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A Review of The Progress Towards The Adoption of Supply Chain Management (SCM) Relationships in Construction PDF
A Review of The Progress Towards The Adoption of Supply Chain Management (SCM) Relationships in Construction PDF
Abstract
This paper examines the early progress towards the adoption of supply chain management (SCM) relationships in construction. It
is based on a literature review and survey of the views of construction practitioners. We contend that SCM has many of the features
associated with a fth generation innovation. This paper suggests that although construction practitioners have some knowledge
of SCM they need a better conceptual understanding of it and new and more systematic approaches to its implementation.
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174 M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183
Innovation is increasingly dened as the interaction of tions such as JIT (Vrijhoef and Koskela, 2000) and the
the dynamics of the process, the rm and the environ- eld of quality control and TQM (Wong and Fung,
ment in which the rm operates. Its development 1999).
depends on feedback mechanisms between external SCM can be seen as an example of evolutionary and
environments and technical developments (Freeman, cumulative innovation, which is often described as
1987). Innovation is increasingly generated by networks emanating from internal programmes aimed at improv-
of relationships between rms, subcontractors and ing overall effectiveness. The focus is now not only
government institutions rather than just within organi- limited to increasing the internal efciency of organisa-
sations (Cooke et al., 2000). tions but has been broadened to include methods of
The signicance and inuence of interactions and reducing waste and adding value across the entire supply
feedback mechanisms on the development of innovation chain (New and Ramsay, 1997; Harland et al., 1999). It
are largely explored in the literature, which has shifted is seen as a set of practices aimed at managing and co-
the debate from an emphasis on internal structure to ordinating the whole supply chain from raw material
external linkages and processes (Tidd et al., 1997; suppliers to end customers (Vollman et al., 1997) and
Harland et al., 1999). These external linkages are which develop greater synergy through collaboration
increasingly being used as a rapid response to fast along the whole supply chain (New and Ramsay, 1997).
changing needs through the pooling of resources and the This more holistic approach is associated with the
sharing of risk. This type of innovation can be seen as a effective management of the interfaces between all the
way to deal with growing uncertainty, complexity and organisations involved (von Hippel, 1986), and the
competition, and to facilitate learning and further integration of both upstream and downstream processes
innovation. It can be described as a collective process .
(Harland et al., 1999; Christopher and Juttner, 2000).
which depends on many different interactions and This signicant emphasis on co-ordination and integra-
relationships between an organisation and its external tion is strongly linked to the development of more
environment, and which includes suppliers, customers, effective and longer-term relationships between buyers
training bodies and government agencies (Gann and and suppliers (Spekman et al., 1998; Kosela, 1999).
Salter, 2000). Rothwell (1992) denes this type of These new types of relationships are increasingly
innovation as the fth generation innovation,1 which perceived as a means to utilise resources better through
is seen as a multi-factor process requiring high levels of the whole supply chain (Dubois and Gadde, 2000). In
integration at both intra- and inter-organisation levels. addition, they can also lead to greater openness and
The key factors associated with fth generation transparency in transactions, and increased trust and
innovation, which will be used to assess the introduc- commitment (Ali et al., 1997). There are successful
tion of SCM in construction, include: examples of where SCM is delivering signicant
performance improvements and increased competitive
* a multi-factor process; advantage (Houlihan, 1985; Burgess, 1998). It can also
* a long process which is cumulative and evolutionary; be an important element in innovation in products,
* a process comprising a number of stages including the processes and organisation (Holti, 1997). Information
need to innovate, knowledge awareness, evaluation of can be more readily shared and knowledge identied,
alternative innovations, planning and implementa- captured and disseminated throughout the organisations
tion; in the chain (Edum-Fotwe et al., 2001).
* effective intra- and inter-organisational relationships However, SCM is a long, complex and dynamic
and strong interactions with the external environ- process. Its implementation requires a thorough under-
ment; standing of the concept (Akintoye et al., 2000; Whipple
* a strategic and long-term approach and continuous and Frankel, 2000; Edum-Fotwe et al., 2001). It is also
learning; seen as closely dependent upon the ability to create,
* top management commitment and champions. manage and reshape relationships between individuals,
organisations and networks within the supply chain
(New and Ramsay, 1997; Spekman et al., 1998; Harland
3. SCM: a fth generation innovation et al., 1999). The shift from an adversarial to a longer
term and close relationship is associated with new
The objective of this section is to explore the concept organisational arrangements (Savage, 1990) leading to
of SCM and its similarities with the fth generation greater synergy (Harland et al., 1999), transparency,
innovation. SCM is a concept that originated in openness, sharing and trust (Sako, 1992; Whipple and
manufacturing industry. It was developed from innova- Frankel, 2000). Such an approach, however, requires
considerable commitment and resources, and takes time
1
For more details about this fth generation model and other to develop. Further difculties include a lack of
models see Rothwell (1992). common purpose, multiple and often hidden goals,
M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183 175
power imbalances, different cultures and procedures, tendering, Design and Build, Management Contract-
incompatible collaborative capability, the tension be- ing and Construction Management represent some
tween autonomy and accountability, over dependence, differences in relationships, roles and power between the
and continuing lack of openness and opportunistic design and cost consultants and main contractor, and
behaviour (Huxham, 1996; Cox and Townsend, 1998). between the main or managing contractor and the
As can be seen from the above review, SCM specialist and trade subcontractors. As can be seen in
demonstrates the key features of a fth generation Fig. 1, these new approaches to procurement have
innovation. It is the outcome of an evolutionary and resulted in some potential for greater collaboration
cumulative process, which started with other innova- and integration. However, a number of authors remain
tions such as JIT and TQM. It is a multi-factor process, critical of constructions attempts to reshape its procure-
which involves different functions, stakeholders and ment approaches. Cox and Townsend (1998) argue that
variables, and a whole sequence of events. It is a there has been no theoretical framework underpinning
complex, dynamic and long process, which involves the development of these procurement approaches. This
actors from within and between organisations. SCM has suggests that construction lacks a systematic and
shifted the emphasis from internal structure to external strategic approach to change which can be seen as
linkages and processes, and is dependent on the impeding the cumulative and evolutionary aspect of
interaction between the organisation and its external SCM relationshipsa key aspect of fth generation
environment, with strong feedback linkages and collec- innovation.
tive learning. Its success is associated with the challen- A further weakness associated with these procurement
ging and difcult development of a new culture based on approaches is that the culture of construction remains
long-term and closer intra- and inter-organisational essentially adversarial with continuing reliance on price
relationships, mutual competitive advantage, shared competition and rm contractual arrangements. Most
learning, greater transparency and trust. relationships are still largely arms-length and short-term
(Cox and Thompson, 1997; Dubois and Gadde, 2000),
with a strong tendency towards the use of litigation to
4. Progress towards the adoption of SCM in construction resolve disputes (Latham, 1994). Indeed in the case of
some new approaches to procurement, such as Manage-
The objective of this section is to review the main ment Contracting, contractual relations have often
collaborative changes introduced in construction that become even more complex than in the traditional
can be seen as contributing to the evolutionary and approach and provide further potential for conict.
cumulative process leading to the adoption of SCM. It was only with the emergence of project-specic
This review, summarised in Fig. 1, is based on an partnering in the late 1980s that there appears to have
investigation of the main procurement approaches that been a signicant move towards the more collaborative
emerged in construction during the period between 1960 relationships and integrated processes associated with
and 2000. This timeline is represented by the horizontal SCM. The Construction Task Force report (Egan, 1998,
axis. The vertical axis represents the type of relation- p. 12) Rethinking Construction denes partnering as
ships between clients, consultants, contractors and follows:
subcontractors in terms of the degree of collaboration
Partnering involves two or more organisations
and integration. As can be seen, the traditional single-
working together to improve performance through
stage approach to procurement, which was developed in
agreeing mutual objectives, deriving a way of
the early nineteenth century, continues to dominate the
resolving any disputes and committing themselves
approach of construction clients and their advisors to
to continuous improvement, measuring progress and
procurement. This procurement method still accounts
sharing the gains.
for around 38.4% of construction work by value and
80.7% by numbers of contracts (Davis Langdon and The early ideas on partnering in construction revolved
Everest, 2000). This approach is characterised by short- around three key principles: agreeing mutual objectives;
term and adversarial relationships, deliberately frag- making decisions openly and resolving problems in a
mented processes, and tightly compartmentised func- way that was jointly agreed at the beginning of the
tions and roles. project; and aiming to achieve measurable improve-
A number of alternative procurement approaches and ments in performance through incentives. The progres-
forms of contract have emerged since the 1960s in sion towards the adoption of the principles associated
response to the changing needs of constructions more with SCM is more evident with the emergence in the late
informed clients (Edum-Fotwe et al., 2001), and as a 1990s of the second generation style of partnering
growing realisation of the inherent problems of the which includes a strategic decision to cooperate by the
traditional route (Ball, 1988). These alternative procure- key project partners (Bennett and Jayes, 1998). This
ment routes, which include two-stage competitive more developed form of partnering often places greater
176 M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183
emphasis on a more holistic approach based on a wider fragmentation and lack of integration (Bennett and
range of performance criteria in addition to time, quality Jayes, 1998).
and cost and acknowledges the strategic importance of However, partnering is still largely misunderstood
such longer-term business relationships. It also incorpo- throughout much of the industry and is therefore not as
rates some of the key features of the fth generation unied a concept as many of the other forms of
innovation such as developing stronger external lin- procuring facilities in construction (Cox and Thompson,
kages and inter-organisational relationships throughout 1997). There are a number of different perceptions of
the design and construction process. It is increasingly partnering and, as in the case of earlier innovations in
being seen as a way to develop a culture based on procurement approaches, it appears to have evolved
greater cooperation in longer-term and more stable rather than being a deliberate and systematic imple-
relationships (Barlow et al., 1997; Bresnen and Mar- mentation of an innovation. In addition, it is often used
shall, 2000), and as a way of addressing the industrys to describe the negotiation that takes place in other
M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183 177
forms of procurement, such as two-stage competitive integration of project processes and supply networks
tendering, which again causes misunderstandings, with fewer strategic supplier partners. These new
further devalues the concept and has engendered a relationships incorporate continuous improvement tar-
cynical view of it in much of the industry. Whilst gets to reduce costs, enhance quality, and focus on the
partnering has been used to considerable effect by whole-life cost and functional performance of buildings
regular, frequent and more informed clients in more (Holti et al., 1999).
routine and repetitive projects, its impact in the case of
infrequent clients and unique, one-off projects is clearly 5.1. The survey
more limited. Most partnering has, to date, focused on
developing collaboration in upstream relationships This section outlines a postal survey undertaken to
between regular and frequent clients, consultants and investigate the early adoption of SCM relationships in
main contractors (Bresnen and Marshall, 2000; Edum- construction. It also attempts to assess the industrys
Fotwe et al., 2001), with less involvement of organisa- level of understanding of SCM and its degree of
tions such as specialist and trade subcontractors down- preparedness for its successful adoption and implemen-
stream in the process (Jones and Saad, 1998). These tation.
early experiences are revealing that there are also
considerable barriers to the implementation of partner- 5.2. Methodology
ing. These barriers, such as lack of common purpose
and openness, hidden goals and opportunistic behaviour The choice of the methodology was determined by the
have already been identied earlier in this paper as need to capture the views of practitioners including
impeding the adoption of SCM relationships. Thus, clients and their advisors, design consultants, main
partnering has not yet led to a widespread change of contractors and specialist and trade subcontractors, on
culture needed for such a type of innovation. The the adoption of SCM.
culture for much of construction remains essentially A four-page questionnaire and accompanying letter
adversarial, as demonstrated by the continued and were sent to a sample of 800 construction organisations.
signicant use of traditional procurement approaches The questionnaire addressed the following issues related
based on rigid contracts and competitive, xed-price to SCM:
tendering and the failure of a number of partnering * the key features;
approaches. If much of construction is having signicant * the benets and problems;
difculties in implementing partnering, this raises * the project participants championing its introduction;
serious questions about its preparedness to adopt * the state of inter-organisational relationships includ-
SCM as fth generation innovation.
ing the type, frequency of communication, and the
main issues at the interface between the organisations
involved;
5. SCM in construction * the choice of procurement method;
* the factors in the selection of partners;
Despite the barriers to the implementation of * the measures to increase the effectiveness of SCM
partnering in construction, parts of the industry have
and;
started moving toward the adoption of SCM relation- * the main sources of learning support.
ships. This is being led by more informed private-sector
clients who were early adopters of partnering in the
early 1990s, as they attempt to both increase the degree Each section of the questionnaire contained a
of collaboration that exists between their preferred composite question normally requiring between 10 and
consultants and contractors and to extend this approach 12 responses and so provided over 140 inputs in total
downstream to include key subcontractors and suppli- from each individual respondent. For most of the
ers. Some public-sector clients are also leading the way sections, those surveyed were invited to score their
in building the purchaser-supplier relationships asso- responses using a Likert-style rating scale, with a score
ciated with SCM. For instance, the Defence Estates, an of 5 indicating very important or very effective and a
agency of the UKs Ministry of Defence, is adopting score of 1 indicating unimportant or ineffective.
Prime Contracting which includes many of the key Other sections required the ticking of boxes or the
elements of partnering, TQM and SCM. Its aim is to stating of percentages.
promote collaboration through leadership, facilitation,
training and incentives, and replace short-term contrac- 5.3. Sample design
tually driven project-by-project adversarial relationships
with long-term, multiple-project relationships based on Given the large number and range of construction
trust and co-operation. It includes the restructuring and rms in terms of size and type of work undertaken, and
178 M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183
Table 2
Features associated with SCM
Table 3
The dependence of SCM on intra- and inter-organisational relationships
Cronbach alpha=0.6882.
5.5.3. SCM requiring a strategic and long-term approach which it has with its customers, albeit adversarial, co-
A Spearmans Rho correlation analysis was also operative, close, short or long term. There are also
carried out on the variables used in question 5 of the correlations between relationships which are short in
surveyWhat proportion of the following relationships nature and those which are arms length. Adversarial
do you have with your suppliers and customers?, and relationships are also correlated positively to both arms-
two variables in question 9What proportion of your length and short relationships. This conrms the
work is undertaken in the following procurement ndings of the review of procurement in Section 4 of
systems? This was carried out to ascertain whether this paper, which also suggests that relationships in
respondents were taking a strategic and long-term construction are mainly short-term and adversarial.
approach by developing longer-term relationships with However, Table 4 shows that over 40% of respon-
the same partners (see Tables 4 and 5). dents consider their relationships with both suppliers
The type of relationships that a rm has with its and customers to be close, co-operative and long
customer has signicant correlations with those it has term. A further investigation of Table 4 indicates that
with its suppliers. This would imply that the type of only 9% of respondents are involved in strategic
relationships a rm has with its suppliers mirrors that partnering and 2% in Prime Contracting which are the
180 M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183
Table 5
Spearmans Rho Correlations
only procurement approaches allowing formal and long- 5.5.4. Significant links between SCM and support from
term relationships. This may suggest a lack of clear the external environment
understanding of the type of relationships associated Table 6 shows no signicant link between the
with SCM. adoption of SCM and support from the external
M. Saad et al. / European Journal of Purchasing & Supply Management 8 (2002) 173183 181
Table 6
External support
Variable number Variable name Number Mean valuen Percentage scoring less Percentage scoring
than 3 more than 3
Table 7
The role played by learning in SCM
Variable number Variable name Number Mean valuen Percentage scoring less Percentage scoring
than 3 more than 3
for Innovation and the Construction Best Practice European Journal of Purchasing and Supply Management 7,
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