CHAPTER 1 INTRODUCTION 1.

1 General As a result of the ever- increasing competition within the construction industry companies now tend to respond more frequently, electively and efficiently to customers requirements. Another significant change in the concept of modern business management is that individual businesses and companies are no longer competing as sole autonomous entities but rather as supply chains. The challenge is to create a competitive advantage in an uncertain environment in which enhancement of supply chain management must be driven by the corporate strategy aimed at increasing shareholder value (Blandon & Reveles, 2001). However, most companies both in the construction industry and other sectors, especially small and medium enterprises, often fail to design and manage their supply chains in a profitable way, as they seem not to understand the complex dynamics of Supply Chain Management (SCM), ignoring the global aspects of SCM, and thus failing to coordinate along the Supply Chain (Chen-Burger and Rovatsos, 2009). Today Supply Chain Management is one of the most discussed topics in general management. The implications of the decisions made in how an organization runs its supply chain goes on to affect how the whole operations of the organization. Hence for sustained long term success to be achieved in any organization as well as companies in the construction industry the supply chain strategy must address collaboration and alignment of objectives among supply chain partners. For the construction industry to achieve improved performance there remains a number of critical issues that need to be considered and rectified. Supply Chain Management (SCM) has been around for over the last 25 years existing predominantly in sectors that are highly on a physical supply chain examples of such sectors are Construction (where 54% of the industry is concerned about supply chain management to some or a great extent), Manufacturing & Engineering (53% is concerned about supply chain management) and Retail & Wholesale (49% is concerned about supply chain management) (ICAEW, 2009). However, in the manufacturing sector SCM has been developed and widely understood for a number of decades and thus far greatly improved their competitiveness (Vrijhoef and Koskela, 2000) whereas in the construction sector SCM is a much more recent area of interest which is still being explored by the stakeholders/people in construction (clients, contractors, suppliers and sub-contractors) in order to ascertain the dynamics of

SCM and increase competitive advantage (Arbulu and Ballard, 2004). According to Dale et. al., 1994 the concept of SCM is viewed as a strategic tool which is vital to corporate competitiveness and profitability in the current business operating environment (Burgess, 1998) where companies are constantly changing their operations strategy, methods and technology (which includes the implementation of SCM paradigm) by making relentless efforts in ensuring they flexibility is on the constant increase and in turn their competitiveness (Vrijhoef & Koseka, 2000). SCM evolves from logistics that has to do with breaking down existing barriers between departments in order to allow for efficient and effective productive output in an organization. Today this ethos is now been extended through to the network of producers to the endcustomers (Humphries & McComie, 2009), in the construction industry several efforts have been made to better understand efficient and effective ways of managing construction supply chains (Wegelius-Lehtonen 1995, Vrijhoef and Koskela 2000, Naim et. al. 1999, Arbulu et. al. 2003, OBrien 1995, Wegelius-Lehtonen and Pahkala 1998). The construction industry has seen the launch of a number of SCM initiatives as a result of inadequacy in the traditional approach to the control of the construction supply chain management thus the need for shifts of methods for managing the supply chain more effectively (Vrijhoef and Koskela 2000). Supply chains in the construction industry can be very complex as it composes of a large number of parties/players with several project supply chains and markets (OBrien et al., 2002) such as subcontractors and suppliers, especially in large scale or mega projects or at a corporate level where thebparties involved in the supplychain could amount to thousand for a whole (Humphries & McComie, 2009). Prior studies carried out by Bertelsen, (1993) indicated that projects with poor supply-chain design had cost increases of ten percent. Through implementing the concept of SCM all the parties involved in the construction process work as a virtual corporation where they are kept aware of commitments, schedules and expedited activities thus, being able to source, produce and deliver projects/products at the least lead time and expense and other credits attributed to SCM includes enhanced productivity, facilitating innovation (Elumti, 2002). Nevertheless, the construction industry has been slow in adopting the SCM concepts (Akintoye et al. (2000) which may be caused by a number of obstacles (Olsson, 2000) which includes the absence of the common project goals, lack of focus on the customers' requirements, resistance to new ideas as a result of the

fragmentation of contractors' organizations and the lack of transparency of project information. It is conventional wisdom to accept that the construction sector is no longer confined to that among individual companies but rather composed of a large number of players with numerous project supply chains and various markets (OBrien et al., 2002). Hence it becomes pertinent to study the possibility of using SCM to improve the performance of construction enterprises. Construction industry researchers and practitioners are increasingly seeking to apply the experience accumulated in the manufacturing industry (Bresnen and Marshall, 2001). Other management concepts that are have being adopted from the manufacturing industry that are now familiar in the construction industry are , total quality management (TQM) and lean manufacturing Empirical evidence as reported in OBrien and Fischer (1993) that there is the potential to make significant improvements in construction supply chain performance (e.g. Green, 1998; Wong and Fung, 1999; Lapinski et al., 2007).

1.2 Research Aims And Objective The research aims to investigate SCM practices, drivers and challenges that the construction supply chain is experiencing in practice, carrying out exploratory study of the UK construction industry, investigate improvement opportunities and propose utilizing the practice of FPAL (First Point Assessment Limited). Expected benefits from such improvements include reducing project lead times, decreasing costs, improving quality, and decreasing variability. Motivation behind this thesis comes from the desire to see construction companies achieve success and survive during economic downturn and economic boom. The research is aimed to obtain information on: 1- To provide an overview of current SCM practice and identify the main drivers to implement SCM practices. 2- To indentify the barriers caused by economic impacts to implementing SCM practices in the construction industry and expectations for the future. 3- To identify the key factors in effective SCM relationships between the construction contractors and their suppliers and clients 4- To develop a description of FPAL (oil and gas supply chain database) as it can improve the performance of SCM in the construction industry. 5- Limitations of current practice

6- to develop a description of FPAL As it can help organizations to add values to their business in a constructive manner. 7- To make recommendations for future best practice 1.3 Methodology According to Adedayo (2000), the term methodology requires a specific procedure, entails decision on what information to be generated, the data collection method, the measurement approach and the data is being analyzed. The methodology adopted for this research is based on extensive literature review of the origin and current literature on the adoption and implementation of supply chain management within UK construction sector, supplemented by qualitative and anecdotal primary information gathered in a survey of some UK construction contracting organizations. Also case studies of successful SCM and problems and associated factors/barriers that hinder its successful implementation within the UK construction industry will be examined. In an effort to have an in-depth study, the following data collection techniques will be adopted for this investigation. Issue of questionnaire Interviews Surveys

1.4 Limitations to the Study There is a common saying that the road to success is full of oppositions and it takes the strong to pass through the oppositions. The process of this research/ investigation however encountered few limitations. Such as difficulty in gathering data, difficulty in getting relevant materials and also time constraint. 1.5 Significance of the Study Unlike in most manufacturing and business situations, each construction project scenario is unique and dependent on a bewildering array of contextual variables and participants; the practical methods for supply chain management implementation have to be developed so they take into consideration the characteristics and the specific situation of construction. These need to be appropriately processed and properly managed to achieve expected performance

levels. The traditional approach to the control of the construction supply chain is not adequate any more, and a shift of methods for managing the supply chain is needed. The construction industry is a major contributor to the UK economy (directly c. 8.5% in 2008, rising to 10% overall when the entire value chain is considered) and is also known to be plagued by cost-time overruns and is said to be lacking behind in the drive by many sectors of the economy such as manufacturing industries to increase productivity, customer satisfaction, and overall profitability. In recent years, the application of SCM philosophy to the construction industry has been widely investigated as an effective and efficient management measure and strategy to improving the performance of construction, which has suffered from high fragmentation, large waste, poor productivity, cost and time overruns, conflicts and disputes for a long time, and to address adversarial inter-organizational relationship of organizations. In order to improve on the SCM of the construction industry and find solutions for some of its problems, this dissertation seeks to propose FPAL (oil and gas supply chain database system) and its possible effect on improving the supply chain in construction. 1.6 Outline of Chapters The study of the entire research would consist of five chapters. The contents of these chapters are outlined below Chapter 1: Introduction. This chapter introduces the research work in general. Here the research questions and objectives are stated .Also the scope of study and the research hypothesis would be included in this chapter. Lastly the scope, methods and limitations related to focus of the research would be stated. Chapter 2: Literature review. This chapter would attempt to review the work of past researchers and other authors in relation to the core of SCM in the construction industry. Chapters 3 and 4 will analyse the FPAL system, the attributes associated with the construction industry and the effect of its application to the construction industry is implemented. Chapter 5: Research methodology. This chapter states the research design employed in relation to data collection, data presentation and analysis. For the purpose of this

work, the research design that would be employed here is the survey design. A detail of its application would be presented in the main body of the work. Chapter 6: Data analysis and interpretation. This chapter deals with the actual presentation of data collected during the survey and also the analysis and interpretation of data to enhance its relevance. Chapter 7: Conclusions and Recommendations. This chapter as the title implies entails the presentation of the summary of the whole work. Furthermore, the recommendations in relation to the research topic would be enumerated here. Limitations of studies and also the suggestions for further studies are included in this chapter .this chapter conclude the main body of the research work.

CHAPTER 2 LITERATURE REVIEW

2.1 The UK Construction Industry in Crises Until the summer of 2008, prior to the fall-out from the sub-prime mortgage market crisis, credit was abundantly available the construction industry has enjoyed a period of sustained growth for over a decade, in sharp contrast to the cycles typical of much of the post-war era. By the middle of 2008 the credit crisis started to make headlines. The construction was severely hit by the crisis, which has precipitated or magnified an eventual cyclical decline in activity. The construction industry is said to be facing the prospect of the most severe contraction in 30 years thus requires a Government stimulus for the situation to be curbed. It is also reported by majority of major contractors that there is a steep decline in construction activity which indicates that the current situation might deteriorate prior to any sustained recovery. Survey carried out by the Construction Confederation State of Trade survey for the fourth quarter of 2008 shows that 70% of contractors reported that construction output was expected to fall over the following quarter, and 50% expected a fall in output over the following 12 months (CIC, 2009). The global economic downturn has forced many companies to be more focused on their supply chains, the difference between the survival and success of any organization is based on how efficient and adaptable the strategy with which the supply chain risks are managed notwithstanding the status of the economy whether in a recession or no recession. It is estimated that during 2008 at least 5 million construction workers lost their jobs (Based on data from OECD countries, Gulf countries, Russian Federation, China and India). The construction industry shrank considerably in the 2008 recession. Businesses involved in construction had however been doing badly since 2006, so the crisis might not have been the main and/or only cause for its decline. According to reports of the Economist Intelligence Unit on the disruption caused as a result of the effects of recession, it was revealed that supply chains had the most impact in the past year. The survey carried out also indicated that more than one-half of the respondents were hit by rising input costs and swings in energy prices, and over one-third have been affected by the insolvency of partners or suppliers (The Economist Intelligence Unit, 2009). Projections suggest the industrys optimum size could shrink to 12.3bn by the end of 2010

and to 10bn in 2011 which happens to be 33% and 43% below its longterm optimum size respectively (CIC, 2009). The UK construction industry is said to have suffered a more pronounced decline in construction activity since the onset of the recession when compared to its European counterparts, this has is evident in the sharp increase in company closures between the fourth quarter of 2008 and the first quarter of 2009, redundancies and individual bankruptcies which happens to be the highest amongst the other UK industries (L.E.K, 2009). Currently, organisations tend to regard each business venture within the construction sector as being new and project-based. The construction industry is a major contributor to the UK economy (directly c. 8.5% in 2008, rising to 10% overall when the entire value chain is considered) and is also known to be plagued by cost-time overruns and is said to be lacking behind in the drive by many sectors of the economy such as manufacturing industries to increase productivity, customer satisfaction, and overall profitability. These improvements as witnessed in other sectors of the economy are attributed to the adoption of supply chain collaborative measures like partnership, partnering and integration within the supply chain. Hence, supply-chain management is said to promise an engineering basis to design, plan, and manage construction projects in a collaborative manner (OBrien, 1998). It is therefore appropriate to conclude that an effective supply chain management and purchasing process are crucial to the improvement of a companys overall performance. The current crises has been keenly felt in the Western countries particularly in the UK, this is as a result of the dependence on the hardhit financial services sector and the high level of household indebtedness. The outcome of the current global economic crises may be a new economic order, the nature of which cannot be fully understood today. Consequently, the economic outlook regarding the depth and duration of the downturn remains highly uncertain (Bank of England 2009). Business and consumer confidence in the UK have fallen substantially. There are suggestions that suggest the UK will return to growth in 2010 (HM Treasury 2009; NIESR 2009b), while others predict further decline (IMF 2009a). In general, the UK construction sector is expected to continue to shrink in 2010, but on the contrary the housing sectors and infrastructure is expected to have a better year (www.davislangdon.com).

Supply Chain Management (SCM) has drawn much attention of both practitioners and researchers in the construction industry (O'Brien et al. 2002). This is understandable since the

construction industry forms one of the most diverse and unstable sectors within the UK economy and it constantly faces wide fluctuating demand cycles, project-specific product demands, uncertain production conditions and it has to combine a diverse range of specialist skills within geographically dispersed short-term project environments (Dainty, Millet and Briscoe, 2001). According to Elumti (2002), the credits for implementing SCM concepts in construction production operations are achieving enhanced productivity and profitability, cost saving, facilitating innovation and improving organizational competitiveness. 2.2 Supply chain

Supply chain is a concept that has been reviewed by different bodies of literature (Croom et al, 2000). According to Chopra and Meindl (2003, p. 4) a supply chain (SC) consists of all parties involved, directly or indirectly, in fulfilling a customer request. Supply chain is a term that used in referring to the links between an organization and its suppliers, through its distribution on to its customers. Thus a supply chain is said to be a buyer-supplier relationship. So a typical supply chain consists of the supply chain focal organization (final product manufacturer), those involved in supply of resources and the customers. In construction a supply chain refers to links between the parties participating in a construction project which includes all the business and other organizations which are involved in the process from the extraction of raw materials to the eventual demolition of the building, and disposal of its components. The figure below shows a typical supply chain, which includes the involved flows of products (downstream), funds (upstream) and information (across the SC).

Figure 2.1: A typical supply chain From the diagram above it is clearly indicated that a supply chain encompasses the entire product or project cycle from the point where raw materials are introduced to the point of end-user product consumption (Stock and Lambert, 2001).

It is worth mentioning that there is a wide range of supply chains in the business world, those consisting of few suppliers, a manufacturer/producer and a customer (simple supply chain), to those which consist of numerous tiers of suppliers of resources and raw materials, a manufacturer, several wholesalers, retailers and customers and some tiers of distributors and warehouses across the supply chain (complex supply chain). The figure below shows the network structure of a complex supply chain.

Figure 2.2: A complex supply chain network structure (Lambert and Cooper, 2000, p.68) The process that integrates, coordinates and controls the movement of goods, materials and information from a supplier through a series of intermediate customers to the final consumer and essential to this the activities between suppliers and customers to the consumers are all linked in a timely manner, this process is referred to as supply chain (Emmett and Crocker, 2006), these activities are presumed to be performed internally in the firm under the traditional model of supply chain. In other words a supply chain can be viewed as a complex network or set-up of information systems, management techniques and operational activities existing amongst entities or parties that maintains relationships of varying strengths with one another (Chandra and Kumar, 2001a).

The figure below illustrates how the supply chain bridges the gap between the fundamental core business aspects of supply and demand.

Supply

For example: When is the product made? Where is it made?

Supply chain gap Demand

Which suppliers? How much and how many are required? How and when is it delivered? For example: When is the product required? Where is it needed? How many and when needed? What is the mix required? How is it required? What distribution network to use?

Figure 2.3: The supply chain bridges the gap (adapted from Emmett and Crocker, 2006. p. 2). The concept of supply chains is relatively new though it provides a useful framework for which the construction process can be analysed. Thus far there seems to be a universal agreement as to the definition of supply chain (Teigen, 1997).Examples of similar definitions is: Swaminathan et al. (1996) defined the supply chain as: a network of autonomous or semiautonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products. Lee et al. (1995) have a similar definition: A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system. Ganeshan et al. (1995) have another analogous definition: A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.

According to Stevens (1989) the supply chain defined as the interconnected series of activities that are concerned with the planning and controlling of raw materials, components and finished products from suppliers to the final consumer. Mabert and Venkataramanan (1998, p. 538) define the supply chain as the network of facilities and activities which performs the functions of product development, procurement of/and movement of materials between facilities, manufacturing of goods, distribution of finished goods to customers, and after-market support. According to (Cohen, 1996; Cooper and Ellram, 1993), the primary purpose of supply chains is to minimise the flow of raw materials and finished products at every point in the pipeline in order to enhance productivity and cost savings. According to Berry et al., (1994) Total management of the supply chain enhances the competitive edge of all players therein. The supply chain is said to consist of the parties who are involved in ensuring that customer demands are met (Chopra and Meindl, 2007). There has been much debate on the confusion regarding interpretations of the supply chain concept in the research community (New, 1997; Day, 1998; Hines, 1998). The supply chain concept became an explicit area of research in the mid 1980s and originated largely from the two separate management streams of distribution and production, which merged into the field of logistics (Coyle et al., 1996). Also research concerning the supply chain concept is a new field in construction that emerged in the mid 1990s. Similar to the mainstream management literature, it is evolving with corresponding in influences from the theory of production, distribution and strategic procurement (London and Kenley, 2001). Masters (1994) went on to describe the supply chain more clearly as one firm producing a raw material and selling it to the second firm which then uses raw material and turns it to a component. Then the third firm purchases this component from the second firm and then goes on to assemble the component into a product sold to the fourth firm which might be a wholesale distributor. This firm distributes the product to the retail merchants who finally sell this product to the end users (customers). The set of firms which pass these materials forward can be referred to as a supply chain. From 1975 to 1990s, businesses were focused on vertical alignment and several companies were involved in process mapping and analysis to evaluate their operations. This was as a result of the firms realising the benefit of integrating functions such as product design and manufacturing with the introduction of various total quality management (TQM) philosophies of Deming, Juran, and Crosby, and ISO Standard for quality measurement. Supply chains has gone from the process of vertical integration where asset ownership was used in

controlling the various stages in the process of virtual integration in which alliances, agreement and partnership are the means through which organizations secure their supplies (Power, 2005). Although every supply chain has different challenges and different customer requirements, product types, schedules, organizational structure and business strategies; similarities exist in the approach which must be taken by supply chain leaders in their given situation. As a result of the increasing global competition in the 1990s, strategic alliances amongst organisations became the interest in order to align with companies processes. This growth was facilitated by advancement in information technology with design for assembly, synchronous manufacturing, and agile manufacturing becoming the order of the day in the manufacturing industry (Chandra and Kumar, 2000). Manufacturing has been the reference point in construction for many decades, and a source of a number of solutions or visions for relieving construction problems and a source of innovation in the construction industry. The trend in the manufacturing industry is based on a production philosophy which lays emphasis on the relevance of basic principles and principles (Koskela, 1992).

Just-in-time (JIT) production: JIT is a management philosophy which involves a pull system of production where only the right/required item/product is produced at the correct quality and quantity at the correct time and place (Cheng and Podoslky, 1993). The concept of JIT seeks to achieve a stockless production: minimising raw materials, components, work-inprogress and finished goods inventory with a view to cutting inventory costs through collaborative working or good communication with suppliers to ensure that production is initiated by actual demand rather than by plans based on forecasts (Vuppalapati et al., 1995; Cartlidge, 2004). JIT stresses the elimination of wait times in the production process in order for value to be added thus improving overall productivity (Voss, 1987), shorter construction periods and greater profits (Cartlidge, 2004, p. 51). The JIT approach makes the business process more simple and effective to operate with a higher degree of integration (Mortimer, 1986). Total Quality Management (TQM): This is an integrative management philosophy that views the organization as a collection of processes. TQM is an approach for continuously improving the quality of business processes/organizational functions (design, marketing, engineering, production, finance, customer service) and products to achieving customer satisfaction and meeting organizational objectives. TQM seeks to build quality into its products and

processes by improving the competiveness, effectiveness and flexibility of the entire organization irrespective of the type of organization [manufacturing or service, small or large, public or private (Vuppalapati et al., 1995)], it goes on to describe ways of managing people and business process/organizational functions to ensure customer needs are continuously met at every stage. TQM focuses strongly on the supply chain relationships which involves the customer (internal and external) and the supplier, with the conviction of achieving a zero defect work in the whole business process (Bank, 2000). Value Management (VM): This is generally regarded as problem solving technique used for defining and maximising value for money (Kelly et al., 2004; Cartlidge, 2006). Value based strategy refers to conceptualized and clearly articulated value as the basis for competing (Carothers & Adams 1991. The European standard describes VM as a style of management encompassing various management tools of which value analysis is but one. It is a service that maximise the functional value of project by managing its development from concept to use through the audit of all decisions against a value system determined by the client (Kelly et al., 2004). VM can be applied to any type of project regardless of size or timeframe and at all stages throughout the life cycle of the project from inception to completion.

Framework Agreements / Arrangement: Framework arrangements are flexible supplier agreements between parties where goods and services are obtained on the basis of pre-agreed terms and conditions, price and quality levels. They arrangements are increasingly being used in both the private and publics sectors. Framework arrangements are simply a promise and not guarantee of work (Cartlidge, 2004). Framework arrangements are used by some major clients to provide a pool of competent consultants, contractors and specialists for their construction projects. It provides opportunity for firms to provide specific goods or services on predetermined terms and conditions which remain valid during the lifetime of the agreements thus enjoying a long-term commercial relationship (Bennett and Peace, 2006). Within the UK the history of supply chain have gone through three phases which are summarised in table 2.1 below (Emmett and Crocker, 2006). Attributes Functional supply chains To the 1980s Responsive supply Adaptive supply chains chains The 2000s The 1990s

Integration focus

Over the wall Reactive/quick fixes Monopoly suppliers

Transactional Responsive Competition suppliers

Collaboration Decision/proactive in Joined-up network of enterprises

Customer focus

Customer can wait

Customers want it Customers want it now. soon. You will You will get it You will get it when we have it when you can send it want it

Organisation focus

Department fencing

and

ring Intra-enterprise internal involvement Assemble to order stock Centralised holding

Extended enterprise involvement

Product positioning

Make to stock Decentralised holding Stock then delivers

Make to order

stock Minimal stock holding Whatever is needed

Collect and cross dock ( transit handling with only hours of storage Command control ERP and Collaborative

Management Approach Technology focus

Hierarchical

Point solution

Web connected

Time focus for Weeks to months the business Performance focus Collaboration Response times Cost

Days to weeks

Real time

Cost and service

Revenue and profit

Low Static

Medium Medium

High levels Dynamics

Table 2.1: History of supply chain (Emmett and Crocker, 2006) The initial efforts included rudimentary process of mapping, displaying the flow of primary products and services to a few key market segments and customers. It expanded them to

reduce warehouse cost, the consolidation of facilities, and the introduction of third party organizations to perform some or all the logistical functions. However, the current economic downturn has provided evidence that supply chains (following the very common outsourcing strategy) are far from perfect. High cost for logistics and supply chain and inventories, unmet forecasts, stagnant or decreased revenues, unutilized capacity, profit warnings are some of the most important effects of a chain that was not able to adapt to the new level of activity. Hugos (2003) identified three steps to aligning supply chain and business strategy namely understanding customer requirements; develop supply chain capabilities to support the roles the company has chosen, the roles the company will play to serve customers and defining its core competencies. Early efforts concentrated on improving only the internal efficiency of an individual firm in the supply network. In todays business, organizations seek ways to change, redesign and reengineer towards specific markets and customer segment, thereby developing networks for sourcing raw materials, manufacturing products or creating services, storing and distributing the goods and ultimately delivering the products and services to customers and consumers. This effort is referred to as supply chain management.

2.3 Defining Supply chain Management (SCM) The concept of supply chain management (SCM) originated the Japanese automotive industry as part of a production system precisely from the supply system implemented by Toyota, where the first signs of SCM were perceptible in the JIT delivery system- which is a part of the organizations (Toyota) production system (Shingo, 1988) used to coordinate and manage its suppliers such that the supplies to the Toyota motor factory are just in the right - small amount and just on the right time. After its emergence the concept flourished in the entire manufacturing industry (Vrijhoef et al., 1999) and has resulted in an autonomous status of the concept in industrial management theory, and a distinct subject of scientific research (Bechtel et al., 1997), (Cooper et al. 1997). The basic of the concept is to reduce inventories and regulate suppliers interaction with the production lines more effectively. The concept of SCM has also been widely used by companies in other industries as a means of improving their ability level with the aim of being flexible and responsive to meet present and future changing market requirement (Gunasekaran et al., 2004).

SCM is widely used by companies to improve their ability level with the objective of being flexible and responsive to meet changing market requirements (Gunasekaran et al., 2004)

Although, since its birth SCM has evolved into a full range of disciplines that involves closer customer-supplier relationships According to Kannan and Tan (2005) SCM can be defined as the integration of suppliers and customers into the decision-making processes, focusing on the planning, implementation and control of the logistics operations to pull materials through the supply chain. Handfield and Nichols (1999) defined SCM as: The supply chain encompasses all activities associated with the flow and transformation of goods from raw materials (including extraction), through the end user, as well as information flows. Materials and information flows both up and down the supply chain In other words SCM can be defined as the integration of suppliers and customers into the decision-making processes, focusing on the planning, implementation and control of the logistics operations to pull materials through the supply chain (Kannan and Tan, 2005). The Council of Logistics Management (2000) defines SCM as a systemic coordination of the traditional business functions and tactics across these business functions within a particular organization and across businesses within the SC for the purposes of improving the long-term performance of the individual organizations and the SC as a whole. One definition of SCM is offered by La Londe (1998).as: the delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing through consumption. The various definitions which have been proposed indicate that SCM prescribes organizational restructuring, extended to the achievement of a company-wide collaborative culture. Lambert and cooper (2000) define SCM as the integration and management of key business processes and multiple relationships across the supply chain. Similarly, according to Lambert et al. (1998) SCM is defined as the integration of key business processes from end user through original suppliers that provides products, services and information and thus adding value for consumers/customers and other stakeholders.

SCM can further be described as a system formed by the cooperation and synchronization of supply chain members that have bonded together to solve common problems. This cooperation includes the sharing of common objectives, goals, policies, and financials as well

as forming commitments about issues such as capacity and production (Chandra & Kumar, 2001a). Research in SCM evolved along two separate paths that eventually merged into a common body of literature, with a primary focus on integration, customer satisfaction, and business results. The purchasing and supply perspective of SCM involves the previously disparate purchasing and supply management functions of the industrial buyers, whereas the transportation and logistics perspective evolves from the transportation and physical distribution functions of the retailers. A summary and discussion of the recent SCM literature can be found in Tan (2001).

Most of the recent SCM literature addresses the purchasing process, emphasizing that it is a basic strategic business process, instead of a supporting role to overall business strategy (Reck et al. 1992). Supply chain management is a philosophy that extends traditional internal activities by embracing an interenterprise scope, bringing trading partners together with the common goal of optimization and efficiency (Harwick 1997).

Scott and Westbrook (1991) and New and Payne (1995) described SCM as the chain linking each element of the manufacturing and supply process from raw materials through to the end users, and treating all firms within the supply chain as a unified virtual business entity. Baatz (1995) further expanded SCM to include recycling. The philosophy of SCM focuses on how firms utilize their suppliers processes, technology, and capability to enhance competitive advantage (Farley 1997), and the coordination of the manufacturing, logistics, materials, distribution, and transportation functions within an organization (Lee and Billington 1992). In an attempt to trace its development, Tan (2001) classified the SCM literature into two perspectives, that is, the purchasing perspective of the manufacturers and the logistics perspective of the merchants. Simchi- Levi et al. (2000), went on to describe SCM as a set of approaches which are utilised to ensure that the suppliers, manufacturers, warehouses or stores are effectively integrated and managed such that the end product is produced and distributed at the correct quantities, to the correct locations and time, thus minimizing the entire cost of the system while satisfying service level requirements which includes the customer satisfaction. Therefore, the concept of SCM is about getting the right things to the right places at the right times for maximum

profit. This description is not far from the opinion of Kaufman (1997, p. 14) which describes the purpose of SCM as to being to . . . remove communication barriers and eliminate redundancies through coordinating, monitoring and controlling processes. In this light, Cooper and Ellram (1993) concluded that SCM looks across the entire supply chain rather than just at the next entity or level, and aims to increase transparency and alignment of the supply chains coordination and configuration, regardless of functional or corporate boundaries.

Figure 2.4: Supply chain main components, (Robinson and Malhotra, 2005)

Researchers realized the importance of incorporating SCM in the overall business planning process when SCM research merged into a common body of knowledge that encompassed all of the value-adding activities. Although it we not widely practiced according to Carter and Narasimhan (1994).It was also discovered by Ellram and Pearson (1994) that the primary function of purchasing remained a clerical role of negotiating prices/items despite the increased emphasis of integrating purchasing into overall corporate strategy. The concept of SCM was just simply a different way of competing in the market that falls between transactional-type relationships and acquisition, and assumes a variety of economic organizational forms (Ellram, 1991).

A predominant approach to SCM research as identified by Leenders et al. (2002) is the socalled supply management, which emphasizes primarily the buyer-supplier relationship within the process. The management of relationships with other members of the supply chain (i.e. buyersuppler relationship) is increasingly being referred to as SCM since the suppliers have a profound and direct impact on cost, quality, time and responsiveness of the buying firms (Chen and Paulraj, 2004).

Though, the literature on SCM has constantly laid emphasis on the importance of effective two-way communication to the above relationship (i.e. buyersuppler relationship). The concept of SCM has been criticized. Tompkins and Jernigan (1997) suggested that it should be replaced by demand your leadership which connotes a pull approach to product flow for better customer service (`demands); a more continuous movement and integrated approach (`flows); and teamwork, co-operation and dynamism (`leaderships).

Figure 2.5: Generic configuration of a supply chain in manufacturing (Vrijhoef et al., 1999) Since the emergence of SCM, it was noticed according to Akintoye et al. (2000) that several definitions conceptualized in different perspectives. Some researchers focused on the total material flows [Oliver and Webber (1992), Jones et al. (1997), Akintoye et al. (2000)]. In this view the concept of SCM was defined as "the network of organizations that are involved, through upstream and downstream linkages, in different processes and activities that produce value in the form of products and services in the hands of the ultimate customer" [Christopher (1992)]. A further opinion is that of Johnston (1995) who saw SCM as an effective strategy through "managing the movement and storage of materials, parts and finished inventory from the suppliers, through the firm and to the customers." While Thomas and Griffin (1996), Dainty et al. (2001) treated SCM as a set of logistic management strategies, covering the transportation of materials and the management of informations along the production line of the organization/company. Similar view was the definition given by Ho et al. (2002) which

defined SCM as the management of materials, products and information flows from source to end-users. Supply chain management is somehow different from the traditional concept of logistic or operational management. The latter is associated or places emphasis on the activities a particular organisation must perform when managing its own operations while the former goes beyond the particulars companys boundaries into understanding how the company is linked in with the operations of its suppliers, distributors, and customers (Bozarth and Handfield, 2008 and Hugos, 2006). Operations Management is about the transformation operations that take place within an organisation to produce goods and services for the customers. The SCM philosophy was noted to have some key themes which were identified by McGeorge and Palmer (2002) as: Improved customer value and reduction of costs Strategic management of the chain of relationships Synchronisation of information, product and funds flow, and Competitiveness, market forces and innovation.

Supply chain management has shifted the emphasis from internal structure to external linkages and processes, it is a philosophy that embraces an inter-enterprise scope which brings trading partners (buyer and supplier) together with the common goal of optimization and efficiency by so doing it extends traditional internal activities of organizations (Harwick,1997). Thus, it is dependent on the interaction between the organisation and its external environment, with strong feedback linkages and collective learning. This view seems to be supported by the definition given by Charles Poirier (1999) who defined SCM as the means by which firms engaged in creating, distributing, and selling products can join forces to establish a supply network with unbeatable competitive advantage. The short-term

objective of SCM as identified by Tan (2001) is to increase productivity and reduce inventory and cycle time, while the long-term strategic goal is to increase customer satisfaction, market share, and profits for all members of the virtual organization. Probably these objectives could be the reason for which SCM is growing in popularity as a source of competitive advantage as noted Burgess (1998).

Table 2.2: Characteristic differences between traditional ways of managing the supply chain and SCM, see (Cooper et al., 1993) mentioned in (Vrijhoef et al., 1999).

The success of adopting the SCM philosophy is associated with the challenging and difficult development of a new culture based on long-term and closer intra- and inter-organisational relationships, mutual competitive advantage, shared learning, greater transparency and trust. The manufacturing industry can be said to achieved increased productivity and reduce costs through the adoption of supply chain improvement measures like collaboration, partnering and integration within the supply chain. These supply chain measures are complex, dynamic and long process, which involves actors from within and between organisations. However, one of such measures is the adoption of what is called lean production by automobile industry. Lean Production is the generic version of the Toyota Production

System, recognised as the most efficient production system in the world today (Egan, 1998). It is about using less of everything compared with mass production-half the human effort, half the manufacturing space, and half the engineering hours to develop a new product in half the time by the removal of the non-value adding activities with the supply chain (Egan, 1998 and Cartlidge, 2006). The SCM concept is an outcome of an evolutionary and cumulative process, which started with other innovations such as JIT and TQM. It is a multi-factor process, which involves different functions, stakeholders and variables, and a whole sequence of events. For this research a most straightforward definition of SCM from OBrien and Fischer (1993) is adopted, which defines SCM as the system where suppliers, contractors and

clients/architects work together under the coordination of the main contractor to produce, deliver, install and utilize information, materials, plant, temporary works, equipment and labour and other resources for construction projects.

2.4 Construction Supply Chain The key players of the construction industry are shown in the figure below to illustrate the complexity of the sector.

Figure 2.6: Stakeholders of the construction and built environment (Courtney, 1999)

Like every other industry the construction supply chains end with the customer. Upstream sits any involved engineering, construction, or professional services firms. These organizations fill all the planning, engineering, and project management functions of the project. From here, the respective material, labor, and equipment supply is sourced. This construction supply chain is illustrated in figure below;

Figure 2.7: The myriad of construction supply chains (Cox and Ireland, 2002).

As a result of the variety of products, buildings, sizes and technologies used in the construction industry, there tend to be no such thing as a typical supply chain (Akintoye et al., 2000). Thus, there is no doubt that within a construction supply chain there are several supply chains, each one with different properties and circumstances. However, figure 8 exemplifies some of the most important elements. Love at. Al. (2000) suggested that each organization in the construction industry that are involved with a project is both a customer and a supplier hence consideration tends to be given by both parties involved as to how each can add value throughout the supply chain. Figure 9 below shows this suggestion. From the research carried out by Cherns and Bryant (1984) it is expected that construction supply

chains only exist for the duration of a project. However, where maintenance services are agreed as part of the contract, the supply chain can theoretically remain in existence for the life of the building (Reed, 1999). Construction supply chains on larger projects is usually expected to involve hundreds of different companies supplying materials, components and a wide range of construction services (Dainty et al., 2001). The continued reliance on a fragmented and largely subcontracted workforce has arguably increased the complexity of the construction supply network.

Figure 2.8: A typical construction supply network [Briscoe, Dainty and Millet, (2001)]

Vrijhoef and Koskela, (2000) agreed that a typical construction supply chain involves the flow of both information and materials. This concept was widen by Cox and Ireland (2002), they included material supply chains, labour supply chains and equipment supply chains as additional components of construction supply chains. This view happens to also be in line with the three types of construction supply chains which are categorised according to Muya et al. (1999), they are: the primary supply chain, the support chain and the human resource supply chain. The primary supply chain delivers the materials that are incorporated into the final construction product, for example, raw materials, components, sub assemblies and mechanical and electrical equipment. The support chain involves providing or acquiring the required equipment, expertise and materials that facilitate construction, such as framework, excavation supports, scaffolding, temporary works related to operation of equipment, site access. While the human resource supply chain has to do with supply of labour and the supervisory staff as inputs to the construction process (Hatmoko and Scott, 2010).

The main types of suppliers in the construction supply chain can be classified into materials, labour, equipment or machinery and professional services (Cox and Ireland, 2002). The role of contractors is usually the integration of all the actors mentioned. Both the supplier and contractor are selected through bidding and typically based on lowest cost, given adequate capability and experience. In order for the construction supply chains to be clearly understood there are two main factors that are put into consideration namely the behaviour of construction firms within markets and the behaviour of individual supply chains (operational aspects) (O'Brian et al., 2002).

Figure 2.9: Customer supplier interface in construction project supply chain (Love, Irani and Eswards, 2004) Construction runs on a project by project basis where each is unique in scope and design. Suppliers and customers are quite frequently changing and relationships with the constructor need to be re-developed. As a result the construction industry market is often described as fragmented and highly adversarial (Boardman, 2004). According to Cox and Ireland (2002) construction supply chains have remained contested, fragmented and highly adversarial because of the conflicting nature of demand and supply. There are a number of sourcing options along with complicated structures of power within the different markets. Construction is purchased or procured through construction contracts. Another important aspect of construction supply chain is the process of materials management. There are four main phases of the material life cycle according to Hagin (1998) which comprises of; order, approval process, fabrication and delivery process and the installation process. There are two most widely used formats of contracts in construction; they are the competitively bid contracts and negotiated contracts. The competitively bid

contracts yield low and competitive prices thus they are utilised the most. This form of contracts has two main types namely the lump sum contract and the unit price- contract. The construction sector is characterised by traditional trading and non-cooperative relationships which result in a non-trusting climate and aggressive business mentality (Vrijhoef and Koskela, 1999), generating more focus on the clients than on the suppliers (Akintoye et al., 2000). There are large amount of suppliers comprising mainly of SMEs with less than 20 employees (Courtney, 1999; Sjostrom and Bakens, 1999). In few cases, the customer appoints the contractor and some of the suppliers for a particular construction project (Akintoye et al., 2000). (Cutting-Decelle et al, pg. 79, 2007). Suggested that in a systemic approach, supply chain can also be considered as a network of systems, sub-systems, operations, activities, and their relationships, where the members of the chain are: suppliers, transporters, manufacturing plants, distribution centers, retailers and construction co- and sub-contractors. While in terms of structure and function, for Vrijhoef et al., the construction supply chain is characterised by the following elements (Vrijhoef et al., 2000): It is a converging supply chain directing all materials to the construction site where the object is assembled from incoming materials. The construction factory is set up around the single product, in contrast to manufacturing systems where multiple products pass through the factory, and are distributed to many customers. It is, apart from rare exceptions, a temporary supply chain producing one-of construction projects through repeated reconfiguration of project organisations. As a result, the construction supply chain is typified by instability, fragmentation, and especially by the separation between the design and the construction of the built object. It is a typical make-to-order supply chain, with every project creating a new product or prototype. There is little repetition, again with minor exceptions. The process can be very similar, however, for projects of a particular kind. These characteristics have an impact on the management of supply chains.

Figure 2.10: Supply chain data acquisition process in construction (adapted from Spekman et al. (1998) An empirical investigation into supply chain management: a perspective on partnerships).

2.5 Supply Chain Management (SCM) Practice in the UK Construction Industry The industry comprises of more than 270,000 active enterprises [Ev 117, para 4 and Ev 133, Annex F (BERR)] and it accounts for more than 10% of the UKs GDP and 12% of total employment, notwithstanding the relevant role of the construction sector within the UK economy the sector is not well protected against downturns in the business cycle. The UK construction industry is said to be highly fragmented (separation between the design process and production, the standard contracting system and the informal nature of many of its management practices) by international standards, and in comparison to other domestic sectors. These characteristics of the industry are widely suggested to have together restricted large-scale innovation, technological and organizational advances and have also acted as a potential barrier to investment in the construction sector. Thus creating the basis of conflicting relations between contracting parties which in turn leads to problematic issues such as time overrun, quality and productivity problems, lack of motivated staff and failure to attract and retain skilled staff (Miozzo and Ivory, 2000).

Table 2.3: Construction output in Great Britain in 2006 (BERR, Construction Statistics Annual 2007, Table 2.1, August 2007)

The construction industry has been undergoing a gradual process of reform since the recessionary phase experienced between 1990 and 1995 by the UK construction industry. This led to various drives to reform the working practices and attitudes across the sector. The reform process resulted into innovative and new arrangement of supply chain partners (McDermott et al. 2004) in the construction sector, was provided by the influential government supported reports (Latham 1994) and Egan (1998, 2002). . The first effort of reform practices across the sector came with the publication of Sir Michael Lathams influential Constructing the Team report in 1994 with its main recommendation that that the client should be at the core of the construction process and that the route to achieving client satisfaction was through team work and co-operation (National Audit Office, Modernising Construction, HC 87, January 2001; Foreword written by Sir Michael Latham). The Egan Report proposed that continuous service and product improvement and company profitability can only be achieved through innovation. The report also promotes the adoption of practices such as consensus, teamwork, improved quality,customer focus and supply chain integration in construction projects.

Both Latham and Egan reviews called for a radical new approach to be adopted by the construction industry which helped different organisations within the industry to come up

with innovative ways of procurement- one in which client leadership is key, there is greater collaborative working / partnership in the entire construction supply chain and a fully skilled work force. Thus far there has been progress on all these fronts as well as the progression towards the adoption of the principles associated with SCM. As a result of the Egan Report (1998), the Movement for Innovation (M4I) came into existence, the UK Government Construction Clients Panel responded with a report of laid down targets for the number of projects that were to be procured using integrated supply chain and partnering known as Achieving Excellence (HM Treasury, 1999). Though the industry and its clients had positive response to the Egan Report Rethinking Construction, the progress was slow and patchy. The National Audit Office also followed on the trend of innovation in the construction sector by identifying new procurement routes based on partnering approaches as a key tool in ensuring that better public projects are delivered (NAO Report, 2001). Following this report was a data that suggests innovative procurement approaches, which tend to encourage partnering and supply chain integration, had a demonstrable benefit within the public sector (NAO Report, 2005). According to the Specialist Engineering Contractors Group, [Ev 327, para A.1.7] the partnering and team-working arrangements have often appeared to be skin deep or have excluded the supply chain. This call for change in working practice within the UK construction industry from the traditional way of procurement to the new and innovative methods have already started realising the potential benefits (McDermott et al. 2004). It is reported that the awareness of the strategic importance of supply chain management is high within the industry according to the construction Best Practice Programme (CBPP). However, the implementation is low thus the sector tends to be lagging behind compared with more advanced sectors. The adoption of SCM relationships started in parts of the industry in the early 1990s with increasing informed private-sector clients attempting to both increase the degree of collaboration that exists between their preferred consultants and contractors and to extend this approach downstream to include key subcontractors and suppliers (Saad and James, 2002).

Most companies in the UK are constantly working to improve their supply chain risk management processes and procedures as there are increasing evidences that supply chain improvement measures like partnering, integrated team working, {PPP (Public Private Partnership) /PFI (Private Finance Initiative)} and other supply chain collaborative techniques is gaining momentum in the UK construction sector. For instance, Some publicsector clients like the Defence Estates, an agency of the UKs Ministry of Defence are also

leading the way in building the purchaser-supplier relationships associated with SCM, by adopting Prime Contracting which includes many of the key elements of partnering, TQM and SCM with the objective of promoting collaboration through leadership, facilitation, training and incentives, and replace short-term contractually driven project-by-project adversarial relationships with long-term, multiple-project relationships which includes restructuring and integration of project processes and supply networks with fewer strategic supplier partners based on trust and co-operation (Saad and James, 2002). ). Incorporated also in these relationships are targets by the agency to carryout continuous improvements in order to achieve costs reductuion, improved quality and focus on the whole-life cost and functional performance of buildings (Holti et al., 1999). Another example of the adoption and implementation of supply chain management innovative techniques in the industry is that of BAAs Heathrow Terminal 5s Mechanical and Electrical (M&E) Buy Club which ushered in a new era of openness, collaboration and striving for world class results (Bennett and Sarah, 2006; Construction Excellence, 2004). When fully developed by 2011, T5 will handle 30 million passengers annually, compared to the present 65 million dealt with by Terminals 1, 2, 3 and 4.The first phase of value 4.2bn, to be completed by 2008(Construction Excellence, 2004, p. 5) Partnerships UK (2006) report assert that by October 2005, agreements for 700 PFI projects have been signed by central and local government across a wide range of sectors of which about 450 these projects were said to be operational. Another similar project is National Health Services (NHS) ProCure 21 partnering programme with construction industry initiated in 2001 to promote better capital procurement through the development of long-term framework agreements with the private sector, which will continuously maximise the benefits of supply chain management (Cartlidge, 2006). Regardless of this positive trend, some organisation are just beginning the journey of process improvement, while others feel they have the matter well in hand and though still reluctant to embark on the partnering and integrated teaming working route (Thomas and Thomas, 2005).

Client

Supply Chain Level Tier 0

Main Contactors (MC)

Tier 1

Main Subcontractor (MSC)

Subcontractors
Tier 2

Suppliers

Suppliers

Suppliers

Suppliers

Suppliers

e.g. supplying raw materials, plant hire, paints, cements, bolts, drainage pipes, site fencing etc

Figure 2.11: An adapted UK construction industry supply chain (culled from Beach et al., 2005, p. 612).

2.5.1 Partnership within the supply chain and Construction Integrated Teamworking Partnering is normally regarded as a strategic arrangement that involves engaging the services of a contractor in a series of projects with the primary aim of achieving cost reduction and improving efficiency, or can be a short-term single project arrangement (Harris and McCaffer, 2001). In this light, Campbell (2002) suggested a change in management

techniques towards greater supply chain orientation and greater information connectivity. Pearson (1999) reported a few UK clients (BAA, the Ministry of Defence and Tesco) and contractors (Balfour Beatty and Tarmac) implementing the SCM approach. The firms have mainly accomplished drastic reduction in their supplier base (e.g. by over 75% in Balfour Beatty over two years); established and maintained integrated relationships with suppliers; solved problems by applying a co-operative approach which was inculcated through organised training programmes and developed systems for rating suppliers` performance on quality, speed and price. According to Reed, (1999); Himes, (1995) partnering is

recommended as having the potential to enhance problem solving and to improve knowledge of the process by the participants. Barlow et al., (1997) gave good examples of clientcontractor partnerships that have led to considerable improvements under each of these performance measures. Partnering have been embraced by a significant number of larger construction organisations, it is often identified as the preferred mechanism for delivering value. Evidence by Akintoye et al. (2000) confirmed a growing trend towards partnering arrangements though the main focus of these arrangements were on the client-contractor linkages rather than extending down the chain to subcontractors and suppliers. Though this may be as a result of the industrys highly fragmented nature; It restricts opportunities for the complete integration of processes in the entire delivery chain; this may also explain the apparent inability to accelerate its rate of performance improvement (Strategic Forum for Construction, 2002). This goes to confirm the criticism of that construction partnering for being a rather loosely defined term that actually masks a multifaceted practice (Bresnen and Marshall, 2000). Bresnen and Marshall (1999) noted in their research carried out on case studies of client/contactor collaborations in the UK that on some projects involving partnership/ alliance there was often cases of mistrust and conflict, with `the continued use of quasi competitive mechanisms and the retention of systems of controls (p. 177).

An integrated supply team includes the clients, as well as those involved in the delivery process who are pivotal in providing solutions that will meets client requirements. The set target for this initiative was 20% of construction projects (by value) should be undertaken by integrated teams and supply chains by end of 2004, rising to 50% by end of 2007 (Strategic Forum for Construction, 2002). It comments further that Integrated teams made up of existing integrated supply chains, which once successfully formed are kept together and move from one project to the next taking their experience and a culture of continuous improvement with themand strong clients/customer integrated teams that work proactively amongst other things to drive out waste during planning, construction, maintenance, refurbishment and operation. Integrated Teamworking forms one of the basic recommendations of the two government sponsored reports into UK construction Latham (1994) and Egan (1998). The later report (Egan, 1998) stressed on the necessity for the construction industry to integrate its processes and products to ensure that better value can be delivered to the client. This approach would

involve clients, designers, main contractors and subcontractors working together as a unified team, rather than as a disparate collection of separate organisations (Briscoe and Dainty, 2005). Integration in the construction supply chain has been the focus of a number of earlier investigations. For example Murray et al. (1999) was of the opinion that long-term strategic partnerships was the key to integration and they went further to demonstrate how such relationships could overcome the temporary nature of one-off projects and so provide a measure of continuity in the supply chain. Graham and Hardaker (1998) echoed on the necessity of managing relationships at all levels in the supply network and to build longer-term trust as a basis for partnering. OBrian (1997) and Green and Lenard (1999) stressed the importance of good communication and information sharing between the various stakeholders to the construction contract was regarded as a key component of partnership. The recommendations of these researches conform with the emphasis put forward by Lathan (1994) which trust as a prerequisite for performance improvement within the construction industry. Some recent evidences suggest that there are still opportunities for improving integration practices. The studies carried out by Chiderhouse et al. (2003) shows clearly how the UK housebuilding sector is responding late in the day to the compelling need for change, is capable of developing its supply chain to embrace the principles of integration despite starting its business process re-engineering from a relatively poor baseline. Correspondingly, Humpphreys et al. (2003) describe a new approach by a main contractor to establish qualified partnering with subcontractors that yields gains to all the agents in the supply network and produces significant improvement in collaborative working (Briscoe and Dainty, 2005).

2.6 Barriers to Supply chain Management (SCM) in the Construction Industry Much research work and real test cases analysis have assessed that construction is ineffective and many problems can be observed. Most of the scholars or experts on supply chain management are of the opinion that the main barrier or problem for effective collaborative supply chain working in the UK construction is the organisational cultural working practice (Briscoe, 2005; Wood and Ellis, 2005; DTI, 2006; Cartlidge, 2006; Bennett and Peace, 2006). Analysis of these problems has shown that a major part of them are supply chain problems, originating at the interfaces of different parties or functions, that is, the traditional adversarial or as Critchlow (1998) said the intrinsically flawed that permeate the supply chain

participants

right

from

upstream

(clients/main

contractors)

and

downstream

(subcontractors/suppliers) within the UK construction industry. This was further emphasised by Baiden et al (2006); This fragmented approach to project procurement and product delivery process frequently lead to project team being characterised by adversarial relationships, a lack of transparency and mistrust. This, in turn, often results in a blame culture whereby the various team members seek to minimise their level of exposure to poor performance, rather than working together in a spirit of trust, cooperation and collaboration (p.14). Vrijhoef et al., (2001) in his research mentioned some of the supply chain problems, originating at the interfaces of different parties or functions as: Client/design interface: difficulties in finding out clients wishes, changes of clients wishes, long procedures to discuss changes. Design/engineering interface: incorrect documents, design changes, extended wait for architects approval or design changes Engineering/purchasing & preparation interface: inaccurate data, engineering drawings not fitting the use, Purchasing & preparation/suppliers interface and purchase &

preparation/subcontractors interface: inaccurate data, information needs not met, adversarial bargaining and other changes, Suppliers/subcontractors interface and suppliers/site interface: deliveries not in conformance with planning, wrong and defective deliveries, long storage period, awkward packing, large shipments, Subcontractors/site interface: subcontracted work not delivered according to main design, contract and planning, Site/completion of building interface: problematic completion due to quality problems, Completion of building/occupation interface: unresolved quality problems, delayed occupation due to late completion, Purchasing & preparation/site interface: inaccurate data, information needs not met, unrealistic planning.

Figure 2.12: Generic problems in the construction process (based on Vrijhoef 1998)

In the research of Vrijhoef et al.,( 2001) it is noticed that most generic problems in the construction supply chain problems had to do mostly with communication issues (either described in terms of data, or more generally in terms of information handled during the exchanges). The high cost of bidding [includes financial cost, time spent by senior managers in establish the approach, select the team and training and partnering workshops (Bennett and Peace, 2006)] has also being identified as a barrier to effective collaborative working amongst players in the UK construction supply chain (RIBA, 2005; Dixon, 2005; Bennett and Peace, 2006; Cartlidge, 2006). Akintoye et al. (2000) identified six major barriers to manage contracting relationships in UK construction projects. It was found that the most critical barriers were, the 'lack of top management commitment' and 'poor understanding of the SCM concepts'. It was also found that 'unfair risks and benefits allocation' and the 'adoption of the traditional contractual approaches' were one of the major obstacles to embrace subcontractors into supply chain of the main contractor (Dainty et al. 2001). In addition, studies carried out by Neuman & Samuels (1996) it was found that insufficient supplier resources in terms of information systems, employee skills, and organizational resources may also hamper SCM efforts in construction. This is because integration can be resource intensive). In such cases, some assistance may be given by the focal organization.

The weak links in SCM according to Palaneeswaran et al are as follows: Adversarial relationships between clients and contractors; Inadequate recognition of the sharing of risks and benefits; Fragmented approaches; Narrow minded win/lose attitudes and short-term focus; Power domination and frequent contractual non-commitments resulting in adverse performance track records with poor quality, conflicts, disputes, and claims; Prime focus on bid prices (with inadequate focus on life-cycle costs and ultimate value); Less transparency coupled with inadequate information exchanges and limited communications; Minimal or no direct interactions that foster sustainable long-term relationships.

Other obstacles to achieving supply chain coordination were identified by Chopra et al. (2001) which could also be used to highlight some of the necessary organizational components required in an integrated supply chain. The five types of obstacles were according to Chopra et al. (2001) includes: Incentive Obstacles: Incentives offered to different stages of the supply chain that serve to reduce supply chain effectiveness. Information Processing Obstacles: Distortion to the movement of information in the different parts of the supply chain. Operational Obstacles: Actions that may lead to variations in the supply chain for example placing orders in large lots, gaming, and irregular replenishment lead-times. Behavioral Obstacles: These are obstacles such as managing locally, blaming others in supply chain for problems, and optimistic behavior also cause integration difficulties.

2.7 Conclusion SCM is probably the latest procurement and logistics philosophy being adopted. It deals with overall business process excellence and the management of a network of organisations (members) that are involved in carrying out the business process (Harland, 1996). Although

it is currently in its developing stage for construction industry, its application in the sector is widely reported [Lambert et al. (1996), O'Brien et al. (2002)]. The innovations on

construction SCM are still in the embryonic stage hence many difficulties and barriers ought to be overcome (Cox and Townsend, 1998). Consequently it is essential that the construction industry develops its supply chain practices such that value is delivered to the client, (Lockamy and Smith, 1997). Mechanisms by which values are delivered which have been embraced by most large organisation in the construction industry are identified as partnering and similar procurement approaches (Pocock et.al, 1997). SCM is seen as a multi-factor innovation to overcome the fragmentation and adversarial culture of the construction industry. The current SCM concepts encompasses both the design of material flow within the production process and a strategic framework for the design of logistic and information management, with the aim to improve its relationships, coordinate and better integrate a network of organizations along its production line (Chen and Paulraj (2004) as well as the entire construction process.The focus of SCM in construction is on the early establishment of a fully integrated client-supplier project team.

CHAPTER 3 FIRST POINT ASSESSMENT LIMITED (FPAL) SYSTEM 3.1 Introduction After the economic crises in the 1990s the oil and gas industry also followed the trend in initiating response measures in order to cope with the difficult trading conditions that were enhanced by World economic slump, inflation, increased competition and globalisation as at that time. Example of such initiatives was referred to as the Cost Reduction Initiative for New Era (CRINE) (Egan, 1998; Roe and Jenkins, 2003; Cartlidge, 2004). The objective was to achieve a reduced development and production costs of 30% across the industry. The result was unexpected with emergence of a network of innovative individuals committed to ongoing improvement and reduction of the cost of oil and gas developments by 40% as reported by Egan (1998). The strategy of the initiative was based on the philosophy of adopting some measures like standardisation of design, procurement and construction and rationalisation of certification procedures (Roe and Jenkins, 2003). In order to for the objectives of the initiative to be achieved practices such as alliancing, partnering, integrated project teams, long-term contracting were identified as been instrumental (Roe and Jenkins, 2003; Cartlidge, 2004). Another of such initiatives introduced within the oil and gas industry along with other forms of innovation was the commissioning of First Point Assessment Limited (FPAL) in late 1996. FPAL is the oil and gas supply chain database for the UK, Netherlands and Ireland, and is one of a range of supplier management services provided by Achilles Information Limited. It is governed by an industry-based steering committee which includes representatives from oil majors, (mainly contractors and suppliers) and it is operated as a qualification system under Article 30 of the EC Utility Directives. The FPAL evolution began with the collaboration of a number of oil & gas organisations to create the supplier database, with individual schemes for buyer and supplier communities across a diverse range of industry sectors throughout the world. The objective was to replace in-house vendor approved lists with the FPAL system to be shared by all purchasers in the oil & gas industry. It was hope that the system would unite the industry and help organizations involved to achieve cost and time savings. The FPAL system offers a number of industry solutions to facilitate efficiencies in the supply chain and is

currently subscribed by over 80 purchasing organizations and 2500 suppliers to identify and select current and potential suppliers when awarding contracts or purchase orders. The FPAL system provides a structured way of identifying and selecting the best potential suppliers and contractors by so doing eliminating the need to maintain your own in-house supplier database. The system increases supply chain efficiencies by reducing administrative aspect in the pre-qualification process. Suppliers in the oil and gas sector are obligated to sign up in the database and provide their company information. The performance history and audit information along with the companys information are held within the FPAL database and accessed by the operators and contractors (suppliers). FPAL serves as the direct route to business in the industry and manage risk in the supply chain. FPAL strives to identify, qualify, evaluate and monitor suppliers on behalf of registered major organisations (members) worldwide, the services includes supplier identification, pre-qualification, a unique total supplier management solution, performance feedback, auditing, benchmarking, and document control. Currently FPAL is recognised as the standard approach to supplier pre-qualification within the UK, Dutch & Irish Oil & Gas Sector. The system is an off the shelf supply chain management tool based on industry best practice which matches the needs of its subscribed purchasing organisations with the capabilities of pre-approved suppliers. Consequently, it helps to streamline the tender process by fast tracking suppliers through any required pre-qualification. It equally forms a basis for understanding and recording actual performance thereby facilitating continuous

improvement. Thus, it builds and supports buyer-supplier communities in the industry creating an effective supply chain network (http://www.energy-focus.com;

http://www.fpal.com; McLennan, 2008). Other features of FPAL are to remove duplication, offer complete, validated and up-to-date supplier information and documentation, speeding up procurement cycles. The main purpose of FPAL is to operate as a neutral industry steered organisation, facilitating efficiencies in the oil & gas supply chain by being the channels for its three fundamental roles namely (http://www.fpal.com);

Collaborative Role- FPAL enables buying and supplying communities to build better relationships through a more open, trusting and proactive approach. Sharing knowledge, standards and expectations leads to buyers and suppliers sharing success. Neutral Role - FPAL continues to offer an impartial and transparent approach meaning objectives are shared, expectations are raised and standards are higher all round. This results in all parties benefiting from better opportunities and lasting business relationships. Insightful Role - FPAL enables buyers and suppliers to connect, and benefit from valuable knowledge and foresight relevant to their market. The main drivers of the FPAL system are: To Increase Supply Chain efficiency Operator Compliance with EC Utilities (Supply Chain Code of Practice) Procurement Directives Others include Reduced administration in Pre-Qualification process Improve flow of information Sharing of audit and assessment costs Open & transparent method of Call For Competition An ethical way of doing business Corporate Responsibility (to be added soon) The benefit of registering with FPAL to suppliers and purchasers includes the following: FPAL applies an industry standard approach that promotes consistency and openness in the procurement process thus complimenting the purchasing organizations corporate responsibility standards and offers a fair way of selecting and managing suppliers. Helps the suppliers meet customer satisfaction monitoring and continual improvement aspects of the ISO9001standard. FPAL assists in reducing effort in repetitive pre-qualification and evaluation of suppliers and provides a cost-effective mechanism for reducing tendering lead times by using much more concise pre-qualification documentation.

 FPAL secures cost and time savings for its members (both purchasers and suppliers) by eliminating duplication. FPAL provides its registered suppliers the opportunity to present credentials and work with 70+ purchasing companies and also benefits from FPALs processes such as Performance Feedback, Capability Assessment, Verify and Notice. FPAL improves business and supply chain performance through a performance feedback process. Consequently, it also measures business improvements using benchmarking techniques. Profiles and benchmarking information can be used as an effective business improvement tool by the supplier. Consequently, suppliers can use the profiles for marketing. Provides an objective track record of supplier performance which can be used by the purchaser to manage supply chain responsibilities; it can also be used as filtering to differentiate various suppliers. Reverse feedback from suppliers encourages more cost-effective procurement for the purchaser. Purchasing organisations using FPAL can award contracts more swiftly as they are no longer required to publish individual calls for competition in the OJEU. (http://www.energy-focus.com; http://www.fpal.com, McLennan, 2008) 3.2 FPAL Processes/Services: The FPAL system comprises of the following process/services- Registration, Performance Feedback, Capability Assessment, Verify and TechWeb (http://www.energy-focus.com; http://www.fpal.com, McLennan, 2008). The assessment is carried out by both suppliers and purchasers. 3.2.1 Registration: FPAL pre-qualifies prospective suppliers and contractors. They are invited for registration by completing an online questionnaire where important datas are gathered from suppliers, checked for accuracy and currency, thus creating supplier capability profiles which are then made available online for purchasers. Informations collected from the suppliers includes health, safety and environment policy, financial performance data, products and services data. By so doing, FPAL registered Oil and Gas organisations will gain access and utilize the FPAL system for identifying potential suppliers that meet their

requirements in a fair and consistent manner, as well as managing information on their existing suppliers. 3.2.2 Performance Feedback: Purchasers (clients) and suppliers (contractors) use this Performance feedback as a tool to carry out performance assessment during or following work execution. It comprises of the supplier performance and purchaser performance. Performance Feedback forms a key part of the Supply Chain Code of Practice that are recorded in a Report format and completed at intervals agreed between the two parties. The performance of the supplier is scored a maximum of 15 elements with the quantified results expressed as a company based graphic profile; where the profiles can be analysed by product/service line, work size and time. The reports are inputs into a suppliers registration, which are displayed graphically showing an objective assessment of the levels of performance achieved across the range of elements. The performance feedback measures how well purchasers supports suppliers through a contract. It is a tool that can be used by both suppliers and purchaser as a business improvement tool by benchmarking their performance against their peers or competitors without divulging individual company performance. 3.2.3 Capability Assessments: FPAL carries out an in-depth assessment of supplier capability through the supplier responses in a Capability Profiling Questionnaire (CPQ). By so doing they are able to quantify the existing core competencies as well as key areas of improvement of the company. On completion of this process the need for repetitive and generic pre-qualification activity within the oil & gas industry is completely removed. This in turn saves valuable time and money for the business. It is designed to represent a company's capabilities and to allow clients to decide themselves on what is an acceptable standard for the work being considered.

Product Quality

Service Quality Project Mgt Documentation Supplier Mgt. Planning &Delivery Installation & Commissioning Health & Safety Environment Skill, competence & Training Innovation & improvements

Poor

Mediocre

Adequate

Good

Excellent

10

Maximum score within group

Suppliers position within group

Average score of group Minimum score within group

Figure 3.2: Suppliers benchmarked Capability Profile, adapted from McLennan, 2008. 3.2.4 Verify: This is a supplier assessment service that involves a verification visit and appraisal process that focuses on the suppliers Health, Safety and Environmental practices in alignment with the oil and gas industrys standards. This process eradicates the need for costly and repetitive client assessments, thereby eliminating duplication of effort and

information gathering across the industry. The results achieved as result of the visit and appraisal along with the individual supplier improvement plans are made accessible via the FPAL database for registered purchasers who participated in the Verify Scheme.

CHAPTER 4: EXPLORING THE BENEFIT OF APPLYING THE FPAL SYSTEM IN THE CONSTRUCTION INDUSTRY SUPPLY CHAIN 4.1 Overview The construction industry plays a core role in the growth of other sectors as a result of its heavy reliance on an extended and varied supply chain. Thus lots of construction clients invest large resources, income and efforts in SCM applications/systems as the key to increase their competitive advantage, improving their overall supply chain efficiency, enhance the transparency, sharing and trust of their supply chains (Chun-Chin Wei and Liang-Tu Chen, 2008). The manufacturing industry has been able to save hundreds of millions of dollars through adopting and applying supply chain techniques whilst improving customer service (Arntzen, et. al, 1995). On the other hand, limited studies in construction suggest that construction project cost increases by ten percent on a regular basis as a result of poorly designed supply chain, thou this estimate is said to be conservative (Bertelsen, 1993). It is the contention of the author that lessons could be learnt from the FPAL system used in the Oil and Gas Industry and its elements (some if not all) is adapted in the construction industry as a useful approach for improvement in the construction supply chain. Best practice can be transferred between different industrial sectors in line with Fong et al (1998), (Errasti et al, 2007), just as lessons were sort from the manufacturing industry in the 1980s by most UK and US firms from the Japanese. JIT, TQC, and close and collaborative buyer-supplier relations were implemented so as to improve the productivity and solve problems arising from construction processes (Heng Li et. al, 2008). Subsequently it is rather imperative for highly efficient construction supply chain management solution to be developed that decreases risk and increases profitability. Talluri (2000) in his paper highlights the importance of the efficient use of information systems at strategic, tactical and operational levels of SCM. Applying generic methodology and developing corresponding principles and methods in the construction supply chains may go on well to resolve problems encountered in managing the supply chain in the construction industry (Vrijhoef and Koskela, 2000). As stressed in the Egan Report, Innovation in the construction industry is of high importance as it is core to achieving continuous service and product improvement and

organizational/company profitability.

The application of schemes like the FPAL system in the construction industry provides support for logistics operations and allow for closer integration between buyersupplier thus enabling SCM to be successful. For example utilising FPAL process (such as prequalify and Capability Assessments) to source, and select suppliers for procurement requirements in the case of the construction industry would act as a means to speed up the tendering process and results in other benefits, examples are cost savings resulting from reduced internal procurement procedures, paper transactions and enhanced opportunities for the supplier/buyer partnership. According to the RIBA, (2005) research in the year 2005 the average bid costs for PFI hospital projects has rose from 7.7million in 2003 to 11.5million. By having a scheme like the FPAL system in the industry, the number of companies to consider for bids or selection as members of partnering arrangement is reduced as the construction clients would be able to obtain qualified supplier information required for contractors/subcontractors and supplier selection without going through rigorous processes and negotiations. Consequently, benefits such as extensive cost/time saving and increased likelihood of a successful bid would be achieved.

Selection Criteria

Selection Process

Identify Suitable Firms

Questionnaire

First Evaluation

Short List

Formal Interview

Last Evaluation

Select Firm

Negotiation Appoint Firm

Negotiation Fails

Figure 4.1: Stages for selecting firms for partnering, culled from Bennett and Peace, (2006) The figure above shows the stages used by construction clients in selecting consultants, contractors and specialists for project partnering. If adopted in the construction industry the FPAL system would speed up the stages used for selecting firms for partnering as illustrated by Bennet and Peace (2006) in the diagram above. The FPAL system (described in the previous chapter) already takes care of the first five stages (selection criteria to First Evaluation) as such stages 1-5 would be eliminated so as to avoid duplication of information and effort, waste of time and funds, construction clients would then moving into the stage of short listing contracting/supplier firms.

Also the implementation of the FPAL scheme would enable construction clients to have a benchmarked capability profile of contractors, suppliers, consultants and specialists. By so doing the industry would be moving in the positive direction of learning and adopting best practices/experiences from other sectors as advocated by Fairclough, J. (2002), Egan (1998) and Latham (1994).

CHAPTER 5 RESEARCH DESIGN AND METHODOLOGY 5.1 Introduction The process of searching and/or re-searching for new insights, advancing knowledge, understanding of a practice or a phenomenon on a subject area of interest is regarded as Research (Bloomberg and Volpe, 2008). Research is conducted to solve problems and expand knowledge according to Drew, 1980). Bell, (1993) defined research as seeking through methodical process to add to ones own body of knowledge, and hopefully to that of others by the discovery of non-trivial facts and insight. The research methodology describes the procedures followed in realising the aims and objectives of this academic research. Consequently, this chapter will consider the issues surrounding the chosen research methodology, the rationale behind the selection, sequences of the research, the questionnaire designed for the interview and analysis of the research data. The methodology of this research is originally based on sending questionnaires to contracting organizations in the construction industry in order to analyse responses in terms of their perceptions about, current SCM practices, economic impacts, drivers and barriers, how important they felt improved supply chain collaboration and management was for the industry, their perception/proactive response on partnerships for the post economic downturn. This study adopts a wide range of research methods, e.g. literature review, focus and expert interview. It started with a comprehensive literature review where it looked at the SCM practices in the construction industry and the issues that hinder its successfulness in the present economic climate. It also presents a review of the FPAL system used in the oil and gas industry with the aim of transferring best practice into construction. Finally, the researcher aims to explore/present how the FPAL system could be of benefit to the construction industry if implemented.

5.2 Research Method/Strategy Research can be considered to be a `voyage of discovery` whether anything is discovered or not. According to Fellows and Liu (2003) ` what is discovered depends on the pattern and technique of searching ...the subject matter investigated and the analyses carried out.` In order to achieve comprehensive and detailed information to address the research objectives, require the selection of an appropriate mechanism for obtaining relevant data. A research strategy could be referred to as a systematic investigation and study of materials, sources, etc

in order to establish facts and reach new conclusions. There are two methods/strategies namely, qualitative and quantitative approach. 5.2.1 Qualitative Research The qualitative research method is subjective in nature, out with the confines of an established theoretical base (Easterby-Smith et al, 2008). It is concerned with collecting and analyzing data or information describing meaning rather than drawing statistical inferences. Creswell (2007), assert that qualitative research is an inquiry process of understanding based on a distinct methodological tradition of inquiry that explores a social or human problem. It lays more emphasis on exploring much detail as possible, a few/sufficient number of examples which are sees as being to illuminating and aims to achieve a depth rather that breadth (Bouma and Atkinson, 1995). Qualitative research builds a complex, holistic picture, analyses words, reports detailed views of informants, and conducts the study in a natural setting. Qualitative research method helps to understand the context in which to address a problem. It investigates the why and how of decision making, not just what, where, when. Hence, smaller but focused samples are more often needed, rather than large random samples to seek understanding in individual perception of the world, and to seek insight rather than statistical analysis. 5.2.2 Quantitative Research Quantitative research method tends to be objective in nature, not abstract but hard and reliable. As the name suggest refer to counts and measures of data, in numeric form. Qualitative research adopts scientific method in which initial study of theory and literature yields precise aims and objectives with hypotheses to be tested. White (2002) suggests that quantitative research involves an objective way of studying things. It is considered as a measurement of tangible, countable sensate features of the world. According to Creswell (1994) quantitative research is `an inquiry into a problem based on testing a hypothesis or theory composed of variables measured with numbers and analyses with statistical procedures in order to determine whether the hypothesis or theory hold true.` Quantitative research sometimes referred to as positivist, it used to find facts about a concept, question or an attribute, by collecting factual evidence in numeric form and study the relationship between these facts in order to test a particular theory or hypothesis.

5.3

Selection of Research Strategy

The qualitative research strategy and method was chosen for this research work on the premise that data collected is not numeric in nature but rather a clear and precise statement of the individual perception of the recognized problem. The qualitative research method is often used for policy and program evaluation research since it can answer certain important questions more efficiently and effectively than quantitative approaches (Holliday, 2007). It was also preferred for the advantage of allowing for more diversity in responses as well as the capacity to adapt to new developments or issues during the research process itself. Having recognized the relevance of SCM in the construction industry, the researcher chose the qualitative research method as the most appropriate for carrying out this research work, investigating and getting more insight as to how improvements could be carried out on the SCM practices to achieve greater performance in the industry. 5.4 Sources of Data The data that would be used in this research work would be from both primary and secondary sources. 5.4.1 Primary Data This refers to the data obtained from a particular study or investigation and used for the purpose for which it is collected. Primary data is collected by using questionnaires, interviews, focus groups and observation. However, primary research takes a lot more effort and time than secondary data because it has to be connected first hand, unlike secondary data which is already accessible. The usefulness of primary data lies in its helping to ascertain the accuracy of the secondary data already utilized. The primary data for this research will be documenting sources, observations, mail questionnaire and interviewing with construction client organizations. 5.4.2 Secondary Data According to Saunders et al (2003), secondary data is known as subsequent publicati on of literature such as textbooks, journals, magazines and information from the website. Consequently secondary data could be referred to as raw data and published summaries. Most scholars are of the opinion that research works commences with secondary data sources. Secondary data was used in order to provide a basis for the dissertation to identify what had

been previously written on the topic area. Sources of secondary data for this research include journals, articles, literature in textbooks and previous academic project works. 5.5 Data Collection Process

This deals with the method that would be used in collection of data and information in the analysis of this investigation. Data collection is based on review of documents, records, means of interviews (telephone), questionnaires (simpler version of the semi-structured questions) sent via emails to some senior staff who because of business commitments and time factor could not be available for actual interview sessions and other secondary sources were also used . All these materials were used and were being applied towards making the content of this project. All the respondents were contacted by email, telephone prior to sending out questionnaires and conducting the interviews to acquaint them with the aims and objective of the research and to solicit their participation. 5.6 Design of Questionnaire Questionnaires are important instrument of research, a tool for data collection. As asserted by Oppenheim, (1992), a questionnaire is not some sort of official form, nor is it a set of questions which have been casually jotted down without much thought. It is advised that questionnaires be kept as short as possible (Saunders et al, 2003). Since the research is considered to be more exploratory a questionnaire survey was designed (Bailey et al., 1995). The design of questionnaire used for this research was that of a two-page open ended and closed questionnaire accompanied by a cover letter sent to managers and other senior staffs in the construction industry (main contractors); it was made so in order to attract the interviewee with the flexibility in the questions and was also designed such that they could be easily understood to ensure the completion time would be no more than five minutes. However, the questionnaire was placed in a logical order and designed so that it would flow from question to question. The Open ended questions allows the respondents to talk about whatever is of relevance to them, also inviting them to tell their story in their own words; providing a clear accurate opinion of the respondents. This gives them the opportunity to express their own views from their experiences, supplying their own answers without being constrained by a fixed set of possible responses.

The closed ended questions were questions which would provide a simple choice of answering in the affirmative or negative, which in most cases require short response such as Strongly Agree or Strongly Disagree or Yes or No. The analysis of the questions is straight forward. 5.7 Interview For the purpose of this research work, the interviewing method which was done over the telephone in order to save cost of transportation to the various locations of the organizations interviewed. It provides a useful means of qualitative research, thou face to face/personal interviews tend to give a high response rate and allows for opportunity to collect supplementary information, the researcher endeavored to create a rapport during the phone call interviews to collect as much needed and relevant information required for the research. It could be said that datas obtained from interviews are more accurate and response rate is relatively high. A variety of personnel from clients/main contracting firms, subcontractors were interviewed. The objectives of the interview was to explore/investigate the current SCM practices (collaboration and management) in the economic downturn (strengths, weaknesses and barriers), their perception/proactive response on partnerships for the post economic downturn and to ascertain the willingness of the industry to adopt innovative SCM practices from other industries like that of the proposed FPAL system in the construction industry, thereby obtaining qualitative data from managers and other senior staff in charge of managing the supply chain in the industry with the aim of providing a clearer related view and valid means of essential information. The interview also aimed at confirming the opinion of the construction contractors (main contractors) on how important they felt improved supply chain collaboration and management was for the industry. The interview sessions were structured to standardised responses and were recorded in note format, thus enabling me to aggregate the results into the questionnaire analysis. It helped me to know more about the industrys present and future innovative plans for managing the construction supply chain more effectively and efficiently.

5.8 Sampling Sampling is the selection of a population sample to represent the whole. For the purpose of this research, selection was from a list of top 100 construction companies 2010 (www.theconstructionindex.co.uk). The questionnaires were sent to 25 key persons who are managers and senior staff in charge of managing the supply chain in the construction contracting companies selected. In total a response rate of about 48 percent, as only 12 respondents were interviewed and questionnaires received from them within the given time for this research work. 5.9 Data Presentation The researcher organized the extracted data in a presentable and readily comprehensive form before the researcher carried out the analysis. The data was refined, changing the form from a raw state so as to make it easier to understand and comprehend. 5.10 Conclusion In summary the qualitative approach to research has been utilized in this study in order to achieve its objectives. The next chapter will present the results of the findings of the respondents from the questionnaires and interviews conducted under headings drawn from the analysis where appropriate. The findings will be analyzed and supported by secondary data which is literature review. Recommendations will then be made on findings, and also for further studies. An inherent limitation/shortcoming of the method used is its subjectivity nature though this is compensated by the richness and deepness of data collected and the level of relationship (close) developed between the researcher and the participants.

CHAPTER 6 RESEARCH FINDINGS/RESULTS AND DISCUSSION 6.1 Introduction In this chapter, all the raw data assembled through the use of research instrument stated in chapter five will be processed and the outcome will be used in supporting the research findings. The essence of this chapter is to analyze the available data, discuss and interpret the findings. It deals with the presentation and analysis of data obtained in the course of this research work. 6.1.1 Description of the Research Findings Frequencies and ratio calculation will be used for some sections of the questionnaire. Frequency (%) = n / N * 100 Where: n= number of respondents (frequency) N= total respondents Microsoft Excel is used to calculate the percentage of item and perform weighing, ranking of responses where necessary.

6.2.1 SECTION A: Consciousness of Supply Chain Management in the construction Industry The aim of this section was to identify through a series of questions how conscious each of the construction contracting organisations is with issues concerning SCM in their business. (1) Is SCM of importance to your organization? (Yes / No/Neither) This question was aimed at determining the perception of the construction firms with regards to the importance of SCM to their operations during the current economic downturn. The major finding from the responses was that out of the total twelve (12) companies, 83% (n=10) felt that SCM was important to their business. While 17% (n=2) felt that SCM was neither of importance nor of no importance to their business. This suggests that the industry appreciates the SCM concept and it is been implemented by most construction contractors in the UK.

(2) Does your SCM offer ways of working that fulfils a collaborative environment? (Yes / No/Neither) Having determined the importance of SCM amongst respondents it was important to also establish if their working environment was that which is directed towards a collaborative effort within their supply chain. All respondents answered in the affirmative which leads us to the next question. (3) Does your organization have a partnership agreement with suppliers/client? (Yes / No) Out of the total sample of 12 respondents from the contracting firms, 67% (n=8) has partnership agreement with their supplier and clients while 33% (n=4) of the respondents were of the opinion that they have no partnership agreement with their supplier/clients.

6.2.2 SECTION B: Perceptions about the current economic downturn and the construction SCM The questions in this section are aimed at getting the views of the companies with regards to SCM in the construction industry and the effect of economic recession respectively. Respondents were asked how much they agreed with the following statement(1) The economic downturn has been challenging to the SCM practices of our company. This closed ended question was intended to enable the researcher to determine if any of the organisations were facing any challenges in their SCM as a result of the effect of the economic downturn. 83% (n=10) respondents answered in affirmative with the exception of two (2) declined response. (2) Our suppliers are not well prepared for the economic downturn. With all the respondents from the contracting firms accepting to be currently facing challenges in their supply chain. It is rather imperative to confirm the preparedness of their suppliers as well. Only 8% (n=1) rated strongly agreed, with a further 42% (n=5) agreeing that that their suppliers are not well prepared for the economic downturn. 25% (n=3) of the respondents was neutral, another 25% (n=3) disagreed with the statement.

(3) The construction supply chain is forced to be more cost driven as opposed to value driven as a result of the economic downturn. Majority of the contracting firms seems to be focused on cash since the actual availability of credit has decreased. This situation continues to undermine the activity of most contracting

firms. Thus a major challenge has been in containing or reducing cost. Most respondents 75% (n=9) agreed with the above statement. While 17% (n=2) disagreed with the statement with a further 8% who remained neutral on the statement.

(4) Our supply chain operations are significantly disrupted as a result of credit shortage which is leading to insolvencies of our suppliers. Having confirmed if the construction supply chain is more cost driven and not value driven, the researcher found it important to establish whether the supply chain operations/ activities of the contracting firms were significantly disrupted also if their suppliers are going insolvent. All the respondents were in confirmatory with the statement, with 58% (n=7) agreeing with the statement with a further 25% (n=3) in strong agreement. 17% neither agreed nor disagreed.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The economic downturn Our suppliers are not well The construction supply Our supply chain has been challenging to prepared for the chain is forced to be more operations are the SCM practices of our economic downturn cost driven as opposed to significantly disrupted as a company value driven as a result of result of credit shortage the economic downturn which is leading to insolvencies of our suppliers.

Figure 6.1: Chart representing percentage of respondents perceptions about the current economic downturn and the construction SCM. 6.2.3 Section C: Features associated with your companys SCM efforts in responding to the economic downturn The respondents were asked to rate which of six SCM measures was of significance to their companys SCM amidst the current economic crises.

The chart below shows that measures taken by contractors in responding to the economic downturn are: cost reduction and improving efficiency (92%); improving level of trust and collaboration among supply chain members (83%); continuous improvement, learning and innovation (83%); delivering value to clients (75%); regular communication and information sharing with suppliers and clients (67%) and reducing the number of suppliers (42%).

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Delivering Improving level Regular Continous Reducing the Cost reduction value to the of trust, communication improvement, number of and improving client collaboration and learning and suppliers effieciency among supply information innovation within your chain sharing with organization memebers suppliers & clients

Figure 6.2: Chart representing percentage of respondents opinion of Features associated with organizations SCM efforts/practices in responding to the economic downturn.

6.2.4 Section D: Identifying preferred Suppliers The aim of the questions in this section is to provide an understanding the measures taken by in engaging their suppliers and factors considered by contracting firms in their selection process by identifying the criteria adopted in selecting their preferred suppliers. Fig 6.3 below shows what factors majority of contractors are most likely to consider when selecting suppliers. The most relevant factor considered by contractors was commitment to

quality/ continuous development [92% (n=11)] and financial position [83% (n=10)], closely followed by reputation [75% (n=9)] and ability to meet delivery commitments [75% (n=9)].

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Reputation Commitment to quality and continuous development Financial position Commitment to specified delivery time

Figure 6.3: Chart representing percentage of respondents opinion on factors considered by contractors in the selection process of their suppliers.

6.2.5 Section E: Obstacles to implementing SCM in your company The focus of this section is to identify the factors that pose as obstacles to implementing SCM in construction contracting organizations. Respondents were asked to select and rank the level of seriousness and impact from a list of factors that may be barriers to their supply chain. Fig 6.4 shows the percentage of a range of factors that might pose as difficulty to implement SCM. Most respondents choose low commitment of supply chain members, ineffective communication in the supply chain and lack of training as major barriers to implementing

SCM. Ranking inappropriate tendering method & organisational structure and high cost as the minor or lower factors that may pose as barriers to implementing SCM in their organisation. This indicates that there is the need for increased awareness of the SCM concept especially in smaller contracting firms.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Low knowledge Ineffective Inappropriate High resources Low Lack of training about the SCM internal tendering (financial & commitment of & innovation concept in the communication method and human) supply chain industry in the supply organizational members chain structure

Figure 6.4: Chart representing percentage of respondents opinion on obstacles to implementing SCM.

6.3 Interview Analysis

6.3.1 Section F: Selecting Supply chain members Question: What measure does your organisation take to engage your supplier? Analysis: This question intended to identify the kind of measures used by the organisations in engaging their supply chain partners. Some of the twelve organisations were small to medium scale construction companies specialised mostly in building contracting with a few them carrying

out road/highway construction. Most of the respondents revealed that clients make use of questionnaires, interviews and negotiation to secure or appoints suppliers/partners. Respondents also contend that competitive tendering which is a traditional procurement method in the construction industry is used for selecting SCM partners for either a one-off or individual project or a longer term contract. It was found during the interview that contracting firms prefers the latter method because it is more cost efficient. On other hand on rear occasions most clients are said to nominate or recommend partners usually as a result of close relationship developed from past works undertaken, reputation and expertise shown on similar projects in the industry.

6.3.2 Section G: Benefits of implementing SCM practices Question: What are the benefits of implementing SCM in your organization? Analysis: During the interview respondents were asked their opinion on the benefits of applying SCM to their organization and the construction industry. Most respondents mentioned cost savings in the form of rebates from partners and continuity/consistency in projects undertaken as benefiting to their operations. They are able to gain competitive advantage in the industry through collaboration and long term relationship developed with their partners (clients and suppliers). Nine of the interviewees were of the opinion that SCM led to the decrease in the existing fragmentation and adversarial culture of the construction industry. By so doing, integrating the entire supply chain process and creating/improving relationships with partners (clients, subcontractors). Other respondents opined that SCM practices had impacts on their project performance, they were able to deliver project to their clients on time and within budget. 6.3.3 Section H: Awareness of SCM practices in other Industries (Includes FPAL, Oil & Gas Industry) Question: To what extent are you aware about current/previous SCM practices used in other industries? Do have prior knowledge of FPAL? Analysis:

Among the twelve participants interviewed, eight of them were quite aware of SCM practices such as lean production and just-in- time production (JIT) while ten of them were familiar with integration and partnering. With regards to FPAL, only four of the participants (contractors) who had a wider experience having done some jobs with a few oil and gas companies had a little insight of what the FPAL system is about.

6.3.4 Section I: Willingness to adopt the proposed FPAL/ new SCM practices Question: What is your opinion about the proposed FPAL system and its impact on the construction industry? Is your organization keen to adopt and/or apply practices from other industries such as the FPAL system with the aim of improving the efficiency of your SCM? Analysis: Most of the respondents were of the opinion that the fragmentation and uniqueness of the construction industry which is quite different from the oil and gas industry would make it difficult to effectively implement the FPAL system to achieve its full benefits. They further opined that construction Industry is more cost sensitive in comparison with the oil and gas sector, especially in the present economic crises. Most construction supply chains are largely made up of small to medium enterprises unlike large multinational and global organizations that exist in the oil and gas industries. Thus, they tend to be more cost driven, in most cases lowest bidders/suppliers are offered work. A few respondents from the contracting firms were of the opinion that they are satisfied with their own intranet/database system where they have lists of their preferred suppliers hence they see no need adopting something similar such as the FPAL. Most of the respondents sounded favourable to the proposed FPAL system stating that it would help better place their supply chain partners in a wider network of supply chain, where best practices from other organisations and industries could be adapted. Few others were of the opinion that such system as the FPAL would be a supplement to a database known as the constructionline that already exist within the UK construction industry, which is owned and endorsed by the Department of Trade and Industry (DTI).

6.3.5 Section J: Future SCM Practices Question: Which of the following measures would your organisation most likely take in the next 12 months to improve its SCM?

Analysis: This question was aimed at identifying future SCM measures which contracting firms in the UK construction industry are focused on implementing in the future in order to achieve economical sustainability presently and boost their supply chain in preparation for an economic upturn. Table 6.1 shows the SCM measures contractors are most likely to take to improve their organisations. The table shows that all nine factors are important to contractors with the more focus being on developing long term and stable relationship with their supply chain members and exploring cost effective initiatives followed by access to clear financial information from potential suppliers before selecting them into their supply chain for future concerns over supply chain insolvency, the least favored measure being decreasing reliance on a single supplier. 50% of the respondents were interested in evaluating opportunities to embed innovation in their SCM. The fact that most factors mentioned are above 50% point suggests that they are measures contractors in the UK construction industry are most likely implement them in their SCM.

SCM Measures Long term and stable

No. Of Respondents

% Of Sample

relationship Explore initiatives Decrease reliance on a cost effective

10

83.3

10

83.3

single supplier Access to clear financial information from potential

33.3

66.6

suppliers Evaluate opportunities to embed innovation Streamlining the SCM and procurement process Adequate performance 7 58.3 6 50 7 58.3

evaluation of supply chain members

Table 6.1: key factors representing future SCM measures in construction UK.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Figure 6.5: Chart representing the percentage of a range of measures that contractors are most likely to take in order to achieve an efficient and successful SCM.

6.4 Summary of findings Taking a holistic look at the findings of the research work, the researcher discovered that the current unprecedented economic downturn has presented major challenges to the entire construction industry with emphasis on the SCM practices. Each contracting firms approached SCM in different ways and it can be seen that the benefits achieved varied significantly. Though it can also be seen from the findings that a crucial characteristic of the existing supply chain management processes in most contracting firms in the UK

construction industry seek to enhance cost savings/financial security, trust, commitment and Long-term relationships with suppliers. The modern supply chain relationships indicate a lack of trust between contractors, subcontractors and suppliers. These among other factors are major drivers for SCM in the UK construction industry. Contractors seem to be more aware of SCM and it is perceived as to a large extent dependent upon strong commitment, continuous shared learning among supply chain members/partners and innovation. It is also perceived by contractors in the industry as means to gaining competitive advantage. A crosscase analysis of the major contracting organizations taking part in this research reveals that there is a positive move towards adopting a more healthy relationship with their members amongst their supply chain. During the interview with some of the contractors establishing direct communication path amongst partners in the supply chain is critical to project progress. On the contrary it was also noted that various parties in the supply chain were either reluctant to reveal information or highly secretive when it came to the exchange of financial information. Another example given by one of the respondents was the slow exchange of key design information amongst subcontractors on some contracts. Majority of contractors are committed to quality improvements in their supply chain, they also recognize the impact their suppliers, partners (subcontractors) have on quality. Hence, they expect their

suppliers/partners in the supply chain to be committed to achieving quality standards by involving them in their quality improvement process. This practice could be expensive for small contracting firms as it might require high financial resources. There are certain factors that stand as obstacles to implementing SCM successfully such as the unwillingness by main contractors to share project information and risks with supply chain partners. These are attributed by the industrys age long reluctance to change its culture and structure and adversarial relationships. Consequently, been faced with the challenge to create a competitive advantage in an uncertain economic environment construction contractors are constantly working to improve their SCM processes and procedures. Some of

the contracting firms who participated in the interviews were of the opinion that their supply chain partners are taking innovative approaches to achieve their SCM objectives. While few others were positive that only a few of their suppliers were committed to innovative ways of solving SCM issues as well as adopting new methods of working as a collaborative team. Few contractors admitted not requiring a formal integration arrangement or partnership relationship with suppliers Instead; informal long-term partnering arrangements are formed between supply chain members by virtue of the same suppliers being used repeatedly. It was noted that some contractors who had worked with supplier organisations for a long period of about 12yrs used on-going communications between parties in their supply chain and geographical ties with suppliers to improve collaborative relations and develop stable long term relationships. The development of such relationships has helped the contracting firms avoid disputes amongst supply chain members and is also serves as the key to securing added value to the supply chain.

CHAPTER 7 CONCLUSIONS AND RECOMMENDATIONS 7.1 Introduction In this chapter, highlights the main points from the previous six chapters detailed in this research work so as to clearly define the stand-point of the researcher from findings made, and link the research objectives with the research aim, to make appropriate conclusions and recommendations for further research. The research aimed to identify several aspects related to current SCM practices in the UK construction industry by carrying out surveys via questionnaire and semi structured interviews. The research was modified to focus mainly on contractors because of their pivotal role in the construction supply chain, thus referred to as the first link of the supply chain. They are seen as having the financial and market power to implement SCM. The information gathered from the semi structured interviews helped to the understanding of how the first link of the construction supply chain is dealing with challenges and issues of the current economic downturn and more specifically with SCM.

7.2 Conclusions SCM has a key role in improving the efficiency and productivity of an organization. It is widely understood by most contracting firms as a temporary partnership with suppliers and clients based on either firm or project level. Construction SCM deals with relationships between contractors, suppliers, clients (Titus and Brochner, 2005) which are seen in this research work as commitment between all parties cooperating to achieve different but complementary objectives (Blayse and Manley, 2004). In terms of SCM in the UK construction industry it can be concluded that large contractors have a good degree of awareness. Though, this could be said for only a small percentage of the entire population of the industry considering the amount respondents. The responses showed that cost and

commitment to quality are the most important in identifying a preferred supplier, followed by other factors resulting from current economic pressures. In general, with the shortage of credit and other challenges of the economic downturn undermining the SCM operations of most contracting firms, they seem to be gradually readjusting their supply chain objectives to the current events, with most of them putting more effort to finding strategic partners so as to

building a stable and fully integrated supply chain, with concentrations on vast opportunities to achieve an efficient SCM. Mutual relationship within the supply chain creates to a reliable environment, higher efficiency level and higher profits and also goes on to building long term association and problem solving efforts.

Majority of the contractors interviewed seem to have more partnerships with a set of clients, which they do prefer rather than to go into partnership with supplier organisations. Relationships with suppliers were mostly found to be developed through experience which is in line with Wang et al (2004) who suggested that traditionally trust develops from specific events and repeated interaction, in relationship development. This could be majorly attributed to the non-trusting climate/business mentality of the industry. It can right to a large extent to conclude that contracting firms in the construction industry must balance the needs of clients with those of suppliers and partners to achieve the high levels of collaboration required to synchronize the supply chain.

With regards to the proposed FPAL system most contracting organizations are reluctant to adopting the technique as only a few had prior knowledge also there is an already existing similar system Constructionline database for pre-qualified local and national construction and construction-related suppliers in the construction industry which although is not quite as that of the oil and gas FPAL system. These reasons prompted the bias response received from the participants as well as their disposition towards its adoption within the UK construction industry. It is the contention of the researcher that there are certain elements of First Point Assessment Ltd (FPAL) as used in the oil and gas industry that could be supplementary to the existing constructionline database if given further consideration and research. An example is the introduction of the Performance Feedback and Capability Profile of FPAL can complement the services being provided by Constructionline.

Stage1 Discuss the requirement and draw up a specification Stage 2 Advertise the Tender Stage 2 Source suppliers through Constructionline

Stage 3 Request Expressions of Interest Stage 4 Distribute, collect and assess pre-qualification questionnaires Stage 5 Invite to tender

Stage 3 No Expression of Interest necessary

Stage 4 Assess all pre-qualification information on Constructionline and download supplier lists into your own e-procurement systems

Stage 6 Negotiate with suppliers

Stage 7 Award tender

Stage 7 Indicate which supplier has been awarded the tender on Constructionline and receive notifications of any change to their status

Stage 8 Draw up purchase order Stage 9 Add feedback on suppliers using Constructionline and analyse how much you have spent on the contract

Stage 9 Track contract progress and performance

Stage 10 Receive goods/service

Stage 11 Receive invoice from supplier Stage 12 Make payment to supplier

Figure 7.1: Constructionline e-Procurement roles

7.3 RECOMMENDATIONS This sub-section will be divided into two groups which include recommendation based on findings and recommendation for further research study. 7.3.1 Recommendation Based On Findings With the key objective of SCM been to creating the most value for the entire supply chain network; contracting, client and supplier organisations need to continually review and improve its performance indicators in regards to SCM in order to remain competitive and relevant in today`s world. From the researchers findings, its undeniably clear that there is still need for improvements of the SCM performance of the construction industry in terms of budget, quality of services and materials as well as delivery time so as to improve the efficiency and productivity of construction industry and achieve the full advantages of SCM as it is the case for other industries like the manufacturing and oil and gas sectors. It is therefore of urgent necessity that main contractors improve on efforts to addressing the collaboration, integration and partnership of smaller firms as well as client organizations, to enable them derive benefits from true supply chain management and what it could add to construction process improvement in the UK construction industry. Based on the significant findings drawn from the survey results and the literature outcomes of this investigation, the following recommendations are offered: Main contractors in particular should show greater commitment towards collaborative working and information sharing within the supply chain, they should not just only adopt a more business-like approach but also further help in moving their relationships amongst their suppliers/partners from merely transactional or temporary but to that which would yield more desire to engender trust in the supply chain and longer-time benefits for all supply chain members/partners. It is also required that there be sustained continuous improvement and training for those strategically involved in SCM implementation within the construction sector. Majority of firms both large and small should be encouraged and reminded of the need of long-term relationship amongst supply chain members/partners that can offer innovation in the current environment. This can be done through periodic seminars and workshops that would help re-enforced the need for change and encourage them

to cut out wasteful practices in their supply chain and reduce applying haphazard continuous improvement in their companies as this move could also make savings for them as well as improve reliability and quality. The proposed FPAL system should be encouraged by those in the fore-front of the call for more collaborative supply chain working. As its Capability Assessment scheme could be incorporated into the existing stages for selecting firms for partnering would help streamline and fast track the process thereby reducing cost and time for both all parties others within the supply chain. The potential benefits of FPAL to the construction sector should be made known to key industry players with the support of top managements from client, contracting and supplier organizations. A critical evaluation into the oil and sector with specific regards to FPAL is recommended to further buttress the points made in this research and to give answers to arguments against adopting the system in the construction sector 7.3.2 Recommendations for Further Studies This research was limited to a few selected contracting organizations in the construction industry which means only one side of the supply chain was evaluated thus providing several opportunities for further research. It would be worth to exploring in more detail more sector players, i.e. owners, suppliers and maybe building product manufacturers in the future research to know how they are all responding to the economic downturn and how effective SCM could be undertaken. A more extensive survey needs to be conducted to verify initial findings in other organizations in the industry as well the oil and gas sector. This

investigation utilized a sample size of 25 respondents of which only 12 responses were elicited within the time constrain of the research work, I would recommend that future researcher who will be carrying out an investigation that is related to this topic should increase their sample size, so as to be able to make a more researchable conclusion based on a wider sample size. Also the possible link between trust, integration and innovation in the UK construction sector is worth giving further exploration as there is need for construction firms to be constantly innovating to adapt to changing economic climate as well as for achieving competitive advantage.