The Collaborative Working Mentors invited Prof Jan Godsell, co-investigator at Network+, professor of Operations and Supply Chain Strategy at the University of Warwick, and co-author of Supply chain productivity in construction. She touched on how productivity improvements, based on supply chain management used in manufacturing, can be applied to improve the performance of the construction process.
Jan first got involved in supply chain management when she started working at Dyson. She was brought in to develop a production line for their vacuum cleaners.
It was clear from the beginning that making manufacturing more efficient was not the right area of focus to make Dyson more successful. They needed to work out what was the actual customer demand instead of overproducing for financial gain. It was essential to ensure that every vacuum cleaner produced by Dyson ended up in the customer’s hands and not just stuck in a warehouse. The growth of the supply base was crucial to successful growth.
The importance of the supply chain to deliver excellence
A well-thought-out end-to-end supply chain management supports organisations to achieve profitable growth efficiently. Jan uses this end-to-end approach of looking at supply chains alongside customer demand through four intermediary flows:
• equipment, and
• professional services.
The four roles of supply chain management in manufacturing
To understand how supply chain management works in the manufacturing industry is essential to understand the roles it fulfils:
• managing supply base – a contract set up, and then the role of the supply manager is to organise those suppliers,
• resource flow – once the contracts are set up is about managing the flow of those resources into the project,
• a combination of the first two – setting up those supplier relationships and managing the flows of the resources, and
• the end-to-end view.
How do different industries approach supply chain management?
The supply chain in the construction industry is not as organised as manufacturing, let alone fully integrated.
There is a common perception that the most exemplar supply chains are in the automotive, aerospace and manufacturing industry. However, the supply chains that actually make a difference are in the fast-moving consumer goods (high volume and variety) who tend to take a much more end-to-end perspective.
The supply chain in the automotive and aerospace industry often refers to supply base management, which is very cost-driven. However, by just looking at only supply base management, there is a risk of missing out on opportunities to achieve productivity gains. When it comes to the construction industry, supply chain management is not developed to facilitate process integration or flow creation.
Types of processes within organisations
Within a company, there are two types of processes: the business process and the functional one. Usually, procurement or planning is part of the functional process. Creating value for the customer is what characterises a business process from a functional process. The business processes, typically, cross functional boundaries to uptake the end-to-end approach and, therefore, sucking up the functional resources to create teams with a strategic goal.
At the heart of any business strategy, there are three key business processes:
• customer relationship management,
• supply chain management, and
• new product development.
Researchers at Harvard proposed that these three key business processes identified are overly simplistic. Instead, we should think about this is from the perspective of how businesses deliver value:
• it can deliver value by establishing a strong relationship with the customer and using that knowledge gained to deliver improved services,
• it can deliver value by having operational excellence, and
• your business can deliver value through product innovation.
These three dimensions are important, and companies are competitive by being exemplary in one value dimension.
Jan and her team conducted surveys in the manufacturing sphere, asking companies the following question “If you were given 100 points to share between the three value drivers, how would you share these points?” About 40% of those points went to operational excellence (supply chain management). The results of the surveys reinforce that effective and integrated supply chain management is essential in delivering value across the entire business, and it is the first place to start.
How many construction firms do you think are aware of all 3 of these processes? And which do you think is the most dominant?
• The architectural perspective – there is no supply chain, and the dominant sphere is building strong customer relationships (customer relationship management)
• The contracting perspective – most contractors will focus on building strong customer relationships & operational excellence. However, product development is still left behind. However, recently it has gained traction, and companies are recognising its benefits.
One of the attendees mentioned that from his experience, when it comes to end-delivery organisations, there wasn’t a matched focus on building strong customer relationships and using that knowledge to improve services. The parties involved had different ideas on the importance of customer engagement. Jan added that the two most dysfunctional industries are the steel and construction sector. In the construction context, there are certain things that you’d never do in manufacturing, for example, the attitude towards risk management and contracts.
How can supply management support innovation?
In parallel with the construction industry, the submarine industry had a divide between the design and implementation phases. The issue is linked to the misunderstanding of effective procurement and work in partnership with the supply chain. For example, people are investing a lot in the design phase and aren’t left with much investment in the implementation phase. Jan suggests that this attitude should change. When we look at supply chain management and the true customer demand, 60-70% of the products are repeatable, meaning a flow can be created, and long-term collaborative relationships are crucial to effective supply chain management.
How can construction embrace these learnings?
This shift towards business process and end-to-end approach is the responsibility of the client. The change starts with them as they set the tone for the rest of the construction process. In construction, you can start to enable more flows by changing the organisational structure and taking up more business process orientation. To recognise the true value of supply chain planning, you need better visibility, ensuring that the contingency across that end-to-end approach is present exactly where it is required.
The CWG will be meeting in September to discuss further.