20.10.08

IBS: Critical Succes Factors 2

Effective Supply Chain Management (SCM)

The problem - Construction has long history of criticism for its poor performance with confrontational relationship and dispute among the contracting parties. Historically, the industry relationship between the main contractors and its suppliers is comparable to 'master to servant' relationship where there are lack of togetherness and the information protectionism is widespread over the industry (Faizul, 2006). To worsern this situation, current supply chain's state in the industry are fragmented and underpinned by poor communication, adversely relationship and lack of trust and commitment (Hong-Minh et al, 2001) and relationship between parties has been driven by the cost driven agenda (Wood & Ellis, 2005). By moving the construction activities upstream from the construction site to factories, high demands will be raised on the management of the supply chain and logistic activities (Pan et al. 2008), (Blismas, 2007) (Gibb, 2001) to ensure successfull IBS implementation.

Supply chain & IBS - Procurement in definition is refered to ordering, expediting and delivering of key project equipments and materials (Sears et. al, 2008). Current procurement systems are tend to discourage construction firms from risking the adoption of non-traditional processes and products to innovation. These systems include those that place a premium on speed and urgency or on competition on the basis of price alone, establish rigid role responsibilities, or promote adversarial and self-protective behaviour (Kumaraswamy and Dulaimi, 2001). The procurement of IBS construction requires careful early attention both to design and hardware of procurement issues throughout the whole supply chain. Partnering with suppliers and component manufactures from the earliest project stages is vital to ensure efficient and timely delivery of supply or specialised work with high quality of product. Good supply chain management encompassing planning and management of all activities including procurement, conversion, logistic and coordination between contractor, suppliers, intermediaries and third party solution providers within and across the company structure (Faizul, 2006). In such arrangement the risk involve with any construction quality and tolerance are also clearly identify and the party responsible for taking corrective action is agreed from the outset of a project. The collaborative procurement approach will also help to achieve better project outcome and facilitate the value management process. As such, the partnering process develop a mature and more open relationship and drive the highest value from the construction project that will benefit both collaborating parties and the end-users. Lean and agile approach has also proposed by Naim & Barlow (2003) to minimise resource requirement trough the elimination of waste in the supply chain.

The call for partnering - Tighter couplings among firms and individuals involved in supply chain and procurement in construction projects are likely to be more supportive to innovation. Miozzo and Dewick (2004) reach similar conclusions, calling for stronger inter-organisational cooperation as a way of enhancing construction innovation. As IBS is considered as innovation to the construction industry, the suggestion to improve procurement system and supply chain to enhance the adoption of IBS was first proposed by Hong-Minh (2001), Vaneble et al (2004) and Goodier & Gibb (2004). One of the most practical solution is partnering and strategic allience approaches to project delivery in creating a shared project vision and developing complementary objectives between project participants. Partnering is typically defined in the literature as a commitment between the client, contractors and suppliers to actively cooperate in order to meet separate but complementary objectives. It is a structured management approach, which encourages teamwork across contractual boundaries (CIB, 1997). Partnering is associated with the use of a range of tools, including charters, workshops, team-building exercises, dispute resolution mechanisms, benchmarking, total quality management, and business process mapping (Bresnen and Marshall, 2000). It also can be in the form of establishing a long term partnership with construction parties to work together as a team (Pan et al. 2008) and establishing effective ways of bringing specialised knowledge holders into design at earlier stage (Palmer et al, 2003). There is also a need for IBS contractors to treat their suppliers, pre-casters and specialised sub-contractors not as commodity suppliers but instead as a strategic partner for the project (Faizul, 2006). Suppliers are also become motivated to invest in development and production when they are asked to produce for more than one project (Hofman et al, 2007). The participants in the processes are often engaged on long-term basis and thereby perform better and create an effective production and economic of scale. A long-term relation is also meant that the team can start projects rapidly since they have a structure for their co-operation. Hence, valuable time is saved since no efforts must be done in bringing in tenders and evaluates different suppliers, manufactures and sub-contractors. The partnership maybe in the form of specialised material sourcing team or production team, which work together to ensure the best pricing and bulk purchase discount or in other word practicing value engineering principal (Faizul, 2006) .These benefits also apply to alliances, perhaps with greater surety given the existence of commercial drivers to ensure cooperative behaviour under alliances. Project alliance can be considered a highly evolved form of partnering that is enshrined in a contract. The main difference between partnering and alliance is that the latter employs contractually established commercial drivers to provide financial incentives for good project performance, while partnering has been characterised as being based on ‘soft-issues’. Partnering relies on trust and integrity rather than the letter of the law (Blaise & Manley, 2004)

Critics - In general, strong reliance on sub-contracting in construction project has create problem in using innovative building technique (Ball, 1996) and maybe hampered the initiative toward partnering. Although good partnering with suppliers and subcontractors is important, the competitive tendering system mean, the contractors must see price as overriding feature and frequently it mean inability to offer repeat business (Gray & Flanagan, 1989). It make contractor most likely to be independent and choosing the lower tender bid for archive competitiveness. Moreover, perception of builders, couple for high demand of housing, limited supply and lack of product competition are inhabiting the progress towards partnering as observed by Naim & Barlow (2003).

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