Mobilising the Resource Base 1© Graham M Winch

7 : The Dynamics of the Supply Chain

I do as little as possible for a firm but as much as I can when I am working for myself

Max Gagg

Mobilising the Resource Base 2© Graham M Winch

The Dynamics of the Supply Chain

• horizontal and vertical governance• internal resource mobilisation• shirking• sequential spot contracting• managing the supply chain• managing consortia and joint ventures• the dynamics of supply chains

Mobilising the Resource Base 3© Graham M Winch

Horizontal and Vertical Governance

• vertical governance– the project chain

• horizontal governance– human resources : internal governance– the supply chain : external governance

• the project value system

4© Graham M Winch

Horizontal and Vertical Governance in the Project Value System

client

first-tier suppliersecond-tier

supplier

second- tiersupplier

second-tiersupplier

humanresources

third-tiersupplier

employmentrelation

principalcontract

sub-contract

supply chain

horizontal governance

verticalgovernance

first-tier supplier

project chain

Mobilising the Resource Base 5© Graham M Winch

Internal Resource Mobilisation

• internal resources as human resources– purchase/hire of plant

• employment contracts and commercial contracts– contract of service <> contract for service

• governance options– asset specificity through learning– uncertainty

Mobilising the Resource Base 6© Graham M Winch

Governance Options

• sequential spot contracting• contingent claims contracting• authority relations• collegial relations• governing the employment relation

Mobilising the Resource Base 7© Graham M Winch

Governing the Employment Relation

asset specificity

uncertainty

low

high

low high

sequential spot

contracting

collegial relations

authority relations

contingent claims

contracting

Mobilising the Resource Base 8© Graham M Winch

Shirking

• the shirking problem– purchase of capacity for work, not work done– information advantage lies with employee– measurement difficulties in work done

• shirking solutions– spot contracts - piece-work– contingent claims - machine pacing– authority relations - supervision– collegial relations - peer pressure/group bonuses

Mobilising the Resource Base 9© Graham M Winch

The Role of Sequential Spot Contracting

• the reliance on sequential spot contracting– casual employment– agency workers– self-employment– gang organisation (the lump)

• the failure to evolve to managerial capitalism• the failure to control the work process

Mobilising the Resource Base 10© Graham M Winch

Managing the Supply Chain

• external governance of transactions• maximising flexibility• benefiting from specialisation• horizontal governance options

– asset specificity– transaction frequency

Mobilising the Resource Base 11© Graham M Winch

External Horizontal Governance Options

• spot market sub-contracts• quasi-firm• consortium• joint venture

Mobilising the Resource Base 12© Graham M Winch

Reasons for High Asset Specificity

• supplier owns proprietary technology• nominated sub-contractor• high switching costs• temporal specificity

– the hold-up problem

• regulatory context– local content– technology transfer

• governance options

13© Graham M Winch

External Horizontal Governance Options for the Supply Chain

asset specificity

transaction frequency

high

low

low high

spot-market sub-contractors

consortium

quasi-firm

joint-venture

Mobilising the Resource Base 14© Graham M Winch

Managing Consortia and Joint Ventures

• the Jane Austen problem– wealth– status– character

• integrated and separated JVs• technology transfer

Mobilising the Resource Base 15© Graham M Winch

The Dynamics of Supply Chains

• the problem of execution variability• the ripple effect through the supply chain• the role of partnering• the role of construction planning• construction clusters

– the organisational principle– interdependence and information processing

16© Graham M Winch

The Principle of Construction Clusters

sub-system level

whole building level

sub-system level

construction methods and plans

design detail

real prices

construction strategy

design strategy

overall cost plan

defined interface

17© Graham M Winch

The Clustered Project Coalition Structure

client’s team

prime contractor

cluster leader cluster leader

designer(‘s) suppliers

designer(s) suppliers

project level design team cluster leaders’ team

clusters

core team