Introduction
In today's competitive construction climate, savvy clients are
starting to demand wholesale improvements in the construction procurement
process as they serve notice on the industry's notorious levels
of inefficiency, i.e. high cost, poor safety, late completions,
adversarial relations.
And the mounting focus on more fully integrated supply chains is
being driven, not only through overt client pressure, but also by
the increasing realisation that, in an increasingly interdependent
world, it is supply chains that compete, not individual companies.
In an age where the vast majority of construction work is outsourced,
each organisation is highly dependent on the performance of its
suppliers (and customers) in the construction supply chain. Increasingly,
if a supply chain is less adaptable and efficient than that of its
competitors, its constituent companies will be competitively disadvantaged.
By becoming an integrated supply chain player you will be giving
your operation a head start in the new construction economy. Clients
are increasingly demanding supply chain solutions where issues such
as resource efficiency, waste elimination, continuous improvement,
innovation, whole-life costs, sustainability, replicability and
predictability are addressed 'up-front'.
But, remember, one-off partnering can be an expensive option. It
is in strategic and repetitive partnering where the real savings
start to kick in. The potential across-the-board savings from strategic
partnering have been shown to be very real (estimates range upwards
of 20%).
Integrated supply teams and integrated supply chains
To make sense of 'new age' construction procurement as envisaged
by the authors of Accelerating Change, it is essential to understand
the distinction between integrated supply teams and integrated supply
chains.
By their very nature, the majority of integrated supply teams will
be project-specific and impermanent. To carry out their work they
will increasingly seek to employ stable supply chains which they
can utilise as necessary in line with project demands. This gives
them freedom and flexibility in line with specific project or term-contract
demands.
Supply chain integration – the bottom line
Pre-assembled supply chain modules or 'mix and match mini-chains'
It has been shown that there are many benefits to be derived from
working with fully integrated supply chains. However, the dynamics
and diversity of the construction market and its tendency towards
bespoke designs mean that the scope for permanent, or even semi-permanent,
top-to-bottom, i.e. fully integrated, supply chain groupings is
poor. Notwithstanding the potential benefits from long-term partnering,
it is almost certain that the industry will continue to require
the flexibility of more transient project-specific procurement arrangements.
The answer to this quandary rests in the concept of 'pre-assembled
supply chain modules' and 'mix & match mini-chains.' In this
scenario the Integrated Project Team or other project leader will
assemble appropriate supply lines from a matrix of pre-assembled
and pre-qualified supply chain modules and disband them as necessary
in line with specific project or term-contract demands.
In other words, the integrated supply chain for a given project
is formed on a 'mix & match' basis by joining up a series of
discrete 'mini-chains' from a pre-established pool with all of whom
the project leader has a formal, yet flexible, strategic partnership.
This approach differs from a basic project-partnering scenario since
the different modules or 'mini-chains' will be used on different
jobs on a recurring basis. In this way the procurer will enjoy the
necessary supply flexibility and guarantee of availability and all
parties will benefit from an ongoing, continuously improving relationship.
Indeed, intrinsic flexibility is one of the key advantages of using
a 'mix and match' integrated supply chain structure of this type.
You can partner with any matrix supply chain, mini-chain or cluster
supplier, and if a particular group or company fails to add value,
it can be removed from the chain.
In this way, 'market forces' will tend towards an efficient outcome,
unlike the situation in competitively tendered procurement which
is inherently sub-optimal or the situation that prevails in monolithic
(vertically integrated) organisations where there are instinctive
tendencies towards protectionism, inflexibility and inertia.
Forming or joining an integrated supply chain
For maximum benefit and efficiency, Integrated Project Teams need
to utilise fully integrated supply chains that can be assembled
and dismantled on a project-by-project basis to meet specific requirements.
To work in this way and still realise the huge and continuously
improving benefits of supplier collaboration requires access to
a network of pre-integrated suppliers.
Whilst the formation of this integrated supplier matrix is the
responsibility of project management, the formation of the individual
supply clusters or 'mini-chains' is not necessarily the preserve
of lead contractors, major repeat clients or even Integrated Project
Teams. In the majority of cases, individual downstream supply clusters
will be initiated, for wholly commercial reasons, by the participants
themselves. As an illustration, a commercially-aware manufacturer
might establish formal partnerships with a network of sub-contractors
and offer the result to project teams as a ready-made integrated
unit. In this way, for example, a specialist roofing/cladding manufacturer
or contractor could enter an integrated project supply chain as
a provider of total building envelope solutions.
The Chain link
Toolkit provides guidance to different supply chain parties
on how to establish integrated supply chain modules. It also provides
directional assistance to project teams seeking to assemble supply
chain matrices as well as fully integrated lines of procurement.
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