Project-based E-procurement : towards strategic purchasing in the Swedish construction industry

University dissertation from Linköping : Linköpings universitet

Abstract: The purpose of this study is to describe and analyse the use of E-procurement and the development towards Strategic Purchasing in the Swedish Construction Industry.The rationale behind this study is to bring out the potential for large decentralized finns, such as large construction companies, to exercise strategic purchasing which I have chosen to define as a more centralized approach to the purchasing function in order to enhance all relative benefits for large organizations. Firms that operate in the construction industry focus their activities in projects of various sizes. It is natural in the construction business that most production operations must be undertaken by local markets with the use of local resources. The business logic in the local activities is centred around construction projects and in the couplings with local players. Local units and project managers have a strong influence in decision-making and have traditionally been left to manage production and purchasing as long as individual projects show profitability. The difficulties in the centralization of purchasing activities are likely affected by the specific characteristics that local project intensive operations entail. Under these circumstances, it is interesting to in particular study the impact of E-procurement in the purchasing arena and how this new phenomenon influences the potential for strategic purchasing. In order to further investigate the main purpose with this study the following research questions were developed:What characterizes purchasing on local levels in the firms and how is it related to the local context?What characterizes purchasing development on the central level in the firms and how is it related to the strategic context?How does E-procurement affect local and central level purchasing and how does E-procurement affect the interrelation between them?What forces affect the Construction firms' purchasing strategy and purchasing organization?How can Construction firms be developed from local purchasing to strategic purchasing?How does E-procurement affect large construction firms towards Strategic Purchasing?The first empirical results of E-procurement projects are now available to use in the research. I have used the empirical results from two major players in the Construction Industry; Bravida and NCC. Both firms have gained substantial experience in the implementation of E-procurement projects. This thesis containes two indepth case studies, describing Bravida's and NCC's purchasing activities on both the central level and the local level as well as the use of Project-based E-procurement.The two cases were found to have both differences and similarities in their characteristics. However, after a case comparison and theoretical synthesis the main conclusions I found were that construction firms must find ways to create more permanent networks that last over time and over multiple number of construction projects. A strict central organization for purchasing coordination and governance is not the ultimate model due to the prevailing complexity in construction projects and the local market dominance. Instead, large construction firms should apply a balance between central govemance and local governance which for instance involves a purchasing strategy based on Continuous (in every project repeatedly purchased) Items and Discontinuous (selldom project based purchased) Items. This approach also indicates the importance that being a large player on the market must pay-off and that not just the contrator tier in the construction supply chain must change, but also the suppliers must change in accordance to their customers.My research will demonstrate how E-procurement can be a very useful tool for the central purchasing management to fulfill the strategic approach of the purchasing activities. E-procurement as a phenomenon constitutes an information plattform creating value for the integrated business units and suppliers as well as act as a catalyst for change of the process itself.

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