CSCM Chapter 1 construction supply chain management
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Transcript of CSCM Chapter 1 construction supply chain management
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Construction Supply Chain Management
Construction Supply Chain Management
(MGT60803/QSB2433)
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Introduction
• The ability successfully to procure built assets is at the heart of the construction process.
• At the heart of the procurement process is identifying the constantly evolving needs of the construction client.
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Just what every construction client wants!
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Supply Chain
• Supply chain is used to describe the interconnected hierarchy of supply contracts necessary to procure the built assets.
• Managing the supply chain involves understanding the breakdown and traceability of products and services, organizations, logistics, people, activities, information and resources that transform raw materials into a finished product.
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Supply Chain
• Construction industry has the particular difficulty that every building is different, a unique prototype, developed by a team od consultants, contractors and suppliers that may never have worked together before.
• To add to the complexity, different procurement systems place elements of supply chain management with varying disciplines and organizations.
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Construction Procurement
• Procurement is the process of obtaining goods and services from another for some consideration. (Generally – acquire something)
• Procurement is used in the context of construction and refers to the processes of acquiring construction project.
(E.g. a building)
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Construction Procurement
• When a project is dreamt about by the client, he works towards actualizing it.
• Apart from funding and providing land for development, the client does not have the requisite skills to actualize his dream.
• He has to employ the services of those who would do so.
** In this case, the client might be the government sectors.
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Construction Procurement
• The task of designing his dream and its subsequent construction are open to different methods.
• Hence, to choose the most appropriate method for his project, he needs professional advice (consultant team).
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How to choose the most appropriate procurement method to satisfy the client’s needs?
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Procurement
• Procurement is a term used to describe all activities undertaken by the client in seeking to bring about the construction, says a building.
• When client wishes to choose any type of procurement method for realizing his project, his major concern are the drivers of the procurement.
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What are the drivers of construction procurement?
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Procurement Drivers
• These drivers determined the selection of procurement path.
• The client being asked to identify which of the drivers was the most important.
** It is impossible to have all three simultaneously.
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Procurement Drivers
• To finish the project on time (Time)• The cost of the project (Cost)• Performance or quality in relation to both
design and construction of the building (Quality)
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Procurement Method
• Traditional• Design and build• Management Contracting• Public-Private Partnership (PPP)
** Only focus on first three methods.
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Traditional Building Project
• On a traditional building project, design consultants are the first tier suppliers, working for the client and the contractor has the supply chain of sub-constructors and specialist suppliers.
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The Construction Supply Chain: Traditional
16
Owner/Operator
Labor Subcontractor
Engineer
Main Contractor
Design team
Sponsor
Distributor
End User
Permanent Finance
Project Finance
Land and Permissions
Consultant
Labor
Material
Material
Building ProductManufacturer
CASH FLOW
PRODUCT
INFORMATION
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Traditional
• The major feature of this method is that the design process is separate from construction.
• It requires full documentation before the contractor can be invited to tender for the work.
• Design Bid Build (TIME)
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Design and Build Project
• On design and build projects, there may be just one first tier supplier (contractor) and design consultants will work for them as part of their supply chain.
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The Construction Supply Chain: Design – Build
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Owner/Operator
Labor Subcontractor
Engineer
Constructor
Design team
Sponsor
Distributor
End User
Permanent Finance
Project Finance
Land and Permissions
Consultant
Labor
Material
Material
Building ProductManufacturer
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Design and Build
• In this method, the contractor is responsible for undertaking both design and construction of the work.
• To choose a suitable contractor for the job, contractors are required to develop a design (from an initial concept prepared by the consultant appointed to advice the client), prepare a tender figure and submit the whole package to be evaluated by the client.
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Design and Build
• A team of consultants will be needed to assess each contractor’s proposal. (different designs)
• Tenderers should be informed of the criteria to be used.
• Price will be the prime factor in this method. (COST)
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Management
• This method of procurement is based upon the client appointing a consultant who will prepare project drawings and project specifications.
• A management contractor is selected by a process of tender and interviews.
• The management contractor will not carry out construction work. WHY??
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Management
• This helps to preserve the management contractor’s independence and reinforces a consultancy relationship with the client.
• The success of this approach depends on the contractor’s team (experienced in construction team working).
• Adjustments will be made to the design and specification of work packages later to keep the project within budget.
• The overall process will be shorter. (TIME)
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The Construction Supply Chain: Project Management
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Sponsor/Owner/Operator
Labor Subcontractor
Engineer
Main Contractor
Design team
Project Management firm
Distributor
End User
Permanent Finance
Project Finance
Land and Permissions
Consultant
Labor
Material
Material
Building ProductManufacturer
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Large/Complex Project
• On large or complex projects, responsibility and performance generally cascades down the supply chain to a plethora / redundancy of suppliers, sometimes unknown to management at the top of the chain.
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The End