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Fcee 2005-06-203-216 Logistics of Construction
Fcee 2005-06-203-216 Logistics of Construction
No. 6
2005
1. INTRODUCTION
The tendencies towards efficiency improvement and risk control in project
management indicate the significance of logistics, i.e. a branch of knowledge
applying new concepts to control material, service, information and finance
flows between suppliers and customers. In the field of construction, procurement
planning and execution (ordering, reception, transport and storage) dominates
the logistic processes [7].
Following the example of other industries, there are attempts to integrate
construction logistics into logistic chains of suppliers and customers, from the
suppliers of raw material, manufacturers, distributors, to the end-users. Logistic
processes, being crucial for successful completion of the project but in fact
auxiliary, are often entrusted to external professionals specialised in logistic
Publishing House of Poznan University of Technology, Pozna 2005
ISSN 1642-9303
204
services, such as logistic centres [1, 2, 3] and this tendency is also to be observed
in construction. Traditionally, each contractor taking part in a project was
responsible for his/her individual supply chain to provide materials and services
required within his/her scope of works. At the present time of well-developed
market for building materials and services, centralising and outsourcing the
project supply logistics is seen as a more cost-efficient solution facilitating
project control. With the development of project delivery and management
systems, and as the choice of suppliers is considered, traditional decision-makers
(designers and contractors) are replaced with new ones: project managers or
even owners select materials and suppliers.
The paper focuses on a number of aspects of logistics and its specific
features regarding a construction company as an organisation and as a
participant in a construction project. The results of a ten-year survey of changes
of construction supply systems are presented and analysed in relation to the
project delivery system as a premise for the selection of the supply system. The
enclosed simulation-based calculations of logistics expenses present the impact
of supply organisation on costs.
Fig. 1. A building contractor within a supply chain of materials and participants of a project
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Fig. 2. Share of value of purchase according to the type of supplier in 1996 and 2002
In most cases, delivery contracts concern single projects and there are no
exclusive suppliers, but a long-time co-operation with a number of suppliers
occurs quite often. Such partnership allows the contractor to negotiate better
terms of contract (discounts, terms of payment). The long-time contracts usually
regard selected ranges of goods. Figure 3. shows the proportion of long and
short-term delivery contracts.
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Fig. 3. Share of long and short-term delivery contracts in Polish construction (2002)
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The results of the survey also point at the changes in the contractors
supply system, consisting in the reduction of the scope of logistic tasks
performed by their own departments. Firstly, own transport and warehousing are
being kept to the minimum. Secondly, processes connected with information
flows, e.g. supplier selection, are being limited.
These tasks and functions are often taken over by the members of the
external logistic chains such as transport companies, wholesalers or
manufacturers. The stock stored traditionally on the building sites is often kept
by the suppliers and delivered on request in batches. The project management,
designers or even employers often select materials and suppliers. Also the
project management, hired logistics professionals or specialised wholesalers take
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over the supply planning and scheduling. Therefore, more participants are
involved in a construction project. The relations among them evolve
continuously (Fig. 7) and further specialisation is to be observed [3,4].
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Fig. 8. Schematic diagram of the relations within the design-bid-build system with
independent contractors (left) and with a general contractor (right)
In the case of the design and build or turnkey systems, the owner
employs a single contractor providing managing, design and construction
services (Fig. 9), acting as a general contractor or hiring contractors. There is
only one contractual relationship involving the owner. The contractor takes over
the whole responsibility for the completion of the project. The design and
construction processes may be conducted simultaneously (within one team or
one company) and therefore improve information flows and shorten the time of
the project delivery. Traditional conflicts between designers and contractors are
eliminated.
Fig. 9. Schematic diagram of the relations within the design-build system with and
without a general contractor
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and to co-operate with the designers and the contractors. The manager offers his
expertise to support any decisions from the conceptual phase to the
commissioning of the project and to co-ordinate planning, design and execution
activities to reach the synergetic effect and to shorten the projects completion
time. The manager may enter the project as a consultant with or without being at
risk (i.e. entering contractual relationship with contractors or not Fig. 10).
Fig. 10. Schematic diagram of the relations within the construction management (left)
and management contracting systems (right)
Regarding the project logistics, four basic models of supply systems are
possible:
x independent supply chains for individual contractors, where selection of
suppliers, supply planning and scheduling is the duty of each contractor,
x centralised supply system managed by general contractor or other party
managing the whole project, by means of their own logistics departments,
x centralised supply system managed by an external logistics company,
x combination of the above.
Supply systems based on independent chains or services of an external
logistics company are possible in any type of project delivery systems. In the
case of delivery systems with a general contractor or other party that disposes of
necessary logistic resources, it is reasonable to use them to create and manage
the whole project supply system. Such party benefits directly from any
improvement of logistics. Integrated logistics for the whole project means the
possibility of optimising supply chains and co-ordinating deliveries, which is
significant for sizeable construction projects that involve many contractors
working in confined space. Shifting responsibility for supplies to many
subcontractors may result in the building site congestions, excessive expenses
and delays.
Business organisations offering service in the field of logistics may exist
in the form of independent companies or be created specially for the needs of a
construction project. According to their scope of activities they may take over all
the logistic processes within the projects life cycle or focus on some functions,
e.g. supply control, transport and warehousing. The complete logistic service of
a construction project may comprise [2]:
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214
Cost
type
1
2
Material 540 960,00
value
Buying
3 627,45
cost
Price
-51 744,75
discount
Cost of
26 460,00
shipping
Int.
1 563,72
transpor
t
Frozen
13 176,28
capital
(stocks)
Total
534 042,70
Advantage
of logistic
centre
services
[z]
(3+4+5)-2
3+4+5
193 660,00
38 640,00
308 660,00
540 960,00
2 469,87
1 478,40
2 952,40
6 900,67
3 273,20
-5 809,80
0,00
-15 433,00
-21 242,80
30 501,90
12 630,00
2 520,00
20 130,00
35 280,00
8 820,00
0,00
0,00
0,00
0,00
-1 563,70
2 117,09
648,46
2 843,90
5 609,45
-7 566,80
205 067,16
43 286,86
319 153,29
567 507,32
33 464,62
The advantages of logistic centres are not limited to cost reduction. The
quality of service is also higher due to specialisation of logistic organisations.
Logistic centres are able to co-ordinate and optimise their transport and therefore
diminish the traffic loads (important in cities) and reduce air pollution.
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5. SUMMARY
Construction logistics deals with many technical, organisational and
environmental issues affecting the cost of a project, time and quality of
execution. Traditionally, each contractor uses and manages his own supply
chains. In the case of larger projects involving a number of contractors,
incompatibility of logistics concepts and lack of co-ordination results in serious
disturbances in material and information flows. According to modern ideas of
management, centralisation of logistic functions and management allow many
actors of a construction project to reach the synergetic effect of their efforts.
Implementation of integrated logistic systems such as these offered by logistic
centres may be particularly effective in larger construction projects located in
city centres (confined space, limited transport possibilities), where massive
flows of material have to be managed (e.g. extensive earthworks requiring
transport of excavated material). The main task of an integrated logistic system
is to provide just-in-time deliveries, eliminating most of material handling and
storage on site, to shorten the time of project completion by eliminating reasons
of work stoppage, to minimise disturbances in local traffic and air pollution due
to exhaust gases emission. Shifting most of the logistic processes on logistic
professionals allows construction companies to reduce their fixed costs and to
concentrate on the development of their core competencies.
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