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
“How will the proper implementation of supply chain management in the construction industry help in delivering the construction projects on predefined time, cost and quality along with client’s satisfaction. In addition, how would the implementation of supply chain management in the construction industry help in reducing the financial and time claims as well as 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.
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. In the era of information technology, the companies 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. 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%)
- Knowledge Management
Knowledge about the constantly changing needs and wants of the customers is quite essential for a successful business. Due to the constantly changing demands of the customers, organization must remain proactive in gaining insight regarding the desires of the customers in terms of customized products and services. By doing so, the customers would be provided with goods and services that could meet the needs and wants of the customers in more accurate ways as compared to earlier products. Hence, along with managing information systems it is important for the organizations to develop the competency to extract the knowledge from the information system as well. Shukla, Garg, & Agarwal, (2011, p. 2064) has also noted this requirement as organizations can significantly enhance the customer’s satisfaction level due to speedier and improved services offered by the organization (Knowledge is critical for organizations to satisfy customer needs for customized products and services, and speedier and improved service).
Importantly, knowledge management is an organization’s intellectual capital that can be acquired and shared at the same moment. This requirement has moved from the mere effectiveness integrating tool to the critical requirement to sustain the competitive pressures. (Lang, (2001, p. 539) in a study clearly notified the challenges of associated with it and declared that the rising global capital due to extensive growth in technology (i.e. information communication and internet technologies) could severely impact the supply chain management’s success due to which the organization must enhance its knowledge management to significantly support supply chain management across the organization. (These two forces – more aggressive global competition and accelerating technological change, especially in information communication and internet technologies – translate into competition that is increasingly knowledge based. This increasingly knowledge based nature of competition is driving change in how supply chains are being managed within and across firms).
- Customer – Supplier Relationship Issues
Responding the needs of the customers in the most accurate manner can help the organization ensure higher level of customer satisfaction that can eventually lead to positive position in the competitive environment. Inability to do so can result in constant distortions which affect the business performance (Corbett, Blackburn, & Van Wassenhove, 2012). (By working closely together, companies and their suppliers can create highly competitive supply chains. Failing to collaborate results in the distortion of information as it moves through a supply chain, which, in turn, can lead to costly inefficiencies). One of the most effective tools in supply chain management is Efficient Customer Response (ECR) that must be managed properly to address the inefficiencies in the supply chain management. In addition, organizations must focuses highly on customer relationship management along with supplier relationship management in every step of the supply chain process. As a result, the organization would be able to create long-term relationship with the customers and the suppliers which will eventually bring higher level of profits along with higher satisfaction level of the customers and the suppliers. Example provided is just a single tool and many successful partnerships have developed effective supply chain. However, the effective and duly implementation of processes are important in reaping desired benefits.
- Customer Relations Issue
Shukla, Garg, & Agarwal, (2011, p. 2065) stated that the performance of the organization along with the success of the organization highly depends on effective customer relationship management. (A company's customer relations practices can affect its success in managing the supply base as well as its performance). The practices through which the organization manages its customer base can significantly impact the organization’s success rate. The greatest element that the organization has to tackle is the management of customers (i.e. downstream integration) and suppliers (i.e. upstream management). For an organization to enhance its competitive edge over the rivals in the competitive landscape it usually focuses on Total Quality Management (TQM) and Supply Base Management Practices. As a result, the organization is provided with an opportunity to increase its productivity, reduce its inventory and cycle time, increase in customer satisfaction level along with market share and profits. Hence, managing customer relationship is also dependent on the effective management of systems that requires connectedness as well as coordination which is also core of SCM.
- Logistics Management
Satisfying customers is only possible if the demands of customers are met. This requires business to develop a system that ensures the provision of the right product at right time and at right place. Hence, requires bonded logistic systems and is an essential element in supply chain management. In addition, this concept is one of the toughest issues for an organization that can hurt the organization’s performance to great extent. Reverse logistics, in particular, is greatly relied upon by the organization’s supply chain management for distribution of goods in constantly changing market landscape. Effective logistic management not only meets the basic requirement to satisfy customer but also provides arm’s length benefit which according to Shukla, Garg, & Agarwal (2011, p. 2065) increases the possibilities for an organization to enhance its success and found that the quick adaptation to the changing market landscape along with the automation of supply chain management processes are the most essential elements to success. (explored the use of an iterative approach for designing distribution chain in an agile virtual environment; and proved that quick adaptation to changing market situation and automation of supply chain management processes are essential).
- Global Issues
The rising level of competition in the global competitive environment has significantly impacted the life cycle of products due to which manufacturers have to work on the product design and development. Moreover, the rising intensity in the global competitive environment has pressurized the organization to focus highly on outsourcing. As a result, organizations have to face issues such as cost, quality, flexibility, strategic focus along with diversification. In addition, the potential risks involved in considering outsourcing are quite enormous as the skills and knowledge regarding the processes undertaken by the outsourced organization would be limited. To reduce the potential loss of information, skills and knowledge the organization would have to focus higher on effective inbound and outbound transportation, warehousing, inventory control, production support, packaging, purchasing and order processing along with effective and efficient ways to disseminate information within the organization and its key stakeholders.
- Partnership Issues
The emerging global markets are much more efficient and active as compared to earlier years. Over the last few decades, organizations have faced increasing competition not only at the individual level but also between the entire value chains. Due to such increase in the level of rivalry, executives in the business are focusing highly on developing long-term supply chain partnership that could result in cost reduction, improvement in the services provided and increasing the level of competitive advantage. According to Frankel et al. (2002, p. 1) the benefits associated with higher level of partnership include the effective provision of transport and distribution services. (While change has been slower than desired, many firms have collaborated effectively and achieved significant results through coordinated supply chain activities). However, since each organization has its own goal and priorities set forth as vision and objectives; therefore, setting a shared vision is not a piece of cake and organizations are faced with the challenges in developing a share system or partnership (Corbett, Blackburn, & Van Wassenhove, 2012). (Mutual trust is crucial to reassuring firms that information shared with a partner will not be used against them).
- Data and Information Integration
Developing a shared vision is dependent on the sharing of information. According to Awad, & Nassar, (2010, p. 60) effective supply chain management revolves around the sharing of information among the members of the chain. By providing the members of the chain with relevant information, the organizations are provided with an opportunity to connect with the customers, partners and co-workers which eventually enhances the success ratio of the organization. This is one of the most frequently observed challenges in the construction industry as organizations tend to store and exchange data in dissimilar format (Information integration refers to the sharing of information among members of the supply chain. The ability to seamlessly connect with customers, partners, and co-workers is vital for success; yet most enterprises store and exchange data in dissimilar formats). The central issues lies in ensuring partners that information shared will not be used in negatively affecting the business opportunities as well strengths of the partner’s business (Corbett, Blackburn, & Van Wassenhove, 2012).
Hence, the ability to map the different formats is the most critical situation for the organization as wrong evaluation of information could lead the project in completely opposite direction. To reduce this challenge, the data and information disseminated should be properly evaluated and understood so that the parties involved in the business should be on the same page of the book. Benton, and McHenry, (2010, p. 15-16) discussed this in the reference to the construction industry and reported that to further improve the quality of projects with the help of supply chain management in the construction industry, the data provided should be of higher quality in addition to the integrated system of timely and accurately. (As the supply chain best practice firms are able to improve project quality, completion times, and work methods while decreasing costs, the demanding project owner will continue to demand more. As a result, the efficient construction supply chains will prosper, and the traditional, adversarial supply chains will not survive). Therefore, in case organizations are with external and internal partners are unable to develop consensus on this aspect may face challenges. However, the (Benton, and McHenry, 2010, p. 15) noted that failure to share the information and integration of due information as required ranks on top to negatively affect the SCM implementation as presented below:
(Benton, and McHenry, 2010, p. 15)
2.4. SUPPLY CHAIN AND CONSTRUCTION INDUSTRY
Constantly increasing benefits across various industries resulted in the concept of supply chain management showing great growth prospects in the construction industry (Akintoye, Mcintosh, and Fitzgerald, 2000, p. 159; Vrijhoef and Koskela, 2000, p. 169; Dainty, Briscoe, and Millett, 2001, p. 841-848). (The manufacturing industry has been at the forefront of developing SCM for many years). (SCM is a concept that originated and flourished in the manufacturing industry). The realization of organizations towards SCM concept is inevitable but the organizations are quite reluctant and slow in the employment of the concept (McDermotti and Khalfan, 2006, p. 44). (Construction industry has been slow and reluctant in employing the concept of SCM). Moreover, Fearne and Fowler (2006, p. 283) revealed that the construction industry has the weakest integration of supply chain management as compared to other industrial sectors. (Firms operating in the construction sector need to pay greater attention to the impact on the effectiveness of supply chain projects of achieving cost savings in discrete activities). The challenges that are attributed to the SCM are reflected with immense impact in construction industry. For instance, lack of coordination along with communication among the involved parties is one of the key elements that have negatively influenced the supply chain performance in the construction industry (Humphreys et al., 2003, p. 166-178; Love et al., 2004, p. 43). (Findings emanating from these investigations have been critical of the industry’s fragmented nature, lack of coordination and communication between participants, adversarial contractual relationships, lack of customer supplier focus, price based selection, and ineffective use of technology).
The number of challenges in supply chain management in relation to construction industry is quite high (Bask and Juga, 2001, p. 137; Jahre and Fabbe-Costes, 2005, p. 143; Briscoe and Dainty, 2005, p. 319-326; Fernie and Thorpe, 2007, p. 319; Bankvall, Bygballe, Dubois, & Jahre, 2010, p. 386). (Recent developments in the areas of strategy, channels, processes, relationships, organization and performance measurement show pressures that call for attention to the various dimensions and varying intensities of integration. It is concluded that emphasis should be directed to focused efforts instead of holistic overall integration, and the concept of semi integrated supply chains is offered for collectively describing the phenomena in today's supply chain management) (Most logistics and supply chain management studies take a “systems view”, where all elements are to be understood by how they affect/are affected by other elements with which they interact. Supply chain integration requires that elements be adapted to each other) (Supply chain management is found to be both synonymous with the concept of partnering and particularly problematic for organizations to implement within the construction sector due to specific contextual factors.) (SCM is considered to be especially problematic in relation to the construction industry).
The construction industry in UAE is estimated at US$30 billion which makes this industry one of the largest industries in UAE (Albaloushi and Skitmore, 2008, p. 14). In addition, 16000 contractors and 340,000 workers are employed in this sector but the limited information regarding supply chain management in construction industry has led to challenges and barriers to effective projects (Albaloushi and Skitmore, 2008, p. 14) (The value of ongoing UAE construction work is estimated at US$30 billion, with 16,000 contractors and 340,000 workers are employed in the sector – making it the UAE's largest single industry). SCM focuses highly on the collaboration and communication between the parties involved in the process making its quite complex (Albaloushi, and Skitmore, 2008, p. 14). (SC is formed by all parties involved in fulfilling a customer request). The integration of SCM in UAE’s construction industry is not straightforward as it seems because of the constant management of relationship with the networks of organizations to meet the organization’s objectives (Tommelein et al., 2003, p. 1). ([SCM] “is difficult because it involves managing a complex and dynamic network of organizations that operate to meet numerous different, conflicting business objectives). According to Chopra and Peter (2004, p. 3), SCM aims to meet the requests of the customers by involving all the parties (i.e. manufacturers, suppliers, transporters, warehouses, retailers and the customers themselves). (A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain includes not only the manufacturer and suppliers, but also transporters, warehouses, retailers, and even customers themselves). Moreover, the primary purpose of SCM is to meet the demands of the customers to generate higher level of profits for the organization through which it could develop new products to continually expand the reach in the market.
