Every player in the construction sector, in one way or the other, is a part of the overall supply chain. The project designer, materials supplier, subcontractors, the main contractor, and the client often act as the links of the supply chain across different construction projects and operations.
Construction supply chains (CSC) are known to be complex, and their intricacies keep increasing with the growing magnitude of the project. The complexity further increases with the involvement of more people, i.e., first-tier, second-tier suppliers, and other tiers of sub-contractors, etc.
The scope of the project is correlated to the complexity of the supply chain as more manpower, parties, and materials are needed for the completion of the project. Thus, it is essential to implement proper planning, organization, and collaboration between supply chain partners for a seamless supply chain operation and a smooth supply chain management (SCM).
This article proposes a set of managerial practices for efficient management of the construction supply chain.
1. Development of Suppliers and Subcontractors
Construction companies have to constantly deal with their contractors throughout the different phases of a project. The performance of the contractors, therefore, plays a very important role in the overall success of the project.
Some of the major manufacturing firms have developed initiatives to improve the suppliers' performance, including well-structured programs based on consulting, training, and feedback provided to the suppliers.
Such programs are led by the principal firm within the supply chain to obtain better results in terms of quality, cost, and dependability from its suppliers. Following the completion of the program, the suppliers are rated, and some of them are advanced to a higher level of development in a new cycle.
2. Performance Measurement
Performance measurement systems are used across all sectors to gauge the performance of employees as well as clients involved in a project. The system effectively recognizes weak performers and improves the company's overall performance; thus, it is a crucial technique to evaluate the current market competition.
Standardized metrics can be used to assess the performance of suppliers and provide feedback for them. It has proved to be a powerful approach for supply chain management improvement.
Such an approach refers to the traditional view of plan, do, check, action (PDCA) cycle, in which "check" measures the performance and gives directions to correct the course of action.
The challenge in terms of performance measurement lies in defining the metrics and using the information provided by them for improvement. However, this can be efficiently dealt with by incorporating software and tools specifically designed for performance measurement that are also user-friendly.
Benchmarking is defined as the practice of measuring the performance of a company's products, services, and processes against companies considered to be the best in class in the industry. It is based on best-practices exchanged between companies in order to improve their processes. Benchmarking can also be used to compare the performance of metrics to establish goals to be reached within a specific period of time.
It would prove to be a valuable step for the construction companies to promote benchmarking in their sector, evaluating the best practices for management, and identifying the gaps between their internal practices and the benchmarks.
The implementation of benchmarking is still a developing concept in supply chain management. Though a complex initiative, benchmarking would improve the overall quality across the supply chain and also set new standards for the suppliers.
4. Knowledge Management
In a supply chain, the suppliers usually develop knowledge not only about their services and products but also about supply chain management. Even though there are many suppliers within a single supply chain, the knowledge possessed by these suppliers is rarely ever gathered by a focal (major) company.
This unveils an untapped opportunity for implementing knowledge management in the supply chain. Establishing a unified platform for knowledge sharing can deliver concrete results for supply chain improvement, especially in construction, which is already used to internal knowledge management practices.
5. Waste Identification and Elimination
The construction industry still lacks the research about waste identification and its elimination from the supply chain. The adoption of practices aiming at identifying non-value-added activities or processes and phasing them out can improve supply chain management.
A thorough investigation of the processes can produce a total redesign of their flows and lead to optimized processes. Efforts can also be made at the operations level of purchasing, stocking, handling, etc. to identify redundant activities and eliminate them.
The application of this concept throughout the different tiers of the supply chain can produce great results from a systemic point of view, given the interaction between the companies is constant, and their individual results influence the overall performance of the supply chain.
6. Information Technology
The application of Information Technology (IT) can yield significant benefits to the supply chain management. Using a web-based information system can reduce interfacing barriers between the various parties on the supply chain. In contrast, information and communication technology (ICT) can improve supply chain performance, support supply chain efficiency, and enable greater supply chain integration.
Proper implementation of IT within the SCM can diminish wastefulness, decrease work-in-progress (WIP), and expand throughput and efficiency. These factors result in lessened working expenses and increased topline income and related benefits.
7. Human Resource and Training
Human resource is an essential part of the supply chain, which further establishes the need for qualified persons within the system. Companies should periodically prepare a comprehensive and extensive training program to equip the best employees with the required skills to efficiently handle the supply chain. Such programs demand managerial support and employee commitment and will go a long way in enhancing the supply chain performance.
The supply chain is a nexus of organizations involved, from the point where the supplier procures the raw material until the point the client receives the product, on the different activities and processes that produce value in the form of products and services for the final client.
Human resource is an essential part of the supply chain, which further establishes the need for qualified persons within the system. Companies should periodically prepare a comprehensive and extensive training program to equip the best employees with the required skills to efficiently handle the supply chain.
Using a web-based information system can reduce interfacing barriers between the various parties of the supply chain. Proper implementation of IT within the SCM can diminish wastefulness, decrease work-in-progress, and expand throughput and efficiency.
How Important is Supply Chain Management in Construction?
Why is Plan Cost Management Necessary? [PDF]