Supply Chain Management in the Construction Industry

Abstract: In this licentiate thesis the implications of a deliberate use of logistics knowledge have been investigated by describing and analyzing the use of a supply chain management approach in the construction industry. <br> A five-step approach is used in the thesis. First, theoretical models are developed from the supply chain management literature. Two models are elaborated; One model identifying supply chain criteria and the other comparing traditional to supply chain-based. <br> Secondly, the literature study of previous contributions in the field is analyzed in terms of the models. The supply of construction material is found to be mainly traditional, that is focused on issues inside the company instead of being supply chain-based. Explicit criteria for supply chain management are not found in the literature treating the supply of construction material or construction in general. The strong development of logistical tools and concepts seen in the stationary industry seem to have no such corresponding movement in the construction industry.<br> A methodological discussion is carried out covering the general need for methodology and the need for qualitative methods. The implications from the desire to change the studied environment are discussed. A qualitative case study is chosen for the thesis, and it is handled in a systems model. The primary data is achieved from interviews, observations and documents.<br> As a third step in the five-step thesis approach, a case study is presented. It is a housing project called Bo Klok, mainly driven by the Swedish contractor Skanska and IKEA.<br> With a strong customer focus, the project was developed by the project managers to meet the consumers' demands, including how much they were willing to spend on housing costs. The consumers were identified as people with normal income. A conventional construction approach was found to be too expensive, and hence the project management developed a new approach. By a series of systematical efforts to change the conventional business environment, the structure of the material flows has been altered and the prerequisites for construction have thereby been improved. Change actions in the case study are e.g. continuous ambitions for a holistic approach, incorporating site deliveries and challenging traditional purchasing patterns.<br> In order to secure a fast high quality production, an industrial approach was found to be necessary by the project management. To be able to evaluate how design decisions affect the conditions in the supply chains, a fruitful iterative communication between the architect and material suppliers was encouraged. This for example meant that some value adding activities were moved to earlier organizations in the supply chains. It also meant that the local construction manager is not allowed to decide or influence methods, materials or planning in a Bo Klok project as in normal construction projects.<br> In order to reduce the total cost for the project to reach the pre-decided cost level, all possible parts of the project were investigated. In combination with the holistic approach in the project, this led to that the existing purchasing patterns for installation materials were challenged. In order to achieve cost transparency and be able to reduce costs for the installation materials' part of the total cost, Skanska tried to buy these types of products directly from manufacturers and wholesalers. But these new ideas concerning an altered material flow structure in the project have met strong resistance. Especially the participants in the traditional supply chains for installation materials protested loudly and tried to stop the challenge.<br> The active and pro active change of the conditions of the production that is seen in the case study is from a logistic perspective notable and unconventional for the Swedish construction industry. In general, active and deliberate efforts to change and improve the conditions for the on site production instead of accepting them are rare. The actions in the case have by the project management been considered to be forced in order to reach the project cost level decided by consumer preferences. As such initiatives are not seen in other types of projects on the Swedish housing market, a general unused cost saving potential exists. All types of changes that have been used in the Bo Klok project are not applicable for all types of construction projects, but still a general potential is undoubtedly present. The approach used in the Bo Klok project has enabled production of high quality housing to a cost level low enough for consumers with ordinary incomes to afford to demand.<br> In order to explain the unconventional purchasing patterns in the case study from a supply chain perspective in terms of action research, supply chain models have been introduced to the companies participating in the supply chains. The supply chain models have however not been recognized nor accepted. In order to bridge the gap that obstructs the understanding of structural changes in the material supply to meet consumer needs, a new model is presented in the thesis.<br> The model connects the phases in the construction value chain to the supply of construction materials by the common entity the construction phase on the site. The need for communication between early stages, e.g. between the designers and the construction material manufacturers, is essential in the model and this kind of information must be encouraged, managed and controlled.<br> In the fourth step of five, the actions and the pragmatical adoptions that have been done in the case are described and, finally, in the fifth step the case and the study in general is concluded. The approach used in the case study project Bo Klok is a step towards a supply chain-based supply, but it can not be described as a supply chain management approach. Even if the actions in the case make sense in a supply chain management context, it has not been a question of a deliberate and systematical use of a supply chain management approach.<br> Supply chain management is a great opportunity for the construction industry primarily to reduce costs and time, and thus improve revenues and still make the products more worth their prices. New latent markets for low price housing could be developed. Also product development and marketing for construction material in the supply chains could be made more effective and efficient. Obstacles for supply chain management approaches are e.g. the poor level of logistical competence, the partly limited competition, the strong project focus as well as the attitudes and traditions in the construction industry.