2009 International Conference on Measuring Technology and Mechatronics Automation

Strategic Supply Chain of Multi-project -An Owners' Perspective

Chen Zhonglin Dong Qiaoting Shen Yingming

Beijing Jiaotong University Shijiazhuang Railway institute
Beijing, China Shijiazhuang, China
E-mail: zxwz@263.net E-mail: shxt7@Sohu.com

Abstract-In view of the current practices and
developing tendency of multi-project management,
it was suggested that it is the owners rather than
the contractors should be at the core to build an
effective and efficient supply chain for multi-project.
Multi-project management is neither an extension
nor a scaled up version of single
management. The characteristics of centralized
procurement, Third-party logistics
procurement, and Just in time (JIT) procurement
were also discussed. Finally a new organizational
structure for multi-project management
designed to make sure the strategic supply chain
can be implemented smoothly.
Keywords-supply chain; owners; multi-project
management; organizational structure
I. INTRODUCTION
Most projects exist as part of a multi-project
environment if you take a look at the main traffic
projects in the eleventh five-year program of China
and 2010 shanghai world expo projects, meaning that
an era of multi-project management has come. The
owners (including investors: individuals, legal person,
corporation, government departments, such as sponsors,
financial agencies; also including some related
organizations being instructed, like the developers, the
construction organizations, consultants etc.) are facing
a new challenge that many projects must be carried out
simultaneously. The more quantltles and the more
types are, the more complicated the management is.
The function of owners has been neglected when the
contractors developed their strategic management
system in the practice of former disperse management
on single project. As a result, it was impossible to
project carry out an efficient management upon multi-projects,
which means it is urgent to learn some new ideas from
(TPL) "multi-project management theory". [1]
Multi-project management IS becoming the
dominant guideline in modem project management.
was Numerous domestic and overseas experts and scholars
hold the opml0n that engmeenng resources
management is the bottleneck to carry out effectively
multi-project management. The owners' resources
management is the key to the success of multi-projects
because it is the start point to the decision-making,
recourses deployment, hands-on project management
from the standpoint of project life cycle. Also it can
solve some management problems by analyzing the
supply chain. [2]
II. EXTERNAL SUPPLY CHAIN FOR
MULTI-PROJECTS ON THE OWNERS'
SIDE
Supply chain management has become a critical
factor which may affect the surviving and the thriving
of an organization. Furthermore, resources
procurement management is the top priority of supply
chain management. A new supply chain which meets

IEEE
978-0-7695-3583-8/09 $25.00 © 2009 IEEE 693 ~computer
DOl 10.1l09/ICMTMA.2009.534 society

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 the needs of multi-project management was proposed
as follows based on resources procurement and some
transformations in the practices of current construction
project management.
A. Differences between single project and
multi-project resources procurement
Multi-project means that an organization manages
many projects simultaneously in a certain period of
time. Some projects are relevant while others are not.
Strategically, it can be planned that projects are bid or
withdrawn. Viewing from the execution, however,
project management may happen at any time. There
are some obvious differences between single project
and multi-project resource procurement.
First, in single project procurement, the owners take
low cost performance as the dominant idea owing to
the limit of quantity. The owner would rather to let the
contractors themselves to carry out recourses
procurement. In sharp contrast, for multi-projects
procurement, large quantitles and long-standing
procurement will most likely lead to form
coordinated procurement for all the projects. So the
owners procure and deploy main engineering recourses
systematically to guarantee the quality of engineering
materials as well as to reduce the cost.
Second, in single project procurement, the owner
usually needs only to check and control the
procurement quality, which does not expand the
owner's supply network from strategic point of view.
Under this situation, it is the contractors rather than the
owners that play the key role in the chain. In
multi-project procurement, as a whole system, the
owners should exam and reorganize their supply chains
to make sure long-term benefit and continuous
development of the organization can be guaranteed by
further reducing cost and enhancing quality. Under this
condition, recourses procurement is shifted from
contractors to owners. By doing so, the owners will be
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the core of the chain and can make a better use of
system resources.
B. Analysis a/procurementpattems
1) Centralized procurement.
It refers to arranging all the needs of small quantity
procurement and joining them up. As a result, superior
price and good service can be obtained. The owner can
procure recourses systematically for many projects
within the organization; also an alliance between
different organizations can be established. This
pattern IS very attractive among the current
procurement strategies in the world. Not only can
centralized procurement reduce the cost of production
and supply, but also cut down the owners' inventory
cost, which leads to the reduction of procurement cost
in the chain.
2) Coordinated procurement.
It refers to the process that the owner makes plans
and executes payment online according to actual
situation in the supply chain, which is based on
a information such as inventory, demands between
owners and suppliers. Only through coordinated
actions in and/or out of related partners can chain
system reflect the demands timely and reduce the
inventory cost. The coordinated procurement needs
high level of interaction, agile response, and precise
plans in all links of the supply chain. It also needs to
establish an exchanging platform for the huge amount
of information in both sides of suppliers and clients.
3) Just in time (lIT) procurement.
Coming from the concept of just m time (lIT)
inventory control developed primarily by the Toyota
Motor company of Japan, it is defined as "A
combination of technique and theory, which rejects to
waste and inefficiency in purchasing process". The
basic philosophy is to supply goods with appropriate
quantity and quality in appropriate place and time, to
most satisfy the clients' needs. Due to the differences
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 between construction and manufacture, it is difficult to
apply lIT to the construction engineering and
management. The construction products have long
duration of production, relatively low standardization,
many participants and constraints. Comparing to
manufacture, construction engmeenng IS more
complicated and influenced by many more factors.
Simply put, construction engineering is a field with
much uncertainty. [3]
4) Third-party logistics (TPL) procurement
TPL is called the socialized logistics which refers to
one company managing, controlling and providing
services for external clients who do not belong to
direct suppliers in the supply chain. It is the third
party, not the owners or contractors, who is an expert
in logistics. The third party can rely on its fund,
specialized technique and the management superiority
to provide a series of procurement services with low
cost, high efficiency to numerous enterprises or even
families. TPL procurement can let the owners and lor
contractors devote their energies to primary work. TPL
can entrust his own logistical activities to specialized
enterprises by contract--contract logistics. By using
TPL procurement, the owners can enhance their core
competitiveness; reduce the cost of supply chain. [4]
C. Determination ofprocurement pattern
It is clear that certain procurement patterns are
better for multi-project than others. The problem is that
to make a precise and detailed demanding plan is very
difficult due to the uncertainty of multi-projects. All
links in the supply chain have certain difficulties to
interact and response quickly and efficiently.
Moreover, it's difficult to build an exchanging platfonn
for infonnation in a short period between suppliers and
corresponding clients. E-business has not been mature
enough to procure engineering resources on-line for
multi-projects especially in some developing countries.
So the coordinated procurement is not suitable for
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multi-project management at the moment. [5] [6]
Due to the high uncertainty in construction
engineering, it is not easy to obtain certain resources
just in time when it is needed. So lIT procurement can
only be a supplementary method to reduce certain cost
of processing and supply.
TPL currently carmot be the major pattern to
procure resources for multi-projects. It is usually
combined with other procurement patterns. [7]
The centralized procurement has the superiority as
follows. It can improve the quality of procurement;
reduce the cost of procurement with high efficiency
and nonnalized procedure. Moreover, as the center of
the chain, the owners can make mutual trusts and
enhance cooperation among the members of the
procurement and various contractors.
As far as the owners are concerned, centralized
procurement is the best choice. Alternatively, if the
owners somehow cannot procure engineering resources
by themselves via centralized procurement, TPL can be
a backup. After signing the frame of supply agreement
between the owners and suppliers by centralized
procurement, the owners may choose lIT to lower
further the cost by reducing inventory when there are
not obvious barriers to carry out the contracts.
D. New strategic supply chain under new
procurementpattern
The owners need to reorganize their supply chains
strategically to make sure that multi-project
procurement will be carried out smoothly. Based on the
fact that design and construction are two separate steps
of project management nowadays in China, a
simplified model of supply chain was suggested. The
owners need to ask the design agency to provide
explicit construction plan and standardized deadline to
finish the design which is one of the bases of
exammmg, evaluating, managing the agency m
accordance with the organizational strategy. A concrete
 diagram of the strategic supply chain IS shown m and construction schedules beforehand.
Figure l.
In this model, the owners or their agents are the III. ORGANIZATION PATTERN BASED
core of the chain. Their functions are as follows: first, ON THE OWNERS' STRATEGIC SUPPLY
the center of information exchanging, meaning that all CHAIN
related information of multi-project management
should be collected and distributed by the owners; Reorganizing supply chains will trigger some
second, the center of logistics controlling; third, the changes to the owners' strategies and the
center of procurement. organizational structures. In the model above, it is
Relevant enterprises critical to make sure that the owners can play the
center roles of information, coordination and
procurement. For this purpose, a new organizational
Consultin structure of multi-project is a must.
Partnering
The current project management patterns mainly
include project type, functional type and matrix type
(such as weak matrix type, balanced matrix type,
strong matrix type, compound type). Basically, the
'"
....
"~
owners focus only on one project, actually the
bO
·in
construction period of the project. Using this method,
"
Ir:l
I 1+--'-------'---1 it is almost impossible to deal with multi-projects
I
I successfully. In view of above problems as well as
I
I
I the characteristics of all the main bodies that involved
Relevant enterprises in multi-project management, a second-level flat
management organizational structure for multi-project
Figure I Strategic supply chain for multi-projects management was put forwarded as shown in Figure 2.

In this supply chain, design agencies, consultants

and suppliers are the relevant enterprises for the reason
that cultivation and cooperation with them will help all
partners to achieve their goals. In the alliance, the
partners may cooperate and compete, or only cooperate
without competing, which is decided by the owners. Project

managementt~:~~;~~~~~~~~~~
General contractor of construction is not included in
organization
this model because it does not have tremendous (Executing
influence on the realization of the owners' strategy. center) Project
Since techniques are relatively mature at present,
general contractor of construction has only the rights to Figure 2 Organizational structure for multi-project
execute the contract and cannot make decision upon management on owners' side
the procurement pattern. The general contractor needs
to make a resources plan according to design drawings Comparing to common organizational structure,

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 some new divisions were added to the new structure:
first, higher managers--a section of strategic
decision-making; second, a section of managing and
organizing---project management office ePMO), a
special support to offer a more effective operation
environment. Using this pattern, the multi-project
leading group which is composed of senior managers
is responsible for deciding major issues and figuring
out strategic developing plan. The PMO can also
make sure that the strategic plans of multi-projects are
consistent with the organizational strategic goals.
Furthermore, PMO, as the multi-projects reaction
center, will rearrange and distribute engineering
resources to the appropriate project. Finally the PMO
will provide effective supports for all the works
authorized by the leading group. The qualified staff
members in such a main center can be found from
inside or even hired from outside or both depends on
the real situations of the owners. To hired qualified
persons from both inside and outside is recommended
by the authors. The innate part comes from the people
who have obligations in the related organizations to
guarantee the smooth implementation of the strategy
and the direct effective leadership in on-the-spot
management. Specialists entrusted outside
alleviate the pressure of human resources in the
organization and guarantee the working efficiency of
the center. Project management organization in the
basic place acts as an executing office to gIve
information back to the PMO and to deal with
on-the-spot tasks in time. As to the staff, it is
recommended to adopt the same pattern as PMO to
alleviate pressure, to improve working
communicating efficiency with the information center.
The organizational structure above can transmit
on-the-spot information from worksites to PMO in
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time. Then PMO will consult with all the suppliers and
design agencies to act as the center of information,
procurement and controlling. Multi-project leading
group proposes the strategic goals of the projects to
guarantee the project goals are consistent with the
organizational goals and suggest the owners rearrange
the resources to make sure that the new supply chain
will be carried out effectively and efficiently.
IV. CONCLUSIONS
A new supply chain was recommended by the
authors. The owners' organizational structure need to
be adjusted accordingly to guarantee the effective
implementation of the new chain. This new concept
will provide new ideas for multi-project management
from the owners' perspective
References:
[1] Wenfa Hu, Construction Project Management, Chemistry
Industry Publish Press, 2008.
[2] John H Payne, "Management of multiple simultaneous
projects: a state-of-the-art Review", International Journal of
Project Management, 13 (1995), pp23-33.
can [3] John Holusha, "Just-in-Time, system cuts Japan's auto
costs", the New York Times, 1993
[4] A.M.Taylor, "The Great Transition", Journal of
purchasing andMaterials management, 26(1988), pp87-90.
[5] Terry P. Harrison, "Global Supply Chain Design",
Information Systems Frontiers, 12(2001), pp 413-416.
[6] Gek Woo Tan, "Web-based Supply Chain Management",
Information Systems Frontiers, 1(2000), pp41-55.
and [7] David P. Christy, "Safeguarding supply chain
relationships", International Journal of Production
Economics, 36(1994), pp233-242.
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