Open Universiteit

Please use this identifier to cite or link to this item: http://hdl.handle.net/1820/7271
Title: Supply chain integration in the construction industry
Authors: Wezop van, D
Keywords: Supply Chain Integration
Firm Performance
Integration Dimensions
Construction Industry
Project-based Industrie
Buyer-Supplier Relationships
Issue Date: 1-Oct-2016
Publisher: Open Universiteit Nederland
Abstract: Problem statement Projects have become larger, more complex, less specified and riskier for contractors. Risk reduction by contractors leads to buying goods and services from subcontractors, which can be up to 90% of the project turnover (Bemelmans, Voordijk, & Vos, 2012; Bemelmans, Voordijk, Vos, & Buter, 2012; Hartmann & Caerteling, 2010). At the end, clients force contractors to integrate. But also contractors themselves want to integrate, as integration in project-based supply chains can have positive effects on firm performance, such as customer service, operations, finance, and profits (Eriksson, 2015; Leuschner, Rogers, & Charvet, 2013). However, most prior supply chain integration (SCI) studies were concerned with continuous exchanges in manufacturing industries (Briscoe & Dainty, 2005; Eriksson, 2015; Martinsuo & Ahola, 2010), leaving a lack of knowledge on a systematic understanding of integration in project-based supply chains (Eriksson, 2015). The project-based industry (for example the construction industry) is a non-continuous environment where the main contractor is contracting suppliers from project to project. Supply chain integration (SCI) can only be properly conceptualized and implemented if it is adapted to specific business conditions. SCI methods within manufacturing industries are therefore not automatically suitable for project-based industries (Eriksson, 2015; Martinsuo & Ahola, 2010). In accordance with Eriksson (2015), this study will distinguish between the dimensions of integration (i.e. strength, scope, duration, and depth) investigating the impact of SCI on firm performance. In addition, this research will investigate how these specific SCI dimensions interact in project-based supply chains (Eriksson, 2015). As there is a need for SCI research in project-based industries with an industry specific concept of SCI, the aim of this study is to gain insight and knowledge about the impact of integration dimensions on firm performance in buyer-supplier relationships and what the interdependencies are between these dimensions. The problem statement of this study is: What are the interdependencies between supply chain integration dimensions (i.e. strength, scope, duration and depth) and what is the impact of these dimensions on firm performance? Research method A conceptual model with 4 main hypotheses were the outcome of our literature review. The hypotheses were tested with survey data from a self-administered online questionnaire. We asked the opinion of 499 professionals working in the project-based construction industry which resulted in an effective response of 24.9% (n=124). Results After the reliability analyses, we performed a regressions analyses in SPSS. Significance was tested at a 95% reliability level. A stepwise multiple linear regression analysis shows that 15.2% of the variance in the dependent variable firm performance can be explained by the independent variables scope of internal integration and customer depth of integration. This means on the one hand that the performance of the focal company will increase if there are people from multiple hierarchical levels involved in the integration activities with customers. On the other hand, it means that integration within a firm will increase the performance of a firm. We also performed four standard linear regression analysis for hypotheses within the SCI model. The scope of supplier integration can for 14.4% be explained with the scope of internal integration and the scope of customer integration can for 20.4% be explained by internal integration. This means that the higher the level of integration within the focal company, the higher the level of integration between the focal company and its suppliers and customers. Supplier relational integration can for 5.9% be explained with supplier informational integration and customer relational integration can for 4.0% be explained with customer informational integration. This means that integration at a relational level of a focal company with suppliers and customer first needs to undergo integration at the informational level. Recommendations There are several recommendations for practitioners. First, the results demonstrate that practitioners in the construction industry should focus on internal integration activities to increase the performance of their firm. It is important that companies avoid internal barriers between departments, projects or other structures. Connecting people, processes and activities will, in the end, increase the financial health of a company. By integrating internally, integration with suppliers and customers is possible. Integration goes in steps. Companies first need to integrate on an informational level and then on a relational basis. Integration cannot immediately be relational or strategically. Companies first need to know each other, exchange information, buy a sample, go through a prequalification or pass a quality check before the relationship can go on to a higher level. People from all hierarchical levels should be involved in the integration activities and especially for integration with clients. People from all hierarchical levels freely need to communicate and integrate with their counterparties because in the end it will improve the performance of their company. The last recommendation for practitioners is that SCI cannot be avoided in the construction industry. On the one hand, customers encourage integration with the use of integrated contract-forms and on the other hand, contractors can have a substantial performance boost by incorporating SCI practices. Some limitations lead to recommendations for further research. This is the first SCI research in the project-based construction industry including a quantitative analyses of the SCI dimensions depth and duration. We therefore encourage academics to investigate SCI dimensions in the construction industry in general. The results shows that breaking down the strength, depth and duration of integration, with a supplier as well as a customer provides interesting details. We therefore encourage scholars to continue with this approach, as relationships with customers and supplier are different. We have not made any difference between subcontractors or vendors in this study. Arantes, Ferreira, and Costa (2015) state that the relationship with subcontractors and vendors are different. It could therefore be an interesting idea to investigate how the SCI dimensions and firm performance react to further separation on the supplier side of the supply chain. A construction company only does projects and the sum of the project performances is the performance of the firm. Additionally, we cannot say which projects have a high performance and which have not. It would also be interesting to see how the SCI dimensions response to typical high performance and typical low performance projects. As already stated in the discussion it could well be that certain SCI dimensions will offer significant results if other scholars will add operational and relational performance besides business (financial) performance. Some other interesting information that is missing in this study lies in the control variables of this study. It could for example be interesting to see which proportion of the contract-forms are integration or traditional contract forms. In addition, the opinion of respondents regarding the focus of the company on SCI would be interesting. It could well be that some respondents only work on projects with integrated contract-forms and others only on conventional projects. Professionals working for companies with a high focus on SCI will response different to questions compared to those who have never heard of SCI. Both of these aspects influence their opinion and may skew results concerning the interaction of the SCI dimensions.
URI: http://hdl.handle.net/1820/7271
Appears in Collections:MSc Management Science

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