Element 010 Supply Chain Management in Construction
Task A: Critical evaluation of the procurement systems
Procurement is defined as the process of acquiring new services or products that comprise everything for obtaining the final service or product. It is not regarding the selection of a contractor, contract or tender rather it is an integrated system for providing best practices for acquiring the facility. It requires the development of a procurement system that can help in meeting the specific demands of the customers.
Procurement systems
The components of the systems of procurement are “separated systems”, “integrated systems”, management systems”, collaborative systems” and “public or private systems”. The traditional systems, “design and build” systems, “management contracting” and “construction management” belong to the “separated systems”. On the other hand, the “collaborated systems” help in embracing a number of systems like “framework agreements”, “prime contracting” and partnering for accomplishing the mutual desire of the parties for accomplishing a common goal (Agapiou, 2020). The benefits of “collaborative procurement” are low costs of construction in real terms, fast completion time, improved quality, safety and customer satisfaction with fewer problems and faster resolution, which influence the choice of this procurement system.
Factors influencing the choice of procurement systems
Procurement strategies are regarding the development and selection of appropriate systems so that an objective, disciplined and structured approach can be established. It involves various stages of procurement like establishing business needs, developing a business case, developing strategy, detailing design and managing contracts for services. The procurement strategies can be design-oriented, construction-oriented, management-oriented and provider-oriented (Fu et al. 2019). This influences the choice of the procurement systems. For example, this strategy includes determining the requirements of the client and the nature of relationships between customer and supplier in the construction. Thus, the factors that influence the procurement strategy are clients, risks, costs, accountability, flexibility, the building, funding and timing requirements, market conditions and industry capabilities.
A client can consider a “collaborative strategy” for any project like partnering irrespective of the method of procurement that is utilised. This type of strategy is most popular among clients for various projects. By the use of pre-defined indicators, it can help in examining him performance of the consultants and the contractors. Apart from this, external factors like the technological, legal, social, economic, political and commercial factors need to be considered. For example, a high inflation rate can result in purchasing of raw materials at high prices in the construction sector (El-Sawalhi and El Agha, 2017). The resources of the client are the other factor since the experience and knowledge of the organisation helps in influencing the building projects. This involves the level of involvement of the clients. The complexity, location, uniqueness and size of the project have to be considered since it influences the time, costs and risks. For example, the construction projects should be set up in a location having good transportation costs and low costs for procuring raw materials.
The most important influencing factor is the ability to manage the project in the initial stages. With the latest models for construction procurement, these models help in overreaching principles of transparency on costs, integrated working of the team, collaborative working approach and earlier management of suppliers. They help in providing certainty in costs and savings up to 20%. For example, cost-oriented procurement, integrated project insurance and two stage book can help in overcoming the excessive costs. During the initial stages of the project, the requirements of the client should be pointed effectively since it is difficult to make changes in the project during its ongoing process (Bienhaus and Haddud, 2018). Changes in this scope can result in increased time and costs that can occur in the construction frequently. Apart from this, it is required to implement a “price assurance assessment” for considering the time delay and costs of the target. On the requirement of the price assurance, it is required to finish the design before completion of the construction. However, collaboration is the most effective method for implementing procurement methods as it helps in overcoming the limitations of the incomplete project.
The risks have to be considered for the procurement systems since without evaluation of the potential risks; it is not possible to complete the project. For example, in “design and build” the contractor has to undertake the risks in the project whereby the clients are not involved in mitigating the risks (Ilhan and Rahim, 2020). In another instance, the traditional method involves risks to be analysed by the clients. Moreover, in public-private partnership, the private companies have to undergo the risks so risk assessment ad proper mitigation strategy is required.
References
Agapiou, A., 2020. Factors influencing the selection of a procurement route for UK off-site housebuilding. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, pp.1-13.
Bienhaus, F. and Haddud, A., 2018. Procurement 4.0: factors influencing the digitisation of procurement and supply chains. Business Process Management Journal.
El-Sawalhi, N.I. and El Agha, O., 2017. Multi-attribute utility theory for selecting an appropriate procurement method in the construction projects. Journal of Construction in Developing Countries, 22(1).
Fu, H.P., Chang, T.S., Yeh, H.P. and Chen, Y.X., 2019. Analysis of factors influencing hospitals’ implementation of a green e-procurement system using a cloud model. International journal of environmental research and public health, 16(24), p.5137.
Ilhan, N. and Rahim, M.M., 2020. Understanding Digital Transformation of Procurement Through E-Procurement Systems Implementation: Business Partner Relationship Perspective. In Leadership, Management, and Adoption Techniques for Digital Service Innovation (pp. 182-206). IGI Global.
Task B– Critical evaluation of the advantages or benefits of “supply chain management” by construction companies
“Supply Chain Management”
“Supply chain management” refers to the task of managing the flow of services and goods and also includes within itself the processes that are involved in transforming raw materials into finished products. It refers to the process in which business supply-side activities are streamlined for maximizing the value of the customers and for gaining of competitive advantage in the market (Adeitanet al. 2019).
Hence every construction companies whether it is a client, supplier, main contractor, surveyor, designer, or sub-inspector is all part of the supply chain. Based on the type of construction project, procurement happens in these companies. They are usually represented as members of different projects but belong to the same supply chain.
In every company of the supply chain, there is a client to whom the organization offers its services. However, if the supply chain is integrated then it would have the responsibility of working wholly and understanding the interest of the clients in the project. Managing the supply chain in this construction involves analysing the traceability and the breakdown of components, services, products, people, for transforming raw materials into finished products (Al-Werikat, 2017).
Advantages of “Supply Chain Management” in construction
The advantages or benefits of the supply chain in construction are:
- reduction in real costs
- margin maintenance
- the incentive for removing waste from the process
- competitive advantage”
- delivery on-time
- improvement in productivity
- creation of value
Project supply chain refers to the process that allows coordinating the activities and resources for delivering a set goal with a frame of time, scope, and budget. It has a scope that is external and internal that is relative to the process. A project supply chain refers to a discipline that manages all the processes and supplies in every stage of the project (Kumar and Shoghli, 2018).
The nature of the “supply chain” in the construction industry involves:
- convergent supply chain which directs all the resources at the construction site where the project is assembled with the incoming materials
- ‘made-to-order” supply chain in all projects that delivers new products from the old customers
From the viewpoint of project clients and end-users, the benefits include responsive industry delivering facilities meeting the needs of the users in a better way, delivered at the proper time and cost with a minimum amount of defects. This helps in building high customer satisfaction and increases the reputation of the industry (Kale and Ahire, 2019). Organizations in the construction industry can reduce the uncertainties in logistics, equipment, and material in the supply chain through the creation of long-term alliances. Hence, it results in the reduction of costs. Moreover, supply chain management in the construction industry provides equal opportunities to vendors and suppliers (Al-Werikat, 2017).
Problems in “Supply Chain Management”
Supply Chain Management concerning construction is very complex and there is a need for more “design input” by the specialist suppliers. There is huge fragmentation in this industry which is revealed through the growth of contractors/ specialist suppliers, fragmentation of control and design activities, and product proliferation. The supply chain in construction is unstable. Some problems of supply chain management in construction industries include:
- Logistics/procurement – no proper study of the logistics, or the logistics route, no obtaining of the permit and the needed licenses, and delays in customs clearing.
- Commissioning Interface – feeding of inaccurate data, not meeting the technical specifications, lack of collaboration, coordination, and commitment in between suppliers. Poor quality of components and materials (Amadeet al. 2017).
Changes in design, lack of trust, and wrong calculations can impose challenges in the proper implementation of supply chain management in this industry. Poor equipment and materials, inadequate training of workers and subcontractors are some other challenges. Moreover, there are no tools for measuring the performance of the parties involved in the construction industry.
It can be seen that there are several advantages as well as limitations in the “supply chain management” concerning the “construction industry”. The construction industry is huge and complex hence several parameters are acting together from bringing success to the process of supply chain management. Poor or delayed performance of any one of the parameters can disrupt the entire supply chain of the industry.
References
Adeitan, D.A., Aigbavboa, C.O., Emem-ObongAgbenyeku, E. and Bamisaye, O.S., 2019. Industry 4.0 and construction supply chain management. In Creative Construction Conference 2019 (pp. 368-375).Budapest University of Technology and Economics.
Al-Werikat, G.K.E., 2017. The Impact of Supply Chain Management on Construction Projects Performance in Jordan (Doctoral dissertation, Coventry University).
Amade, B., Akpan, E.O.P., Amaeshi, U.F., Okorocha, K.A. and Ogbonna, A.C., 2017. Delineating supply chain management (SCM) features in construction project delivery: The Nigerian case. International Journal of Construction Supply Chain Management, 7(1), pp.1-19.
Kale, V. and Ahire, H., 2019.Study of Supplier Evaluation and Development Practices in Supply Chain of Construction Industry.
Kumar, A. and Shoghli, O., 2018. A review of IoT applications in supply chain optimization of construction materials.In ISARC.Proceedings of the International Symposium on Automation and Robotics in Construction (Vol. 35, pp. 1-8).IAARC Publications.
