Project Management

Strategic Issues
Partnering, SCM, Strategic Alliances and
continuous performance improvement
Andrew Brown
EC2.15

SCM & continuous

improvement

Further reading for this subject:

Course Notes

(On vision)

Peter Fewings:

Construction Project
Management-- An integrated
Management
approach,, Taylor and Francis:
approach
Chapter 12

SCM and continuous

improvement

Topics for this afternoon:

The critical challenges faced by those managing

construction in the contemporary market place.

A very brief mention of the partnering concept

Supply Chain ManagementManagement- concepts, goals and

problems.

The problem of continuous improvementand yet

more challenges for the construction industry

Conclusion

PM performance and
Leadership

So far we have examined:examined: the performance of Project Management and the construction
industry in terms of its propensity to deliver finished projects to
clients on time on cost to the required quality; and,
The role of and importance of leadership, power and influence in
seeking to coerce all involved in projects to deliver them on time,
within budget and to the required quality.
This afternoon we are going to take things a little further and
address a number of challengessadly, there are no definitive
answers to these challenges, only suggestions! and food for
thought.

SCM and continuous

improvement

The UK construction industry has faced numerous

Government reports into its performance almost throughout
the last 5050-60 years:years:

The Emerson Report (1950s)

The Banwell Report (1960s)
The Ibbs report (1980s)
Various National Audit Office Reports (1980s)
The Latham Report (1994)
The Egan Report (Rethinking Construction 1998)

Each report, or set of reports, has made a number of

recommendations on the shape and/or structure of the
industry and how it carries out its business

SCM and Continuous

improvement.

Yet the industry, while willing to adopt change in

terms of new procurement procedures, seems to
more or less carry on as before until forced to
adopt new working practices by its major clients.

But Sir John Egan set some very specific challenges

for the construction industry.

First he challenged the industry to achieve ZERO

DEFECTS;
Then, to achieve 10% reductions in construction
costs; and lastly,
To achieve 10% reductions in project schedules.

SCM and continuous

improvement
Question for debate and discussion:discussion:Debate these question in small groups.

Do you think the targets that Sir John Egan set for the construction
industry 10 years ago were realistic and achievable?

Do you consider that there is any evidence that they have been
achieved?

If you dont think they are achievable, Why not?

If you do think they are achievable, How?

SCM and Continuous

Performance improvement

The partnering approaches adopted by leading clients with

consultants and contractors over the previous decade
provide a clear indication that Egans goals are not
unrealistic and that they are in fact achievable.
On single project partnering arrangements, project costs
have been reported as being up to 10% less than would have
been expected if traditional contractual approaches had been
used.
On multiple projects where a longer term or strategic
partnering arrangement has been established, costs on later
projects have been reported to be up to 30% less than may
have been the case with conventional contracting
approaches.
Why is this?

SCM and continuous

performance improvement

Partnering has generally had its roots in the

relationships between Clients, Consultants and Main
Contractors
Supply Chain Management (SCM); or
Partnering the Supply Chain; or
Managing the Supply Chain

is a logical extension of the partnering

philosophy and extends the concept to all involved
in the delivery of the project.

SCM is one of the latest buzzwords in Construction

and in Construction Project Management.

Supply Chain
Management

Definition:-Definition:
The management of upstream and downstream
relationships with suppliers and customers to
deliver superior customer value at less cost to
the supply chain as a whole.
The main focus of SCM is improvement and
enhancement.

Supply Chain
Management

Supply Chain Management and the development of

strategic alliances depend on:on: A high level of joint strategy development with different
organisations and firms, both upstream and downstream.
A common purpose agreed between separate firms and
organisations in the supply chain.
Jointly agreed common goals amongst the members of the
supply chain.
A mutual dependence for all firms in the supply chain on the
success of achieving those agreed common goals.

Supply Chain
Management

Strategic Alliances involve separate firms

(who would normally be in competition with
pooling:one another), Sharing or pooling:

Knowledge;
Information;
Resources;
Technology;
Personnel; and
Resources

Supply Chain
Management

This fundamentally and radically changes the nature of

competition.

We need to remember that the construction industry is one

that has been focused on competitive strategies and a
competitive market for decades;

Grasping a SCM philosophy is challenging and difficult

To fully realise the benefits of SCM, firms stop competing with

firms that they used to compete with and begin to share and
pool resources towards the accomplishment of specified and
agreed goals that will benefit them all.

Supply Chain
Management

This means that competition in the industry

is relocated.

Instead of firms competing with other firms,

we ought to see one supply chain
competing with a different supply
chain..this may not be easy to grasp!!

Supply Chain
Management

BUT!!
We live in a world of BUZZ and SPIN
Controversially, arent the goals of SCM and what it is
attempting to accomplish almost an exact match for the
definition of PM in the first place??
Is it the case that the goals of organisational design,
leadership and integration (the IPC) are almost identical
to the goals of SCM??

Supply Chain
Management

Has demonstrated significant benefits

measured in terms of performance
enhancement in other industries, for example:

The Automotive industry

The Aerospace and Aeronautical industry
Manufacturing Industries; and
The Microprocessor industry

BUT, construction is different??

Supply Chain
Management

If SCM is to deliver any benefit, it depends

on TRUST.

All in a given supply chain must trust one

another:

Contractual Trust;
Competency Trust; and
Goodwill Trust.

All trust will at some level be based on the

personal traits of the managers involved.

Supply Chain
Management

Known Barriers to effective SCM:SCM:

Lack of Commitment
Insufficient understanding of the SCM philosophy
Lack of Strategic Leadership
Lack of Understanding of the new model of network
competition
Inappropriate organisational structures
Lack of leverage
Unwillingness to adopt winwin-win thinking
Insufficient allocation of time to build relationships
Lack of common purpose and goals
Resistance to the sharing of information
Inappropriate use of power
Lack of commitment to change, innovation and learning

Supply Chain
Management

SCM is a solid concept and evidence can be

presented to demonstrate that it has been
associated with significant performance
enhancement;

However, much of its potential benefits and

therefore savings result because the philosophy
drives waste out from processes.

A problem arises insofar as it is logical that there

will be a finite limit to the amount of waste that can
be driven out of a set of processes

Supply Chain
Management

The potential problem is that Egans 10%

performance enhancement challenges for time and
cost delivery were intended to be continuous and
cumulative, not one stop.

We have seen that there are enough challenges to

be overcome in just delivering projects on time, to
budget in the first place without attempting to
speed the process up by 10% per year, while
simultaneously reducing the cost of delivery by
10% per year

Achieving 10% per year in perpetuity is surely

impossible!!

Supply Chain
Management

A brief video clip

Continuous Performance

Comparing Formula 1 with the construction

industry!!

There are of course many differences: BUT

There are considerable similarities as well.

We can also look at the Aerospace or

Aeronautical industries..

Consider the AIRBUS Consortium

Continuous Performance
Enhancement

Continuous improvement requires new

technology and new technology depends on
Research and Development.

In the marketplace that most construction

firms operate in the only effective means of
Research and Development is to take the
SCM concept one step further and
contemplate forging Strategic Alliances with
partners

Continuous Performance
Improvement

Quite apart from Egans challenges for continuous

performance improvement, the construction
industry (as a whole) needs to focus on tackling
even more pressing concerns

Continuous Performance
Improvement

Continuous Performance
Improvement

Approximately 19% of the UKs ecoeco-footprint is taken

up by its stock of buildings.

Approximately 52% of the UKs carbon emissions come

from creating or using buildings.

The construction industry must

respond to this environmental
challenge as well as to Egans process
orientated challenge.

Continuous Performance
Improvement

Both process and environmental challenges require the development

and implementation of new technologiesthis in turn requires
significant financial investment in R & D.

R & D work is expensive and risky.

The Construction Industrys record in R & D, when compared with

other industries of similar scale and size, is, at best, POOR.

There are reasons for this

Strategic Partnerships, Strategic Alliances which allow resource, cost,

knowledge, and risk to be shared, may be the key to moving forward
in these important areas.

We could end up with a construction industry which is organised

around which supply chain a client uses to get a building that has the
performance that they want instead of assembling a distinct supply
chain for each and every building that is constructed..

Conclusion

SCM is a new concept in the construction industry, but its

goals are long established project management goals.

If the construction industry is going to succeed in tackling

performance goals in terms of process and environmental
challenges, it is arguable that it needs to be inventive and
vigorous in implementing SCM and Strategic Alliances.

This will change the fundamental nature of competition in the

supply chain of the construction industry.

Arguably, the project managers role in bringing about this

change, from the perspective of project leadership, is critical