene"t of open building isin the postponement of the decisions of users regardingthe interior of the building. This is realised by separatingthe in"ll from the structure. This also provides adaptabil-ity for the remaining life cycle of the building so thatusers can recon"gure the space as their needs change. Inthe sequential procedure, the idea is to structure the sitework as successive realisations of autonomous sequences(this resembles group technology as developed in manu-facturing). In both of these approaches, the goal is toreplace construction's usual temporary chains with per-manent supply chains. Pre-engineering is another relatedapproach, where the customer may choose a pre-engine-ered building from a certain range of options (Newman,1992). The supply chains for such buildings are typicallystable. Design-build arrangements (Bennett et al., 1996),although more restricted in scope, can also be classi"edin this group.

In critical terms, prior initiatives on construction SCMhave had only limited impact on the industry, andtheir wider application has been slow. Some of theseinitiatives are so new that it can be argued that theyare in the "rst stages of their di!usion, typicallyfollowing an S-curve, which tends to grow slowly in itsearly phases. Even industrialisation, the oldest initiativethat exists, has nevertheless not generally made thebreakthrough into building construction (Warszaswki,1990). A better understanding of construction supplychains is clearly necessary in order to comprehend thereasons for the di$culties of SCM's advance withinconstruction.

4. Analysis of the present status of constructionsupply chains

The status and characteristics of present constructionsupply chains have been investigated in three case stud-ies, carried out in the Netherlands and Finland. Thesupply chains that were observed were randomly chosenand were each representative of a `typicala supply chainand make-to-order construction process. These areshown in Fig. 3.

All of the observed supply chains consisted of #ows ofprefabricated components. Thus, development from thepoint of view of role 3 (transferring activities from the siteto the supply chain) was present in the supply chainsstudied. In addition, the contractors involved had carriedout sporadic improvement initiatives for realising role 1(interface between the site and the supply chain).

The case studies addressed the following researchquestions: What waste and problems were encountered


Table 2Overview of case studies

Case 1: Time measurement ofconcrete wall elements

Case 2: Problem analysiscomposite fac7 ade elements

Case 3: Analysis of extra costs forsite logistics

Description This case study refers to timemeasurement to detect andanalyse time bu!ers in a supplychain process of concrete wallelements, including the excavationand delivery of sand, the fabricationand delivery of elements, and thesite installation of elements.

This case study involves problemanalysis to identify and locatecontrollability problems in a chainprocess of composite fac7 ade elements.The observed parts of the processincluded the job preparation, pricenegotiation, engineering, assembly,and site installation of the elements.

This case study addressed the issue of tra-ditional trading leading to extra costs forsite logistics for a number of building ma-terials (i.e. costs for extra handling andtransport of the materials on site due tounforeseen circumstances). The observedactivities included site operations, pricecalculations and bargaining.

Objective Analysis of the time involvedduring the process in order to gaininsight into how the time was built up,and the magnitude and location oftime bu!ers.

Analysis of the controllabilityproblems along the process inorder to gain insight into theoccurrence and causes of theproblems.

For a number of building materials theaverage market price was compared withthe purchase price and the extra costsmade on site for logistics (as an index of themarket price: index"100).

Method Division of the process intosub-processes and activities

Division of the process intosub-processes

For the materials the approximatebaseline logistical costs were calculatedbeforehand.

Time measurement of the activities Determining the controllabilityproblems per sub-process

The extra costs on site were registeredwhen something unforeseen happened,such as unexpected deliveries ordeliveries of materials in larger batchesthan expected.

Categorising time involved peractivity: wasted, non-value-adding,value-adding

Identifying and locating thecauses

Locating and quantifying timebu!ers

Finding connections betweenthe problems and causes

Determining how the processtime had been built up

Results It appeared that at the beginningand the end of the sub-processessigni"cant time bu!ers occurred,particularly due to inventory anddelays. The proportion of timebu!ers to total lead-time was quitelarge. Underlying problems of thetime bu!ers included uncoordinatedplanning and point to various rootcauses such as inter-organisationalobstacles.

To controllability problems weremany and varied. Root causesincluded non-collaborativeworking relations between parties,and adversarial bargaining. Mostproblems that were encounteredon an operational and manageriallevel were actually caused by strategicand cultural issues, including alack of common targets, prevailingself-interest, reluctance andopportunism.

The extra costs varied from 40 to about250% of the purchase price. The extracosts mainly included man-hours spent onremedying unexpected incidents. Extracosts were incurred, for instance, due toprocurement of large and inappropriatelypackaged batches of material that wereawkward to handle. These tended to be thematerials and goods for which a consider-able discount had been negotiated.

Fig. 3. Typical con"guration of a traditional construction supplychain.

in construction supply chains, and where in the supplychain did their cause lie? What is the root cause of thewaste and the problems? Can the waste, problems and

root causes encountered in construction supply chains beresolved by applying SCM (e.g. by developing new con-trol principles for construction supply chains)?

By comparing the results of the case studies to the"ndings in prior research on construction supply chains,a better understanding and justi"cation of the results areachieved. The next step is to compare the consolidatedresults to "ndings in make-to-order supply chains inmanufacturing.

The case studies merely applied to the part of thesupply chain co-ordinated by the main contractor (Fig.3). The "rst two case studies focused on #ows of prefabri-cated materials in residential building (Vrijhoef, 1998).The third case study was done in an o$ce buildingproject in which the focus was also on #ows of prefabri-cated materials (Table 2). There were no characteristic


Fig. 4. Case 1: Time measurement of concrete wall elements (represent-ed schematically).

Fig. 5. Case 2: Problem analysis of composite fac7 ade elements.

Fig. 6. Case 3: Cost and price analysis of building materials.

di!erences between the chains in either country in termsof building systems and construction processes.

Initially, the case studies analysed the symptoms ofde"cient site activities (i.e. waste and problems) and theimpact of the supply chain on the performance of siteactivities (referring to role 1 of SCM). Then further ana-lyses sought out the root causes of the symptoms leadingto the domain of role 2 (improving the supply chain) aswell as roles 3 and 4 of SCM (transferring activities fromthe site to the supply chain, and integrated managementof the supply chain and the site).

Case study 1: time buwers: The "rst case study repre-sented a time measurement of the production and deliv-ery process in a supply chain for concrete fac7 ade elementsin a housing project (Table 2). Time bu!ers appeared tobe mainly located in between the sub-processes; separat-ing the sub-processes in order to cope with variabilityand non-synchronicity on either side of the bu!ers. Thetime bu!ers had a large impact on the build-up of time inthe total process (Fig. 4).

Case study 2: controllability problems: The second casestudy represented an analysis of controllability problemsin the production and delivery process for compositefac7 ade elements preceded by planning, engineering andbargaining activities in a housing project (Table 2). Thecontrollability problems appeared to stem often fromearlier activities in the chain process performed by prioractors (Fig. 5).

Case study 3: traditional trading: The third case studyrepresented an analysis of extra costs made for site logis-tics due to bargaining practices in an o$ce buildingproject. The extra costs are compared to the purchaseprice and average market price of the materials observed(Table 2). The data has been arranged in a descendingsequence of the relative purchase price of the materialsobserved. In general, it appeared that the lower thepurchase price was the higher the extra costs for site

logistics (Fig. 6). In this case, the extra costs varied from40% of the purchase price (i.e. 50% of the average marketprice: material 10) up to about 250% of the purchaseprice (i.e. 200% of the average market price: material 27).

For instance, the order for material 27 (sand-limebricks) came on pallets that were far too large and heavyto get them with any ease all the way up using theelevator and through the building. In addition, the heavyweight of the pallets made it impossible to move thebricks around on the #oors of the building. Therefore,one man had to spend approximately 50% of his timemanually carrying the bricks across the #oor to thelocation where the bricks had to be put in place.

There were various causes for the extra costs, forinstance, chaotic material deliveries and unsystematicsite organisation. As mentioned above, another reasonwas the procurement of large and often inappropriatelypackaged batches of material, which were awkward tohandle. It appeared that these were mainly the materialsand goods for which considerable discount had beennegotiated. Purchasing materials and goods at the verylowest price is common practice among purchasing de-partments of contractors. In this case, however, it ap-peared that for many materials this approachsubstantially increased the extra costs made on site(Fig. 6).

Case study analysis: From the case studies three mainconclusions can be drawn. Firstly, even in normal situ-ations a lot of waste and many problems exist in the


Fig. 7. Summary of the most common problems in make-to-ordersupply chains (Luhtala et al., 1994). Reproduced by permission ofHelsinki University of Technology, Espoo.

construction supply chain, though these are often eithernot seen or are ignored. Secondly, most of the waste andproblems are caused in another stage of the constructionsupply chain than where the waste and problems sur-faced. The root causes of the waste and problems wererarely found in the activity where the waste and problemswere encountered, but rather in a previous activity bya prior actor. Thirdly, waste and problems are largelycaused by myopic control of the construction supplychain.

4.1. Comparison of case study results with xndingsin previous research

In order to validate the conclusions more generally,the case study results are compared with "ndings inprevious research.

Waste and problems in construction supply chains:Jarnbring (1994) found in his study on construction ma-terial #ows that the value-added time of those #ows isonly 0.3}0.6% of the total #ow time. Only for the inter-face between the main contractor and the supplier has anaverage cost reduction potential of 10% (of materialcosts) through improved logistical procedures beenshown (e.g. Asplund and Danielson, 1991; Jarnbring,1994). When taking the whole supply chain into consid-eration, and all improvement possibilities, the amount ofavoidable costs must be considerably higher.

Root causes of waste and problems in prior stages of theconstruction supply chain: Jarnbring (1994) found thatde"cient planning and information on the amount ofrequisite material are characteristic for materials pur-chasing. In a study on the implementation of leanproduction in construction component manufacturing,Koskela and Leikas (1997) found that there is a tendencyto place construction component orders with missinginformation due to incomplete design data. In a study onthe supply of concrete fac7 ade component, Laitinen (1993)found that several of the problems observed in the fac-tory were due to external parties. In terms of designinformation, design documents are often inadequate anddi$cult issues are not detailed. Changes are caused byunavailable, late, wrong and incomplete information andare often not communicated. On the other hand, thefactory caused problems for other parties. In attemptingto optimise its activities it supplied elements in a di!erentorder to that in which they have to be installed. Thefactory needed to have all drawings simultaneously be-cause of its own inadequate scheduling of its informationneeds.

Myopic control of the construction supply chain: Ina study into construction logistics, it was found that thepurchasing price is the dominating criterion for supplierselection (Wegelius et al., 1996); a "nding which Jarnbr-ing (1994) con"rms. SaK rkilahti (1993) found that subcon-tractors are predominantly selected on the basis of price.

According to Jarnbring (1994), decision making on theimprovement of logistics is often constrained to thosesolutions one has experience of. It is customary to usematerial inventories as bu!ers against disruption. Sim-ilarly, Laitinen (1993) found that nearly all actors in thesupply chain add a time bu!er to their schedule, and thusunduly in#ating the build-up of time.

Comparison of the results of the case studies with priorresearch justi"es that waste and problems in constructionsupply chains are extensively present and persistent. Dueto interdependency, the occurrence of waste and prob-lems in interrelated with causes in other stages of thesupply chain. In addition, myopic control of the construc-tion supply chain reinforces waste and problems, andcomplicates resolution (Vrijhoef and Koskela, 1999).

4.2. Comparison with make-to-order supply chainsin manufacturing

Based on various analyses in di!erent companies pro-ducing non-standard products in di!erent manufacturingindustries, Luhtala et al. (1994) observed typical prob-lems in make-to-order supply chains. The problemsspread along the supply chain and typically exist at everyinterface in the total production process (Fig. 7).

Customers are often seen as the ultimate source ofchanges in speci"cations in make-to-order production.However, it was realised in the study that most of thecontrollability problems and changes in product speci-"cations are of internal origin. They stem from the inter-action of the various units of the supply chain. On theother hand, it is often postulated that poor deliveryperformance of component factories creates most of theproblems in the installation phase. Instead, it wasrealised in the study that the role of the front-line units,responsible for sales and often for installation co-ordina-tion, is crucial for the performance of the whole supplychain, including installation. It was concluded thatmake-to-order logistics networks contain a vast develop-ment potential that can be utilised by managing the


delivery processes instead of individual units withinthem.

These results concur with the "ndings made in con-struction regarding the frequency of problems as well astheir origin and causes.

The "ndings from the case studies are in line with the"ndings in previous research and correlate to typicalproblems in make-to-order supply chains in manufactur-ing. This observation largely justi"es that many problemsexisting in construction supply chains have their origin inthe de"ciencies of obsolete control principles. Therefore,problems encountered in construction supply chains maywell be resolved by applying a generic methodologyprovided by SCM, and developing corresponding con-trol principles and methods.

5. Discussion

Based on the empirical analyses and the generic bodyof knowledge concerning SCM, subjective and objectivelimitations in each of the roles of SCM can now beperceived. Subjective limitations are due to a de"ciencyin conceptualisation; objective limitations are caused bythe characteristics of the environment of the problemaddressed or peculiarities of construction in general. Itcan be assumed that these limitations have thwartedprogress in developing construction supply chains.

5.1. Role 1. Improving the interface between site activitiesand the supply chain

It is a subjective limitation that the logistics initiativeshave stressed (average) costs particularly, and thus failedto address the impact of supply chain variability on siteassembly. In this regard, the last planner method (Ballardand Howell, 1998) provides an appropriate augmenta-tion.

In addition, there is an objective limitation due to thenarrow focus of this role in relation to the whole supplychain. For instance, it is quite possible to improve thedependability of the deliveries of a supply chain throughbu!ering, without addressing the whole supply chain, butthe improvement of the dependability of the total supplychain would be a more e$cient and e!ective solution.

5.2. Role 2. Improving the supply chain

Regarding this role, the erratic and undisciplined na-ture of customer activities (Koskela and Leikas, 1997)causes objective limitations. There are problems at bothends of the delivery process. At the beginning, the prod-uct de"nition is incomplete or capricious, and at the end,the delivery date often changes and the installation con-ditions are chaotic. As far as possible, the supply chain

should be shielded from these problems or made robustin relation to them.

5.3. Role 3. Transferring activities from the siteto the supply chain

Transferring activities o! site yields objective limita-tions. In industrialisation, the structure and behaviour ofthe total process changes: the process is longer, theamount of design required more substantial, the errorcorrection cycle longer, and requirements for dimen-sional accuracy usually higher. Thus the total process ofindustrialised construction tends to become complex andvulnerable to variability, even if the part of the processlocated on site becomes less complex (Koskela, 2000).The inevitable penalties for variability (Hopp and Spear-man, 1996) may grow on account of this. Indeed, ifactivities are transferred o! site, the complexity thatresults in the supply chain must be managed well and beimproved in order to pro"t from the intended bene"ts.

However, industrialised construction, with its long andcomplex supply chain, seems often to have su!ered froma lack of basic SCM; a matter of subjective limitation. Itseems that in badly controlled design, fabrication and siteprocesses the increase in costs due to non-value-addingactivities has often nulli"ed the theoretical bene"ts to begained from industrialisation. As the study by Luhtala etal. (1994) shows, manufacturing-oriented make-to-ordersupply chains are also plagued by problems and waste ifmanaged in the traditional way.

5.4. Role 4. Integration of site and supply chain

Here again objective limitations can be discerned inmany initiatives, related to the nature of constructedobjects. The logic of many existing initiatives is based onthe idea that SCM is more e!ective with stable supplychains and with standardised (even if customised) prod-ucts. However both features, stable chains and standar-dised products, are restrictive to some extent in respect ofmarket opportunities and the broad spectrum of demandfor construction. From this point of view, Naim et al.(1999) suggest developing construction supply chainsalso in the framework of the `agile paradigma: usingmarket knowledge and a virtual corporation to exploitpro"table opportunities in a volatile marketplace.

In terms of subjective limitations, design-build is a par-ticular example that shows integration to have often beenmerely partial or super"cial. Studies (e.g. Bennett et al.,1996; Konchar and Sanvido, 1998) show that the bene"tsof design-build, even if statistically observable, are minor.The most plausible reason for this is that the control andimprovement of design-build processes have been poor.Presumably, it had been thought that mere improvementof the organisational structure would su$ce.


6. Conclusions

This paper contains three contributions to knowledge.Firstly, various existing initiatives towards con-struction supply chain development are explicitly relatedto a generic SCM methodology. In this context, fourroles of SCM have been identi"ed. Previous researchhas often been partial, focusing solely on one role at atime.

Secondly, the present status of construction is empiric-ally assessed from a supply chain viewpoint. The result ofthis investigation is revealed to be compatible both withprevious observations in construction and in make-to-order supply chains. The result provides a new, empiric-ally founded understanding of construction supplychains and shows that great potential exists for theirimprovement. The majority of the causes of waste andproblems are related to traditional management of thesupply chain, and thus new principles and methods ofmodern SCM should provide a solution.

Thirdly, based on the new empirical understandingand generic theories of SCM, limitations in eachrole have been recognised and discussed. These limi-tations had previously only rarely been discussed.Regarding each of these roles, subjective limitationshave to be eliminated while objective limitations, relatedeither to the narrow de"nition of the problem or tothe characteristics of construction like site production,have to be recognised and suitable countermeasurestaken.

All in all, it can be assumed that the generic body ofknowledge accrued in the framework of SCM leads toimproved understanding of the nature of constructionsupply chain problems, and provides direction for action.However, the practical methods for SCM imple-mentation have to be developed so they take into ac-count the characteristics and the speci"c situation ofconstruction.

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The four roles of supply chain management in construction

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