ABSTRACT
Supply chain management is an emerging concept in the construction industry in UAE. SCM tends to provide the organizations in the construction industry with an opportunity to improve cost and time consumption. Moreover, the effective supply chain management provides the organization with an ability to improve the quality of projects as well as the satisfaction level of the clients by meeting the requirements more accurately and precisely.
Although the benefits associated with SCM implementation are quite high in the construction industry but the lack of knowledge and limited perspective of the organization has significantly transformed the benefits into weaknesses. Due to limited scope and vision regarding SCM, organizations now faces challenges and issues that tend to reduce the performance of the organization. Some of the challenges include; lack of clear strategy for the project, lack of coordination between the organization and its partners, lack of trust and commitment, inability to manage and control procurement, improper dissemination of information at the right time and lack of proper use of the information systems.
ABSTRACT 1
Supply chain management in the construction industry is an emerging concept especially in United Arab Emirates (UAE). The problems associated with the emerging concept include separation of design and construction, lack of coordination and integration between the departments within the organization that eventually leads to poor communication. As a result, the clients in the construction industry are frustrated and irritated due to higher level of dissatisfaction level. In addition, the higher cost that has to be paid than the expected costs is also included a prominent reason for such dissatisfaction. With just little awareness of supply chain management concept in the construction industry, the industry is being dominated by the traditional approaches due to which organization constantly lack the ability to provide better outcomes to the customers and clients.
Supply chain management is an emerging concept in the construction industry that tends to connect the elements associated with production stage to the delivery stage of the final goods to the end customers through variety of suppliers. The aim of SCM in the construction industry is to make full use of resources at the right time to produce the right product within the cost allocated. Similarly, Tommelein et al. (2003, p. 1) considers SCM as a technique through which an organization is provided with an opportunity to improve its processes. (SCM is recognized as a leading process improvement, cost saving, and revenue-enhancing business strategy practiced in today’s business world). As a result, the organization is able to earn greater level of revenues, save time and eventually boost the quality of the construction process. Due to such attractiveness of the concept, SCM has been gradually accepted and adopted in today’s business market. With wide array and scope of supply chain management in today’s competitive environment, the SCM concept has grown connection from being a theory of production to supply and planned procurement process.
Application of Supply chain management in the construction industry is quite difficult to adopt because it requires constant innovation, complete information regarding how the market operates along with the knowledge to manage variety of networks associated with the organization with an aim to accomplish the business objectives. For an organization to effectively adopt SCM within the operations of the business, effective participation from all the stakeholders of the organization is quite essential. In addition, with effective participation of the stakeholders the organization would have the ability to effectively meet the requirements of the end users (i.e. customers) by working with the suppliers, manufacturers and the retailers. The most essential and the vital goal of the organization are to meet the consumer’s requirement which will eventually provide the organization with higher level of profits. Additionally, the organization would have significant opportunities with the implementation of SCM to reduce the extent of waste in terms of the following principles;
- Time,
- Cost,
- Quality.
The main problem in the construction industry sector is mostly the lack of communication and coordination between the organization and its partners in supply chain. The lack of sustaining and friendly communication within the organization significantly impacts the smooth running of operation which eventually reduces the organization’s ability to enhance the quality along with the opportunity to effectively meet the requirements of the customers (Gourdin, 2006, p. 1-18; Fugate, Sahin, & Mentzer, 2006, p. 130). (Potential savings associated with enhanced information sharing and decision coordination could reach as high as 35% of total system costs, depending upon the particular operating environment and problem assumptions. A key finding from the study showed that while information sharing was often considered a "silver bullet" for supply chain improvement, even greater benefits in system performance are available through decision-making coordination, which aligns all information and incentives to support global system objectives). As a result, the construction projects are delayed to great extent and in many cases the costs associated with the projects are significantly increased. Additionally, the rise of costs negatively impacts the quality of the projects that can reduce the customer satisfaction level to great extent (Gundlach, Bolumole, Eltantawy, and Frankel, 2006, p. 432-433). (Inferred from the heading of logistics and logistics management). The changes in both financial and time can lead to claims between the parties involved in the project. The inability of the organization due to lack of proper utilization of SCM can lead to litigations in the court between the parties involved in the project.
1.2. REASON TO CHOOSE THIS TOPIC
I have worked in the construction industry since graduation. One of the most commonly viewed factors in the construction industry was that the construction projects were being constantly delayed which eventually increased the costs associated with the project. Moreover, the quality of the projects was continually declining due to which the satisfaction level of the clients and the customers were constantly trembling. In addition, the rising dissatisfaction level of the clients led to financial claims mostly because of the additional time required for the completion of the construction projects.
The above mentioned observation led to chose this particular topic as by focusing highly on the SCM concept to eliminate the flaws would significantly help to reduce the bottlenecks and flaws in the construction company where I am currently employed. Moreover, the proper analysis of the study would provide significant insight that could help in sustaining relationship with the key supply chain partners in the forthcoming years.
1.3. SIGNIFICANCE OF RESEARCH
Supply chain management is an emerging concept in the construction industry in UAE. SCM is a process that involves collaboration and effective communication of all the supply chain partners to effectively meet the requirements of the customers. As a result, the organizations are provided with an opportunity to reduce the time and cost associated with the business while increasing the quality of the project as well as the customer satisfaction level.
But within the construction industry in UAE, SCM is just considered as a purchasing tool due to which the organizations are constantly lacking behind in meeting the needs and requirements of the customers. The study would tend to evaluate the reasons regarding the ineffective or no communication and collaboration between the parties involved in the supply chain. Moreover, the study would aim to evaluate the activities that should be integrated while considering the activities and processes that should be outsourced. Lastly, the study would aim to analyze all the risks associated with each construction project along with other supply chain issues within UAE.
1.4. RESEARCH AIMS AND OBJECTIVES
This study would particularly focus on identifying problems and issues on SCM adaptation in UAE construction industry. Moreover, the research would tend to analyze the benefits that an organization can gain with the implementation of proper SCM in the construction industry.
This particular study would focus on evaluating the extent of communication and collaboration between the organization and its supply chain partners. Moreover, the activities taken by the organizations in the construction industry would also be taken into consideration as it would help in identification of activities that should be integrated along with those activities that should be outsourced by the organization for better performance. Moreover, the risks and barriers within the construction industry that tend to reduce the performance of the projects from time to time would also be analyzed along with the other associated supply chain issues.
1.5. RESEARCH QUESTION
The research question for this research study would be;
- How the implementation of supply chain management can improve the quality of constructions projects in the construction industry?
- What are the main reasons why projects are not able to complete within the time, cost and quality in the construction industry?
- How supply chain management can be used effectively in improving the quality of the project and in increasing the satisfaction level of the client in the construction industry?
- How supply chain management can help projects to be completed in reducing the cost and time of the projects along with litigations?
1.6. ORGANIZATION OF THE STUDY
The chapter included in the study would be described in this section. The chapters are as follows;
Chapter 1: Introduction
The first chapter would tend to introduce the topic to the readers. In this particular chapter, the readers would be provided with the background study of supply chain management in the construction industry in the UAE. Moreover, the issues and challenges in the implementation of the SCM would also be described.
The research aims and objectives along with the research question would also be indicated in this portion of the study. In addition, the significance of the study along with the reason to choose this topic would also be provided in the introduction.
Chapter 2: Literature Review
The literature review chapter would tend to gain information from previous conducted researches that are related to the topic. This means that this particular chapter would tend to review the articles and concepts associated with SCM in the construction industry.
Chapter 3: Methodology
Chapter 4: Analysis
This chapter would tend to gather and analyze the data and information gather through interview. This would provide the exact information about the SCM in construction industry.
Chapter 5: Conclusion
Lastly, this chapter would tend to provide the summary of the chapters. In this particular chapter, the result gained from the research would be provided in this chapter to gain reader’s attention.
2. LITERATURE REVIEW
2.1. SUPPLY CHAIN MANAGEMENT AND CONSTRUCTION PROJECTS
Supply chain management is the process where the raw materials are converted into useful and final products that are then delivered to the end-consumers in the domestic and international markets for consumption (Beamon, 1999, p. 332). (The supply chain has been traditionally defined as a one-way, integrated manufacturing process wherein raw materials are converted into final products, then delivered to customers). According to this definition, the concept of SCM is a network of facilities that aims to product raw materials that are transformed into intermediate goods and then final products. The final products that are produced are delivered to the consumers and customers in the local and international market through well-established distribution network. This concept has been more elaborately defined by Shukla, Garg, & Agarwal, (2011, p. 2059) which SCM process includes procurement, manufacturing and distribution with a basic objective “to significantly enhance the performance of the organization that could help in enhancing the value while reducing the costs associated with the manufacturing and production as much as possible”. (Supply Chain Management is a network of facilities that produce raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system. It spans procurement, manufacturing and distribution; the basic objective of supply chain management is to “optimize performance of the chain to add as much value as possible for the least cost possible”). This eventually tends to reveal that supply chain management aims to seek ways through which all the parties (i.e. supply chain agents) cooperate with one another to deliver maximum productivity along with benefits to all the parties and agents within the process (Shukla, Garg, & Agarwal, 2011, p. 2059). (In other words, it aims to link all the supply chain agents to jointly cooperate within the firm as a way to maximize productivity in the supply chain and deliver the most benefits to all related parties). Hence, systematized management to ensure that raw material is transformed into final product in a well defined manner where roles and responsibilities of each section and point of value addition is defined is offered under the domain of management which is entitled as Supply Chain Management.
The well defined and well implemented chain system as referred in the above definition tends to deliver the most beneficial output to all the parties associated with the process. This eventually reveals that SCM is the process that tends to manage materials, money, and human resource along with information to gain edge over the competitors. In addition, the effective management of processes leads to higher customer satisfaction level as the customers are being provided with the required products and raw materials at the right time, at the right place and at the least possible cost. The graphical reflection of this concept can also be depicted from the image provided in the book of Shukla, Garg, & Agarwal, (2011, p. 2060) as presented below
(Shukla, Garg, & Agarwal, 2011, p. 2060)
The management of supply chain, though mentions that it is about the movement of raw material from points between the raw material provider and the final consumer, does not mean that that is only effective system for the industries involved in tangible movement of goods. Ahmed, Azhar, and Ahmad, (2002, p. 3-5) states that supply chain exists in both service and manufacturing industry but the complexity of the chain varies from industry to industry and from time to time. Also in construction industry, supply chain management has played a crucial role in the success over the past few decades (Ahmed, Azhar, and Ahmad, 2002, p. 3-5). (Inferred from the heading of SCM in Construction). Long, (2003, p. 1-20) has shed the light in the rising role of supply chain management as an emerging concept in which the products are procured from vendors, transformed into finished goods that are then transported to the warehouses through vast and effective distribution centers (Inferred from chapter 1). Since the construction industry is significantly dependent on the timely distribution of the raw material as well as information across the value chain and distribution network plays an important role in SCM by delivering the final products to the customers. Ahmed, Azhar, and Ahmad (2002, p. 2) has also shed a comprehensive light on factor addressed by the effective management of SCM. Ahmed, Azhar, and Ahmad (2002, p. 2) states SCM considers factors to remove bottlenecks and flaws in the process, SCM tends to increase the transparency and the alignment of the process through effective and regular communication among the parties involved in the process. This ultimately eliminates the functional and corporate boundaries that exist. (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 chain’s coordination and configuration, regardless of functional or corporate boundaries).
(Ahmed, Azhar, and Ahmad, 2002, p. 1)
SCM as system of management is already incorporated in the construction industry. Engineers, managers, contractors all make supply chain decisions regularly. Ahmed, Azhar, and Ahmad, (2002, 3-5) reported that supply chain management, in construction, includes a chain of shareholders and companions for the exclusive projects and organizations business life. While in projects supply chain include different categories starting from the owner, planner, designer, engineer, construction manager, suppliers, and distributors. To understand the supply chain in a construction project there are various supply chain levels are organized starting from the top which is the owner, under the owner comes the designers, specialists, contractors etc. Demand floats down the chain in the form of information while materials and products float in the adverse directions. A model of construction process has been developed which consists of two processes. One is the procurement process and the other is the construction service process. Procurement process includes dealing with supply of equipment and materials while construction service process includes various chains of suppliers, architects, designers etc. (Inferred from the heading of SCM in Construction). Hence, with change in participants the supply chain models are already being followed across various industries.
Information can be used effectively in the construction industry by integrating with different departments involved. According to Ahmad, Russell, & Abou-Zeid (1995), Information technology needs to be integrated at different levels where the organization adds value in building a product or service and with regards to the construction industry, the businesses need to integrate technology to inform with other important stakeholders such as clients, suppliers and even employees to improve the quality of the project (Ahmad, I. U., Russell, J. S., & Abou-Zeid, 1995).
The objective of the organization is to attain the maximum profit and increase value for the shareholders. For the purpose, many organizations adopt different techniques like TQM, material management, scheduling, in order to decrease the time of developing a product, improve the quality of product and contract lead times and production costs. But these organizations fail to be successful; Ahmed, Azhar, and Ahmad (2002, p. 5) while discussing the role of supply chain in the construction industry has provided review about the main contributor of such failure. According to Ahmed, Azhar, and Ahmad (2002, p. 5) due to the comprehensive nature of supply chain, it has the credibility of reacting to these challenges in a positive way. The changing aspect of supply chain is making the organizations aware of the competition; this awareness is making the organizations to communicate in a better way with their partners of supply chain. An effective supply chain leads to the reduction in transactions cost. Supply chain also makes alliance with the suppliers existed outside the organization rather than making alliance only with the functions operating inside an organization. In this way a plan of supply and demand to supplier from the consumer is being created through SCM. Different groups can adopt this planning e.g. distribution, manufacturing, marketing etc. Further this planning can also be implemented among various companies in the channel of distribution. Examples include, suppliers, third party management services, etc. (Inferred from the heading of promising benefits of supply chain management in construction ).
Hence, from the above it can be well inferred that benefits of many other system and successful move in industries must be taken as function of the effective management of supply chain.
2.2. IMPORTANCE OF SUPPLY CHAIN MANAGEMENT
The impact of SCM on the performance and productivity of the organization is clearly significant and exponential. The two most prominent impacts of SCM on business include;
- Boosts Customer Service
Organizations tend to meet the needs of the customers more effectively as compared to earlier year by focusing highly on supply chain management. According to Long, (2003, p. 43-54) with the help of SCM, the customers are provided with the right product at the right time and right place at the right cost. Moreover, the extensive distribution network provides the organizations with an ability to provide the customers with products at the expected locations. Additionally, implementation of SCM concept has allowed the organizations to improve the quality of products offered to the customers in the market along with quality after-sale customer support (Inferred from chapter 3). Therefore, in the rising competitive environment of business where business are constantly pressed to offer customer increased value, the organization are offered a comprehensive package in the form of supply chain to generate customer value.
- Improve Bottom Line
The satisfaction of the customers is self reflection of the fact that business is generating efficiencies from in bottom line. Long, (2003, p. 43-54) identifies that with SCM at work, organizations are provided with an opportunity to focus highly on lean management concept (i.e. producing higher quantity of goods with the use of lower resources as compared to earlier) (Inferred from chapter 3). Also, the relationship of strong linkage between the effective supply chain and organizational performance is endorsed in the study of (Rushton, 2007, p. 1) and refers that organization with proper and effective use of SCM can deliver the goods at expected timings which eventually improve the profit level of the organization (The need to satisfy demanding shareholders has meant that businesses have focused on manufacturing and distribution efficiencies, seeking ways to reduce costs. This in turn has prompted companies to seek lower-cost locations for their manufacturing bases, moving factories to Asia, Central and South America, and Eastern Europe. Companies now operate in a global market that, while offering opportunities, is extremely competitive and demanding. All of these changes have affected companies’ supply chains and logistics requirements. Now supply chains are extended over several continents and include suppliers as well as customers.).
The effectiveness of the supply is generated by the implementation of the tools and techniques that the organizations are presented with can inevitably help the organization to properly diagnose the problems and bottlenecks. Moreover, SCM provides the organization with an insight to effectively and efficiently manage the delivery of organization’s products that are in crisis situation. In addition, the benefits associated with SCM are consistently helping in improving operational efficiency that eventually helps in improving the customer satisfaction level along with company’s success. (Stadtler, (2005, p. 576) in order to entitle the credits of organizational performance to SCM declares that SCM is just like the backbone of the organization that tends to manage the critical issues that could reduce the organization’s performance along with productivity (A supply chain (SC) ‘is a network of organizations that are involved, through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hand of the ultimate consumer.’ This definition stresses that all the activities along a SC should be designed according to the needs of the customers to be served. Consequently, the (ultimate) consumer is at best an integral part of a SC. The main focus is on the order fulfillment process (es) and corresponding material, financial and information flows). This performance of the business does not only leverage benefit to the business in local market but in internal market as well. Chopra, Meindl, Kalra, (2008, p. 572) in a study reported that SCM allows the organization to effectively manage the growth of the organization along with global expansion and environmental concerns that may hurt the strategy of the organization during the accomplishment of organizational goals and objectives in the forthcoming years (By considering a global scope across the entire supply chain, a manager is able to craft strategies that take into account all factors that affect the supply chain rather than just the factors that affect a particular stage or function within the supply chain and thus accomplishing the long term goals of the organization). Hence benefits of the supply chain are expanded across the board and it is the effective management and implementation of SCM that enables business to reap the benefits from the range of opportunities.
Hence, to concise report the SCM effectiveness, Flint, Larsson, Gammelgaard, and Mentzer, (2005, p. 117) has listed some as follows:
- Reduction in inventory cost
- Provides the organization and its department with an opportunity to share information with one another
- Significant improvement in the customer satisfaction level as well as service (Logistics services create significant value for business customers because they have the potential to impact both the benefit and sacrifice aspects of customers' overall value perceptions).
- Improvement in the level of trusts among the variety of partners involves in the process
- Greater insight regarding the business which eventually leads to efficient manufacturing strategy (Chopra, Meindl, Kalra, 2008, p. 27-28). (A supply chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product.what the role played by each supply chain entity is).
- Improvement in the process integration
- Improvement in the bottom line of the organization (reduction in fixed assets in the supply chain)
- Significant improvement in quality that leads to higher level of profits (Stadtler, 2005, p. 578). (As Hammer (2001, p. 84) puts it ‘streamlining cross-company processes is the next great frontier for reducing costs, enhancing quality, and speeding operations).
Therefore, from the above discussion it can gauged the level of dependence that company has on effective management of supply chain. Each department of the organization in closely integrated which in turn results in close coordination of the entire business which is reflected in the overall performance of the business. For instance, coordination provision of information enables organization to develop the close to accurate demand of the product and services. The information passed on the related departments ensures the effective management of systems and respective strategies and hence results in the timely and duly service provision to the customers. Hence, increased the level of implementation of the SCM system and tools in the organization; greater will be benefits. However, it is mention worthy that benefits of SCM are function of effective implementation and if each department in an organization attempts to develop their respective SCM system the resulting product will be combination of tools than effectiveness.
2.3. CHALLENGES AND ISSUES IN SUPPLY CHAIN MANAGEMENT
Supply chain management encompasses planning, manufacturing and operation management to provide the right amount of products to the final customers in the market. As mentioned above, the success of SCM implementation is a function of the effective implementation. However, being comprehensive system that requires binding of organizational functions into single thread, organizations are also exposed to the wide number of challenges. Fugate, Mentzer, and Stank, (2010, p. 43) also cites that with the emergence of SCM, the issues and challenges managed by the organizations have enhanced significantly which the organization must tackle to accomplish the desired goals associated with the performance, productivity, efficiency and effectiveness (In attempting to drive performance improvements, managers often struggle with multiple, seemingly conflicting, objectives). This is due to the fact individually each department has its own priorities which sometimes conflicts with the other department’s priorities. For example, finance department is concerned with saving as much as money as possible while marketing department has its own system of fetching sales investing massively in advertisements. Hence, binding into single thread requires department to align onto single path which is faced with challenges. Some of the most dominant issues that must be tackled or managed by the organization include the following;
- Information Technology and Information Management
With the passage of time, companies have been provided with more advanced tools and internet along with electronic communication through which the companies can meet the requirements of the customers more effectively as compared to earlier years. According to Rivard (2000), today is said to be the era of information technology, and knowing this fact, businesses have acknowledged the importance of integration and customization tools and techniques that can help the organization to deliver overall increased performance but have no similar effect on supply chain performance. Information sharing practices are one of the most prominent issues that the organizations have to face in the technologically advanced era. Combining the traditional data with sales data can help the organization evaluate the inventory control along with operational efficiency. But with variety of data available with the organization, the pressure to evaluate the information and to make sound judgment is the greatest issue in the information management.
Information management could be effective if the information that is being exchanged with the other parties is transparent, in proper-flow and available to share. This helps the organization to eliminate any uncertainty that could contribute to inefficiency in information upstream and downstream. The success of the organization highly relies on the sharing of information at the right time and place which eventually helps to coordinate the chain, but it is important for businesses in the construction industry to use the information and integrating it with the technology in the right manner to be successful (Love and Irani, 2004). However, for gaining the due advantage, it is important for the organization to have full implementation of policy than sharing chunks. The importance of this aspect is discussed empirically proven by in the study of Cachon and Fisher (2000, p. 1032-1048) and percentage of benefit is determined as a function of implementation fraction of the systems. (Supply chain costs are 2.2% lower on average with the full information policy than with the traditional information policy, and the maximum difference is 12.1%)
Sambamurthy et al. (2003) have highlighted several benefits of information technology in the supply chain. One of the benefits that Sambamurthy et al. (2003) have identified is that IT has allowed and invented new ways for businesses to manage relationships within the supply chain. Many firms today now use Information technology and share information through IT with their partners in supply chain. Barua et al. (2004) have said that IT has changed how supply chain is managed and today managing supply chain has changed from the way it was done traditionally because of IT. Zhu (2004) as well as Choi (2010) have said that IT has digitalized supply chain today. Rai et al. (2006), Zhu et al. (2006) have said that integration of IT has improved supply chains. Mukhopadhyay and Kekre (2002) have highlighted that integration of IT has benefited businesses in two ways; generating more revenues and reducing costs of operations.
Sharing of information within the organization is very important in the supply chain. Because of this reason, there have been a number of researches conducted on this subject. Sahin and Robinson (2002), Chen and Yu (2005), Choi (2010) and Huang et al. (2003) and many others have conducted research in order to identify the impact and relationship with sharing of information and its impact on the supply chain.
Partners within the supply chain should share information among them in order to improve the overall supply chain and process. Different scholars Mohr, Fisher, and Nevin, (1996) and Cannon, and Perreault, (1999) have emphasized on sharing of information between as critical for the success. Lee et al. (2000) have highlighted the benefits that businesses can achieve by sharing of information within the supply chain. Some of the benefits highlighted by Lee et al. (2000) are the savings, and managing the demand in a better way.
Simatupang and Sridharan (2001) have conducted a research on sharing of information in the supply chain. Their research has been an important in terms of defining how to better use the information within the supply chain. Simatupang and Sridharan (2001) have emphasized on using the information properly and sharing it with the other partners. Simatupang and Sridharan (2001) have presented a model that highlights how the information from the real world is extracted and how it can be used as knowledge by businesses.
(Simatupang and Sridharan, 2001)
Simatupang and Sridharan (2001) have also highlighted the use of technology in sharing of information today. Businesses use online conferencing and video conferencing to communicate with the other players in the supply chain and this improves the sharing of information within the supply chain.
Simatupang and Sridharan (2001) have also worked on identifying the benefits that sharing of information can provide. They have presented a model that analyzes the impact of different factors and variables that impact the four main benefits of sharing of information. These four main benefits are:
- Finding the Contractual clarity within the supply chain
- Managing the uncertainty in the market
- Improving and helping in coordinating within the supply chain
- Reducing opportunism
(Simatupang and Sridharan, 2001)
