SUPPLY CHAIN MANAGEMENT IN THE PAKISTANI CONSTRUCTION INDUSTRY

BY

NAME REGISTRATION NUMBER

Mohammad Imran F-09-101
Usman Satti F-09-102
Zahid Satti F-08-104
Tabassum Daud F-08-123
Ihsan Munsif Sp-09-119
Muhammad Fahim Sp-09-137
Khurram Warraich Sp-08-135
TA Instructor
Faisal Shaffique Butt Khalid Mushtaq

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 Table of Contents

Section Number Contents Page Number

One - Introduction General 3
Statement of the Problem and Hypothesis 3
Aims and Objectives 3
Scope and Limitations 3
Two - Concept of Supply General 4
Chain Management and
Applicability to Construction
Industry
Construction Industry 4
Concept of Supply Chain Management 5
Methodology of Supply Chain Management 6
Supply Chain Management Implementation 7
Requirements
Supply Chain Management in the Construction 8
Industry
Role of Information in Construction Supply 13
Chain Management
Cultural Compatibility 14
Trust Based Relationship 14
Relationship Assessment 14
Essence of Supply Chain Management 15
Barriers to Effective Supply Chain Management 16
in Construction Industry
Three - Research The Way Forward 17
Methodology
Scope of Survey 17
Layout of the Questionnaire 17
Four - Results Results 20
Findings 22
Five - Recommendations Recommendations 24
and Conclusion
Conclusion 24
References 25

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 SECTION 1 - INTRODUCTION

1. General

a. Traditional supply chain activity and the nature of its membership tend to be specific to a
particular project. This condition, whilst not being unique, is unlike the majority of other
industry sectors where supply chain membership is largely stable.
b. The Supply Chain should not be regarded solely as a Procurement process but should
embrace the whole cycle of Procurement, Delivery and Consumption. The Supply Chain
should be regarded as a cross-functional activity between all the inter-related
organizations and internal departments involved in the process.
c. The process should be regarded as a ‘value chain’ and not solely as a Supply Chain
given that it was the ‘value added’ at each stage of interaction in the process that
provided the organizations involved with business activity (profit, turnover etc.). The
Supply Chain members should adopt a ‘replicable rolling business’ approach rather than
the current ‘individual one-off project’ approach i.e. currently, organizations tend to regard
each new business venture within the construction sector as being ‘new’ and ‘project
based’. More attention should be paid to the ongoing nature of business and the lessons
learnt and nature of relationships built through past activity.
2. Statement of the Problem and Hypothesis. In comparison to other sectors the main
players in the construction industry remain relatively unsophisticated in their approach to the supply chain.
The construction industry is characterized by one-off contracts and a failure to develop longer-term
relationships between main contractors and key suppliers. The construction industry in Pakistan therefore
remains hugely fragmented and involves supply chain pressures that militate against a simple single
solution. This study shall be undertaken to shed some light on the awareness of Pakistani construction
contractors of the Supply Chain Management and the advantages and barriers in its implementation in
the construction industry.
3. Aims and Objectives
a. Document the current opinions regarding Supply Chain Management in the Pakistani
construction industry from the contractors’ perspectives.
b. Identify the principal objectives in developing Supply Chain Management.
c. Identify the key factors in effective Supply Chain Management relationships between the
construction contractors and their suppliers and clients.
d. Identify the major barriers to the implementation of Supply Chain Management in the
Pakistani construction industry.
e. Recommendations and conclusions.

4. Scope and Limitations. The research will be done in the province of Punjab, the results
and conclusions can however be applied to the construction industry in other areas of the country owing
to the similarities of rules, regulations and business environment. Moreover, most of the large
construction contractors doing business in Punjab have their presence in other parts of the country.

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 SECTION 2 - CONCEPT OF SUPPLY CHAIN MANAGEMENT AND APPLICABILITY TO
CONSTRUCTION INDUSTRY

5. General

a. Supply chain management is a cross-function approach including managing the

movement of raw materials into an organization, certain aspects of the internal
processing of materials into finished goods, and the movement of finished goods out of
the organization and toward the end-consumer. As organizations strive to focus on core
competencies and becoming more flexible, they reduce their ownership of raw materials
sources and distribution channels. These functions are increasingly being outsourced to
other entities that can perform the activities better or more cost effectively. The effect is to
increase the number of organizations involved in satisfying customer demand, while
reducing management control of daily logistics operations. Less control and more supply
chain partners led to the creation of supply chain management concepts. The purpose of
supply chain management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and the velocity of inventory movement.

b. Supply chain management is a concept originating from the supply system by which
Toyota was seen to coordinate its supplies, and manage its suppliers. In terms of lean
production, supply chain management is closely related to lean supply. The basic
concept of supply chain management includes tools like Just-In-Time delivery and
logistics management. The current concept of supply chain management is somewhat
broader but still largely dominated by logistics.

c. Until now, in construction, initiatives belonging to the domain of supply chain

management have been rather partial covering a subset of issues (e.g., transportation
costs) in a limited part of the construction supply chain (e.g., the construction site). In
most cases, the issues are regarded from a main contractor’s point of view. As a
consequence, main contractors become more and more reliant on other actors in the
construction supply chain (e.g., suppliers and subcontractors). Therefore, they need to
revise their supply strategies and trading relations with subcontractors and suppliers.

6. Construction Industry

a. The construction industry consists overwhelmingly of small and medium-sized

enterprises (SMEs), or more accurately ‘micro firms’. It is estimated that 97% of all firms
are in fact SMEs and that 95% of these are micro firms with ten or fewer employees.
Moreover the structure of the industry continues to fragment with consolidation of the
larger firms and an ever-increasing number of small firms. Even in big national
economies such as France and Germany there are fewer than ten really large national
firms having thousands of employees.

b. The large firms tend increasingly to act as ‘project managers’, assuming responsibility for
the larger contracts in their role as general contractors while outsourcing much of the
work to SMEs acting as sub-contractors.

c. Competition for work in the industry is intense. Because construction activities require
comparatively little investment in capital, firms are able to survive on wafer-thin profit
margins (2% or even less) and still show an adequate return on capital. On the other
hand, construction activities can carry significant risks and small margins of profit can
easily turn into significant losses.

d. The ways in which built structures are procured and erected, used and operated,
maintained and repaired, modernized and rehabilitated, and finally dismantled (and
reused) or demolished (and recycled), constitute the complete cycle of construction
activities.

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7. Concept of Supply Chain Management

a. The supply chain has been defined as ‘the network of organizations that are involved,
through upstream and downstream linkages, in the different processes and
activities that produce value in the form of products and services in the hands of the
ultimate customer’.

b. Supply chain management looks across the entire supply chain as indicated in the figure
above, rather than just at the next entity or level, and aims to increase transparency and
alignment of the supply chain’s coordination and configuration, regardless of functional or
corporate boundaries. According to some authors (e.g., Cooper and Ellram 1993), the
shift from traditional ways of managing the supply chain towards supply chain
management includes various elements highlighted in the table below.

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8. Methodology of Supply Chain Management

a. In the literature on supply chain management, many supply chain methods have been
proposed. Most methods address logistical issues of the supply chain, e.g., quality rates,
inventory, lead-time and production cost.

b. The methods of pipeline mapping, supply chain modeling and logistics performance
measurement analyze stock levels across the supply chain. The LOGI method studies
time buffers and controllability problems of the delivery process. Supply chain costing
focuses on cost buildup along the supply chain. Integral methods like value stream
mapping and process performance measurement offer a “toolbox” to analyze various
issues including lead time and quality defects.

c. Besides assessing and improving the supply chain, other elements are essential to the
methodology of supply chain management. A generic methodology of supply chain
management can be deduced combining and generalizing the commonalities of different
supply chain management methods. Generically, the methodology of supply chain
management consists of four main elements:-
(1) Supply chain assessment,
(2) Supply chain redesign,
(3) Supply chain control,
(4) Continuous supply chain improvement.

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d. In a way, the supply chain management methodology bears resemblance to the Deming
Cycle exhibited in the figure below.

e. The first step is to assess the current process across the supply chain in order to detect
actual waste and problems. The issue here is to find the causality between the waste and
problems, and locate their root causes. Once the causality is understood, and having
found out about the root causes, the next step is to redesign the supply chain in order to
introduce structural resolution of the problems. This includes redistribution of roles, tasks
and responsibilities among the actors in the supply chain, and a review of procedures.

f. The next step is to control the supply chain according to its new configuration. An important
part of the control is the installation of a monitoring mechanism to continuously assess
how the supply chain operates. This includes systems to measure and estimate waste
across the supply chain process, and feedback systems to discuss and evaluate
underlying problems. The objective is to continuously identify new opportunities, and find
new initiatives to develop the supply chain. In fact, this continuous improvement implies
the ongoing evaluation of the supply chain process, and the recurring deployment of the
previous three steps: assessment, redesign and control.

9. Supply Chain Management Implementation Requirements

a. To enable an organization (or organizational unit) to ‘effectively collaborate’ there must

be a harmonization of three key strategic areas:-
(1) business,
(2) people, and
(3) technology.

b. Usually collaboration enables participants to build up capacity to complete a set of tasks

that one sole organization would find difficult to achieve. The collaboration eliminates
fragmentation, duplication and distrust. This is achieved by intelligently using available
resources wisely, sharing the multiple project risk factors across multiple domains, and
enhancing staff and organizational motivation. This can only be achieved ‘effectively’ by
bringing together and aligning the three strategic areas of business, people and
technology.

c. There are many factors that are likely to influence the success or failure of working
collaboratively, with no two collaborations will progress in exactly the same way or within
the same time frame. Every collaboration must find a way to proceed being consistent
with its unique circumstances and composition.

d. Generally, there are 6 key areas that are deemed critical for effective collaboration
include:-
(1) Vision. All members of the collaboration agree on the collaborations aims and
objectives.
(2) Engagement. Collaboration leaders need to ensure that all key participants are
consulted as to the practices to be employed during the collaboration.

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 (3) Trust. Time and resources are needed to enable all participants to build lasting
relationships.
(4) Communication. A common means of communication is decided by all
key participants in the collaboration.
(5) Processes. Both business and project describe to all key participants how
the collaboration is to work on a day-to-day basis.
(6) Technologies. An agreement on those to be used to ensure the collaboration is
easily implemented and maintained.

10. Supply Chain Management in the Construction Industry

a. The generic concepts, methods and lessons learnt, which have been developed in the
framework of supply chain management, can be used in different ways for the
improvement of construction supply chains.

b. Traditionally supply chain management encompasses the management of a network of

organizations that are involved in carrying out the business process. In the construction
sector, this network can often be extremely complex, particularly on a larger project
where the number of separate supplying organizations will run into hundreds, if not
thousands. The figure below illustrates a typical construction supply network, with the
main contractor at the centre of the hub.

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c. Even at a scaled down level as highlighted in the case of a project requiring the
construction of a residential building, the interdependencies between various players in
the supply chain represent those of a classical supply chain.

d. The above two clearly illustrate that there are links to the client, main supply agencies
and to both design and any specialist management services, which are provided
externally. The present interest is primarily focused on the supply relationship between
main contractor and the material suppliers and the production subcontractors.

e. Clearly, the principal material supply companies will also be dependent on many other
firms who provide raw material and component inputs to their production. Similarly, the
main trade contractors will have their own supply chains and many of these will further
subcontract out smaller work packages.

f. The specialist construction subcontractors will usually be much smaller firms, small to
medium size enterprises and several of these may be providing labor-only services. The
composition of the network will tend to be unique to a specific contract, although some
favored suppliers will be used repeatedly by any given main contractor.

g. The highly fragmented characteristics of the construction industry which include the
separation of design and construction, lack of coordination / integration between various
functional disciplines, poor communication, etc., are the important impact factors causing
performance-related problems, such as low productivity, cost and time overrun, conflicts,
and disputes.

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h. The weak links in the supply chain management with in the construction industry can
therefore be identified as following:-
(1) Adversarial relationships between clients and contractors;
(2) Inadequate recognition of the sharing of risks and benefits;
(3) Fragmented approaches;
(4) Narrow minded “win/lose” attitudes and short-term focus;
(5) Power domination and frequent contractual non-commitments resulting in
adverse performance track records with poor quality, conflicts, disputes, and
claims;
(6) Prime focus on bid prices (with inadequate focus on life-cycle costs and ultimate
value);
(7) Less transparency coupled with inadequate information exchanges and limited
communications;
(8) Minimal or no direct interactions that foster sustainable long-term relationships.

i. Considering the ultimate objective of supply chain management to reduce sources of

uncertainty through the active co-operation of the key partners in the chain; construction
supply chain management is concerned with the following clusters of sources of
uncertainties:-
(1) Design. This includes selecting and developing an appropriate design
that meets client’s requirements (design co-ordination and management,
constructability review, design compatibility, design quality and review, project life
cycle, etc.), and communicating the final design product to the main contractor
(quality and completeness of technical drawings and specifications).
(2) Project Deliver. This includes contractor selection and contractual
arrangements (competitive tendering, partnering, aliening, incentives, time/cost
penalties, etc.).
(3) Construction. This includes selection of, and relationships with, subcontractors
and suppliers, scheduling, site activity co-ordination, and resource, material and
logistics management.
(4) Information Management. This includes project information demand and
supply (information transparency, flow, acquisition, availability and sharing).

j. Products, materials and equipment as well as funds move in response to signals from the
information flow. However, in construction projects these flows take place in the context
of linkages between separate organizations.

k. The two most important aspects of the industry are customer specificity of the final
product and the involvement of numerous value-adding organizations. The construction
industry product is in the nature of an investment service where the customer wields
great influence on the final product in relation to its physical aspects (dimensions,
application of materials, etc.) and the value of logistic parameters (delivery date, project
duration, etc).

l. In some cases, the customer selects the manufacturer (contractor), the suppliers of
specialist parts and the material suppliers. Longstanding, efficient supplier–contractor
relationships are vulnerable to disruption in this context.

m. Although effective supply chain management is a key element in reducing construction

costs, no studies have defined what supply chain management is within the construction
process.

n. A plausible definition of the supply chain in the context of construction industry can
therefore be the “network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce value in the
form of products and services in the hands of the ultimate consumers”. In the context of
the current work, Construction Supply Chain Management may be regarded as the
process of strategic management of information flow, activities, tasks and processes,

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 involving various networks of organizations and linkages (upstream and downstream)
involved in the delivery of quality construction products and services through the firms,
and to the customer, in an efficient manner.

o. In terms of the foregoing, the upstream within construction supply chain management in
relation to the position of a main contractor, consists of the activities and tasks leading to
preparation of the production on site involving construction clients and design team. The
downstream consists of activities and tasks in the delivery of construction product
involving construction suppliers, subcontractors, and specialist contractors in relation to
the main contractor.

p. After having assessed the supply chain, the supply chain management methodology
suggests redesign (reconfiguring the supply chain’s structure), control (coordinating the
supply chain according to the new configuration) and continuous improvement. For
instance, towards suppliers, the methodology could include reengineering the
procurement process, installing joint coordination of logistics and recurring product
development programs. Typically, such activities include joint activities between separate
actors in the supply chain.

q. Supply chain arrangements counteracting adversarial relations with other actors (e.g.
partnership) are needed to enlarge the magnitude of the SCM methodology, and clear
the way for resolution of interdependency-based problems and myopic control. In fact,
actors are dependent on each other for implementing the supply chain methodology
successfully. Supply chain development should take place in co-operation with a growing
number of actors tackling a growing number of issues.

r. The actors involved should have a common development goal, share the same view on
the development, and adopt the same approach to issues such as grasping concrete and
objective performance information, and searching for improvement opportunities
cooperatively.

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s. The development issues of supply chain management to the actual practice of
construction can therefore be summed up as under:-

Development Description of the Actual Construction Practice

Issues Development

Order The issue is how to manage It is not rare to find that the
information the order information lacing of a subcontract or
transparency propagation to improve the material order is delayed due to
supply chain. price negotiations. As a result,
the order information
propagation is effectively halted.

Reduction of The issue is how to reduce Changes to orders, originating

variability variability and how to make the from the sphere of the client, the
supply chain robust when design team or the main
facing uncertainty. contractor, are quite usual.

Synchronization The issue is how to It is not uncommon to see that

of material flows synchronize the availability of
materials for assembly.
materials are produced in an
order suitable for the supplying
factory, and delivered to the site
in a mode minimizing the
transportation costs. Thus, other
considerations than the needs of
assembly dominate.

Management The issue is how to identify In the traditional design-bid-build

of critical critical resources, lay out a procurement in construction,
resources critical path network and put where the parties are selected
the effort on reducing the based on price, it often is
workload of critical resources. impossible or difficult to
objectively identify critical
resources of the supply chain in
advance.

Configuration The issue is how to evaluate This kind of continuous and long-
of the supply and then change the chain. term improvement of the supply
chain chain is out of question, because
for each project, a new supply
chain is configured.

t. The figure below illustrates the key generic supply chains that are required in the
integration and delivery of a typical solution. The diagram suggests that the supply chain
is rather simple but the reality is quite different. The ultimate level of complexity involved

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 with the management of the construction project will be determined by the specific
requirements of the end customer. It is difficult to quantify the exact number of constituent
supply chains that have to be integrated into a typical project – such a project does not
exist because of its unique project – specific properties.

11. Role of Information in Construction Supply Chain Management

a. Traditionally, project information exchange between designers and contractors has been
mainly based on documents. These documents come in the form of architectural and
engineering drawings, specifications, and bills of quantities and materials. This practice is
far from being satisfactory, with about two-thirds of construction problems being caused
by inadequate communication and exchange of information and data.

b. Recognizing the importance of communication, construction supply chain management

can be regarded as the process of strategic management of information flow, activities,
tasks and processes, involving various networks of organizations and linkages, through
out a project life cycle.

c. The key to supply chain management is the information flows associated with inter-
organizational communications. As a result, a core issue is the effective management of
information, both in the form of information flows that permit rapid inter-organizational
transactions between supply chain partners and in the form of information accumulated,
coded, and stored in an organization’s database structures.

d. Supply chain management crosses organizational boundaries, organizing information

and process flows, sending signals to operations and evaluating results. Out of necessity,
there is a heavy reliance on information management to coordinate the chain. As a result,
information management becomes the heart of construction supply chain management.

e. The construction industry has for many years suffered from difficult-to-access, out-of-date
and incomplete information. Until the very recent past, it would have been inconceivable
to electronically control and direct information flows in construction. Documents can now
be produced and transmitted instantaneously by digital transmission at fractions of their
previous costs.

f. Project information is usually considered as the processed and presented data in a given
situation, and is the data that enables effective action. Information produced by many

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 sources, at many levels of abstraction and detail and retained by the creator of that
information, contributes to fragmentation of the construction industry.

12. Cultural Compatibility

a. Cultural compatibility is an important consideration in supply chain management. The

meshing of the cultures of trading partners can be time consuming. Likewise, differences
in the management methods of organizations in the supply chain can hinder integration
efforts.

b. Good initial cultural linkages are seen by many authors as prerequisites for the
development of closer relationships between trading partners.

c. It is also important to break the corporate culture that considers supply chain
management a component of the logistics department and ignored the much more wide-
ranging organizational impact of supply chain management.

13. Trust Based Relationship

a. A trust-based relationship is seen as important in the development of an integrated

supply chain. An important facilitator of trust relationships is the ability of the involved
parties to take account of the welfare of other supply chain members and to consider the
ramifications of their actions on the objectives of other members.

b. Trust is also seen as an important prerequisite to enable other forms of integration, such
as shared information systems and operational optimization between the trading
partners. A trust-based relationship may also avoid the duplication of effort in areas such
as inspection and forecasting.

c. Other ways of invoking trust is as under:-

(1) One is the deterrence-based view where trust and cooperation are enforced
using formal contracts that discourage negative behavior.
(2) The process-based view speaks to the scenario where trust and cooperation are
built up over time as a result of positive interaction between parties. The
deterrence view is often predominant in the early stages of relationship and as
trust develops the process-based view becomes more important.

14. Relationship Assessment

a. It is commonly agreed that it is important to identify those trading parties within the supply
chain that are key to integrate with. This is because the investment in establishing
connectivity with parties that occupy a very small portion of an organization’s
transactional volume may neither be strategically important nor financially justifiable.

b. One way to assess importance is to integrate and create joint processes and procedures
with a supplier or customer based on the currency value of transactions with them. This is
widely used method; however, it often overlooks those products with a low-currency
volume that are of critical importance to the firm.

c. A system is therefore required to evaluate those organizations that are of strategic

importance to the supply chain and this is often facilitated by management assessment at
the focal organization.

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15. Essence of Supply Chain Management

a. It is commonly agreed that it is important to identify those trading parties within the supply
chain that are key to integrate with. This is because the investment in establishing
connectivity with parties that occupy a very small portion of an organization’s
transactional volume may neither be strategically important nor financially justifiable.

b. Many authors speak of the benefits gained by competing as an integrated supply chain. A
key idea is that if all stages of the chain take coordinated actions, optimization occurs and
total supply chain profits are increased. In other words, supply chain management often
has the objective of reducing the total amount of resources required to provide the
necessary level of customer service to a specific segment.

c. Supply chain management is the process of strategically managing the movement and
storage (if necessary) of materials, parts and finished product from suppliers, through the
manufacturing process and on to customers or end user, as well as the associated
information flows.

d. Supply chain management is probably the latest procurement and logistics philosophy
being adopted. Initially, the objective of logistics is to reduce the procurement cost. Now
the objective is being extended to build logistics as a strategic corporate competence.
Further objectives of logistics include improvement of production flexibility, order fill rate
and reduction of order fulfillment lead-time.

e. The strategy is to integrate core logistics functions with marketing, production and
financial functions. The supply chain management approach advocates that a company
should extend its internal focus to suppliers and supplier’s suppliers .The essences of
supply chain management are:-
(1) Enhancing trust among supply chain members.
(2) Re-engineering the business process to build a networked enterprise model.
(3) Employing information technology to accelerate information flowing in both intra
and inter organizations.

f. The real power of supply chain management lies with its ability to provide today's
enterprise with radically new opportunities to create marketplace advantage by
leveraging supply channel partnerships, information and communication technologies,
and the knowledge and innovative capabilities of the entire chain's resources.

g. Benefits to the client:-

(1) More likely to meet their particular needs and expectations.
(2) Less confrontation, disputes and litigations.
(3) Increased product quality.
(4) Risk reduction (lower learning curves, multi disciplined risk management).
(5) Comprehensive documentation.
(6) Cost certainty (earlier and better estimates of cost, reduction in variations).
(7) Lower contract cost.
(8) Single point responsibility.

h. Benefits for the contractor:-

(1) Less confrontation, disputes and litigation.
(2) Workload stability (resource planning / cash flow forecasting, and maintaining of
skilled personnel).
(3) Reduced expenditure on tendering process, speed of establishing the contractual
relationships with subcontractors.
(4) Enables a focus on future improving systems and capabilities, staff career
development, safety procedures etc.

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 (5) Risk reduction (better understanding of the project scope, increased time for
pricing, negotiated risk management, development of relationships with good
subcontractors, and reduction of conflict with subcontractors).

16. Barriers to Effective Supply Chain Management in Construction Industry

a. Collaborating organizations have different vision, mission, goals and priorities.
b. Organizational ‘culture’ and methods of communication are often different.
c. A lack of focus and consensus on the delegation of tasks.
d. An imbalance of resources – time, money, human (frequent turnover of participants) etc.
e. Confidentiality, Intellectual Property and legal considerations.
f. Technological incompatibility.
g. A lack of understanding of the expertise, knowledge, and language of the other
collaborating participants.

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 SECTION 3 - RESEARCH METHODOLOGY

17. The Way Forward

a. Step One. Literature review of the available work reported on supply chain
management in construction industry.

b. Step Two. Design of a survey questionnaire to identify views of construction

contractors regarding the current pattern of supply chain management, its future use,
benefits and barriers to effective implementation.

c. Step Three. Collection and collation of data.

d. Step Four. Analyzation of data.

e. Step Five. Compiling of data as per results.

f. Step Six. Conclusions and Recommendations.

18. Scope of Survey

a. General information.

b. Contractors’ relationships with suppliers and clients.

c. How is the supply chain management viewed by the construction industry?

d. Construction functions important to efficient supply chain management.

e. Factors considered when forming a supply chain relationship.

f. Principal objectives in developing supply chain collaboration.

g. Key success factors in supply chain management development.

h. Barriers to implementation of construction supply chain relationships.

19. Layout of the Questionnaire

a. Question 1. What is the strength of your workforce?

(1) Less than 30.
(2) 31 - 50.
(3) 51 - 100.
(4) 101 - 300.
(5) More than 300.

b. Question 2. Which category of construction projects your company has great

expertise in?
(1) Residential Projects.
(2) Transportation Projects.
(3) Industrial Projects.
(4) Utilities Projects.
(5) Technology Based Projects.

c. Question 3. What is your experience in terms of time in the construction industry?

(1) Less than a year.
(2) 1 year to 2 years.

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 (3) More than 2 years to 5 years.
(4) More than 5 years to 10 years.
(5) More than 10 years.

d. Question 4. How would you quantify the importance of supply chain management to
your company?
(1) Not important.
(2) Somewhat important.
(3) Quite important.
(4) Very important.

e. Question 5. Which of these integral organizational functions is important to you for

management of supply chain in your company?

Functions Very Quite Somewhat Not Important

Important Important Important
Production
Procurement
Operation
Storage
Inventory

f. Question 6. Which factors are given precedence for building relationships with
suppliers in the supply chain?

Functions Very Quite Somewhat Not Important

Important Important Important
Quality
Cost
Logistics
Processes

g. Question 7. Which factors are given precedence for building relationships with clients
in the supply chain?

Functions Very Quite Somewhat Not Important

Important Important Important
Construction
Design
Cost
Tendering
Process
Contract

h. Question 8. What are the principal objectives in developing Supply Chain

Management in your company?

Functions Very Quite Somewhat Not Important

Important Important Important
Benefit to
client / supplier
Improvement in
customer
service
Improvement in
information flow
Increase in

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 profitability
Cost reduction
of processes in
the company
Increase market
competitiveness
Integration of
processes

i. Question 9. What are the key factors in effective Supply Chain Management
relationships with your suppliers / clients?

Functions Very Quite Somewhat Not Important

Important Important Important
Trust
Reliability of
supply
Cultural
compatibility
Mutual Interest
Free flow of
information
Joint business
planning
Closer links
between
demand and
supply
Common
platform for
project
assessment
Human
resource
development

j. Question 10. What are the major barriers to implementation of Supply Chain
Management relationships?

Functions Very Quite Somewhat Not Important

Important Important Important
Poor
understanding
of the concept
Lack of
commitment
Inappropriate
organizational
structure
Lack of
strategic focus
Information
flow

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 SECTION 4 - RESULTS

20. A total of 40 companies of public and private sector were included in the survey. The majority of
the companies opted to take part in the survey on the condition of anonymity / confidentiality regarding
their views. The respondent input on the subject is as under:-

a. Company Size and Strength of Workforce

Numerical Strength of Employees Frequency Percentage

Less than 30 15 37.5
31 - 50 9 22.5
51 - 100 7 17.5
101 - 300 5 12.5
More than 300 4 10
Total 40 100

b. Area of Strength / Expertise

Type of Construction Project Frequency Percentage

Residential Projects 17 42.5
Transportation Projects 11 27.5
Industrial Projects 2 5
Utilities Projects 7 17.5
Technology Based Projects 3 7.5
Total 40 100

c. Experience in the Construction Industry

Type of Construction Project Frequency Percentage

Less than a year 1 2.5
1 year to 2 years 5 12.5
More than 2 years to 5 years 11 27.5
More than 5 years to 10 years 9 22.5
More than 10 years 14 35
Total 40 100

d. Importance of Supply Chain Management

Views Frequency Percentage

Not important 18 45
Somewhat important 8 20
Quite important 8 20
Very important 6 15
Total 40 100

e. Importance of Integral Organizational Functions

Functions Very Quite Somewhat Not Important

Important Important Important
Production 32 / 80 % 5 / 12.5% 3 / 7.5% 0 / 0%
Procurement 25 / 62.5% 9 / 22.5% 6 / 15 % 0 / 0%
Operation 16 / 40% 8 / 20% 10 / 25% 6 / 15 %
Storage 10 / 25% 8 / 20% 8 / 20% 14 / 35%
Inventory 12 / 30% 2 / 5% 4 / 10% 22 / 55%

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f. Precedence for Building Relationships with Suppliers

Functions Very Quite Somewhat Not Important

Important Important Important
Quality 32 / 80 % 0 / 0% 8 / 20% 0 / 0%
Cost 35 / 87.5% 1 / 2.5% 4 / 10% 0 / 0%
Logistics 25 / 62.5% 9 / 22.5% 6 / 15 % 0 / 0%
Processes 35 / 87.5% 2 / 5% 1 / 2.5% 3 / 7.5%

g. Precedence for Building Relationships with Clients

Functions Very Quite Somewhat Not Important

Important Important Important
Construction 25 / 62.5% 4 / 10% 2 / 5% 9 / 22.5%
Design
Cost 35 / 87.5% 5 / 12.5% 0 / 0% 0 / 0%
Tendering 38 / 95% 0 / 0% 1 / 2.5% 1 / 2.5%
Process
Contract 26 / 65% 4 / 10% 10 / 25% 0 / 0%

h. Principal Objectives in Developing Supply Chain Management in the Company

Functions Very Quite Somewhat Not Important

Important Important Important
Benefit to 10 / 25% 10 / 25% 20 / 50% 0 / 0%
client / supplier
Improvement in 30 / 75% 10 / 25% 0 / 0% 0 / 0%
customer
service
Improvement in 4 / 10% 6 / 15 % 10 / 25% 20 / 50 %
information flow
Increase in 38 / 95% 1 / 2.5% 1 / 2.5% 0 / 0%
profitability
Cost reduction 10 / 25% 10 / 25% 0 / 0% 20 / 50%
of processes in
the company
Increase market 4 / 10% 35 / 87.5% 0 / 0% 1 / 2.5%
competitiveness
Integration of 20 / 50 % 10 / 25% 5 / 12.5% 5 / 12.5%
processes

i. Key Factors in Effective Supply Chain Management Relationships with Suppliers /

Clients

Functions Very Quite Somewhat Not Important

Important Important Important
Trust 30 / 75% 3 / 7.5% 3 / 7.5% 4 / 10%
Reliability of 40 / 100% 0 / 0% 0 / 0% 0 / 0%
supply
Cultural 4 / 10% 6 / 15 % 10 / 25% 20 / 50 %
compatibility
Mutual Interest 28 / 70% 5 / 12.5% 3 / 7.5% 4 / 10%
Free flow of 4 / 10% 6 / 15 % 10 / 25% 20 / 50 %
information
Joint business 4 / 10% 3 / 7.5% 6 / 15 % 27 / 67.5%
planning

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 Closer links 38 / 95% 1 / 2.5% 1 / 2.5% 0 / 0%
between
demand and
supply
Common 4 / 10% 5 / 12.5% 3 / 7.5% 28 / 70%
platform for
project
assessment
Human 4 / 10% 6 / 15 % 10 / 25% 20 / 50 %
resource
development

j. Major Barriers to Implementation of Supply Chain Management Relationships

Functions Very Quite Somewhat Not Important

Important Important Important
Poor 4 / 10% 3 / 7.5% 6 / 15 % 27 / 67.5%
understanding
of the concept
Inappropriate 38 / 95% 1 / 2.5% 1 / 2.5% 0 / 0%
organizational
structure
Low 40 / 100% 0 / 0% 0 / 0% 0 / 0%
commitment
from partners
Lack of 4 / 10% 6 / 15 % 10 / 25% 20 / 50 %
strategic focus
Information 4 / 10% 3 / 7.5% 6 / 15 % 27 / 67.5%
flow

21. Findings

a. Company Size and Strength of Workforce

(1) The construction industry consists overwhelmingly of small and medium-sized
enterprises.
(2) The structure of the industry continues to fragment with consolidation of the larger
firms and an ever-increasing number of small firms.
(3) The focus remains on hiring of skilled / unskilled labor on temporary basis instead
of building an organizational structure with permanent workforce and retention of
employees.

b. Area of Strength / Expertise

(1) The expertise is more concentrated towards conventional construction projects.
(2) The lack of orientation towards industrial / technology projects suggests a
preference for lower spectrum technology techniques and avoidance of
challenging construction environments.
(3) The margins for earning hefty dividends on residential / transportation works
against investment made are the major source of attraction to contractors.

c. Experience in the Construction Industry. The spread indicates the evolution of

the construction industry with emergence of new firms, amalgamation between existing
ones and consolidation of those already in the business for more than 10 years.

d. Importance of Supply Chain Management. The fragmentation within the industry is

clearly evident from the fact that majority does not assign great importance to the concept
of supply chain management.

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e. Importance of Integral Organizational Functions. The emphasis remained on
production / procurement whereas operations, storage and inventory clearly came out as
losers despite of having great significance in the supply chain.

f. Precedence for Building Relationships with Suppliers. Great importance was

attached to quality / cost while neglecting the fact that these two are achieved by value
addition through logistics and processes.

g. Precedence for Building Relationships with Clients. The most important factor that a
contractor considers when forming a supply chain relationship with a client, is the cost
benefits to be derived from such relationships, followed by creating the standardization of
the process, then the simplification of tendering and construction process.

h. Principal Objectives in Developing Supply Chain Management in the Company .

Profitability and improvement in customer service were the area of emphasis.

i. Key Factors in Effective Supply Chain Management Relationships with Suppliers /

Clients. The most important factor identified by the contractors is reliability of
supply followed by closer links between demand / supply and trust. The key
manufacturers in the industry operate through cartels thereby influencing the execution of
work done by contractors through price monopolies and disrupting supplies whenever
one member’s interest is at stake.

j. Major Barriers to Implementation of Supply Chain Management Relationships. The

biggest barrier to implementing a successful supply chain partnership was the low
commitment of the partners, followed by inappropriate organizational structure and
surprisingly flow information was considered to be least desirable as sensitive information
regarding the company may be siphoned to competitors.

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 SECTION 5 - RECOMMENDATIONS AND CONCLUSION

23. Recommendations

a. Current supply chain performance shouldn’t only be measured and understood given that
it is evaluated by the criteria ‘is the overall product on time and to budget’? This ‘broad
-brush’ evaluation quite obviously does not provide any mechanism to fully understand
where process can be improved, wastage can be reduced and additional value can be
added.

b. A reflective approach must be adopted towards activities where the knowledge ‘gained’ is
stored, shared and applied to the next activity. Currently, all efforts are focused on
looking forward to the next project rather than attempting to learn from previous activities
and applying the lessons learnt to a general raising of value adding activities.

c. All parties involved in the supply chain must look to drive change through all areas by:-
(1) Education process.
(2) Cultural change.
(3) An understanding that all parties will benefit / profit.
(4) Open and shared approach to the dissection of the ‘associated benefits’ of
improved supply chain performance.
(5) An attitude of ‘if your in, you win’ with regard to enhanced approach to Supply
Chain participation.
(6) Pre-planning and visibility opportunities provided by a visible client forward
workload well into the future that is shared by the Supply Chain ‘family’.
(7) Where possible freeze expectations but include change where necessary
through joint agreement through the use of contingency plans.
d. More effective management of subcontractors through: -
(1) Regard the sub contractor as being part of the supply chain (key to the value add
process).
(2) Sharing a full picture of the project.
(3) Sharing the values that are required by the Supply Chain.
(4) Inviting input where the sub contractor can add value.

24. Conclusion

a. Key to much of the current lack of best practice within the construction industry is the
need for the culture to be developed and raised to be more collaborative, innovative,
embrace change (when for the good) and non-adversarial in nature to from its current
levels. Key issues include the following:-
(1) Decisions should be made on a ‘cost’ and not a ‘price’ basis (developing a more
holistic understanding of the Supply Chain).
(2) Where possible, products / materials should be modularized in order to
‘standardize and simplify’ the Supply Chain.
(3) All process activity should be evaluated and where possible simplified /
improved.

b. Improvements to the supply chain must be planned and must form part of an overall
strategy. The change processes must start at the very top of organizations and must be
carried out internally within the organization first. As progress is made within the
organization, change must then be extended to all parties external to the organization
(but within the supply chain).

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