Research on Construction Supply Chain Management in E-business

Environment

,2 3 4
Minmin Zhang , ,Jinhui Wang , Jian Zhang
1 School of Management,China University of Mining and Technology (Beijing), Beijing, China
2
School of Public Policy, University of Maryland, College Park,USA
3 State Nuclear Electric Power Planning Design & Research Institute, Beijing, China
4
China National Construction Machinery Corporation, Tianjin, China
(zmm0981@126.com)

partnership with other partners and enhance market

Abstract - With continuous economic development
and scientific and technical progress, global market
competition is becoming increasingly stiff. Elementary
knowledge of the supply chain management and e­
business of construction enterprise were introduced in
this paper. Some problems of existing supply chain
management of construction enterprise in e-business
environment were analyzed. Measures and key factors
for strengthening supply chain management
construction enterprise in e-business environment
were discussed. It's proposed that cooperation and
communication be reinforced and good relationship
between suppliers and contractor be well maintained
and third-party logistics and JIT delivery system be
made better. Supply chain management and
business are effective tools for construction enterprise
to save cost, shorten construction period and improve
quality. E-business provides low-cost and convenient
information support to supply chain management.
Supply chain management of construction enterprise
in e-business environment is important for improving
competitiveness and economic and social benefits of
construction enterprise
Keywords - Construction enterprise, supply chain,
supply chain management, e-business
I. INTRODUCTION
Construction enterprises are the pillar of national
economy due to their large capacity of employment and
high degree of association with other industries. Therefore,
it is urgent to change the existing state of high
consumption but low efficiency of construction
enterprises via management innovation. In light of this
case, supply chain management may be used to study the
effective demand of construction enterprises at first, take
the general contractor as the core enterprise and link
suppliers of materials and equipment, subcontractors and
the owner into an integrated functional network chain via
controlling information flow, materials flow and capital
flow during the whole process from acceptance of the bid
to construction, final acceptance of construction and after­
sale services. Therefore, more and more construction
enterprises begin to utilize supply chain management
method to improve organizational performance, meliorate
competitiveness.
E-business is a technology of business transaction
via Internet, which not only quickly provides customers
with comprehensive and dynamic information but an
economical public communication platform free from
time and space constraints. E-business fit well with
characteristics of supply chain management l l -2J. Basic
features of e-business are high efficiency, convenience,
of integration, safety and coordination. Models of supply
chain management of construction enterprises on the basis
of e-business are established in this paper, so is the
matched operation system.
The significance of this paper lies in introducing
advanced management mode namely supply chain
e­ management into construction industry and proposing a
kind of integrated supply chain management mode
meeting the demand of construction enterprises.
II. METHODOLOGY SUPPLY CHAIN
MANAGEMENT & E-BUSINESS OF
CONSTRUCTION ENTERPRISE
A. Supply chain management
Supply chain management thoughts had been
embodied by the "Quick Response (QR)" of U.S. textile
and clothing industry in the middle of twentieth century,3,.
Supply chain is the network structure formed by upstream
and downstream enterprises providing products and
services to end users during the process of production and
circulation. SCM (supply chain management) gradually
becomes a kind of advanced management modes with
good perspectives r41- It systematically regards core
enterprise and upstream and downstream enterprises as an
integrated supplier, effectively integrates and manages all
activities related to production so as to adapt to the
development of enterprises and cooperation among
enterprises r5-61-
SCM refers to a set of methods for effectively
integrating suppliers, manufacturers, producers, dealers
and retailers to produce merchandises to minimize system
cost under the precondition of ensuring service level and
delivering merchandises of proper quantities to right
places in appropriate time.
B. Supply chain management of construction enterprise

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The supply chain of construction enterprise covers
the whole process of construction. It starts from the
effective demand of the owner and links the general
contractor which is the core the chain, suppliers of
materials and mechanical equipment, subcontractors,
design units, consultancy units and the owner into an
integrated network via information flow, materials flow
and capital flow r71
Supply chain management of construction enterprise
aims to meet demand via materials flow, information flow
and capital flow. Capital flows from the owner to general
contractor, then to subcontractors and suppliers.
Information flows from the owner to contractor, design
institute, suppliers and manufacturers. The process of
materials flow has a close bearing on the saving logistics
cost of construction enterprise. Materials flow from
suppliers of materials and equipment to general contractor
and subcontractors. Supply chain management includes
coordination of information flow, materials flow and
capital flow among multiple companies l8J. Therefore,
materials inventory of every construction enterprise shall
be as less as possible. The supply chain model of
construction enterprise is shown in Figure 1.
Materials flo.v
Materials
suppliers
Capitalflo.v
Subc:onlracted works COIIItructian promc1s
Labar
NlcClldrac10ll Gell!l'aJ
cc:rilacfm
Capitalflo.v
Materials flo.v
Equipnalll t...
leasers Capitalflo.v
Fig. I. Supply chain model of construction enterprise
Supply chain management of construction enterprise
is a complex and dynamic process which emphasizes the
full use of internal and external resources, win-win among
all parties and cultivation of core competitiveness. It is
known from foreign experience of supply chain
management of construction enterprise, the total project
cost reduces by 1O%� 15 % on average, the period of
disposing suggestions shortens and the degree of
satisfaction of the owner greatly increases 19J.
C. E-business of construction enterprise
As far as construction enterprise is concerned, e­
business is helpful for improving project management
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efficiency and reducing direct cost and management cost.
E-business not only greatly increases the benefit and
improves efficiency of construction industry, but
facilitates the realization of transverse combined
production of construction enterprise and benefits the
implementation of supply chain management. E­
procurement based on supply chain has been very popular
in foreign construction industry and many professional
agencies have been providing procurement management
services to enterprises of nodes in a supply chain, such as
management methods and procurement standards. So far,
many domestic construction enterprises have begun to pay
importance to information management and e-service of
construction projects. Extra large construction enterprises
and most first-class construction enterprises have built
Internet website. The number of computers of domestic
construction enterprises has been growing year by year
and e-mail has become a universal information exchange
tool used by construction enterprises. Under the impact of
the Internet, construction industry has a deeper
recognition of e-business. E-business will completely
change traditional business modes of construction
enterprise and radically change the whole economic
environment of construction enterprise. However, there
are some obvious limitations and deficiencies for China's
construction enterprises to have e-business, for example,
Desicnsuppl2r there is short of overall planning of software development
and development capital most are low-level
redevelopment llO],
Capital Desicn
flo.v
III. RESULTS EXISTING PROBLEMS OF
Owll!r
CONSTRUCTION SUPPLY CHAIN MANAGEMNT IN
Capitalflo.v E-BUSINESS ENVIRONMENT
Capital CarwI
flo.v Supply chain management is dynamic supply system
in which all partners rely on one another. Supply chain
ElPerirg
management of construction enterprise in e-business
cOlll1ll�
supplier environment involves capital, ERP, inventory
management, plan sharing, logistics, transport,
procurement and quality management. Major issues are
..
introduced as follows:
A. Value analysis of supply chain management of
construction enterprise in e-business environment
All nodal enterprises in construction supply chain
have a common objective of providing the owner with
better products and services and improving the overall
value of supply chain, especially small and medium
enterprises, their implementation of e-business provides
technical support for creating more value for construction
supply chain [11l In e-business oriented supply chain
management of construction enterprise, each construction
product shall be reconsidered for its time,cost,efficiency,
labor and client because construction enterprise has
business characteristics like long time duration, fixed
location, big risk, much uncertainty and simple products
configuration and each construction product has different
 supporting supply chain. Moreover, rapid upgrade of
information technology makes the investment for
application of e-business uncertain, so It IS sometime
difficult for construction enterprise to estimate input cost.
Therefore, construction enterprise shall make decisions
after reanalyzing the value of supply chain management
in view of different products, planning design,
implementation and evaluation.
B. Relationship between contractor and suppliers
Many construction materials are used and some are
imported form foreign countries, so the procurement and
supply of materials is one of the key links of supply chain
management of construction enterprise. In case of e­
business procurement, online settlement of construction
materials will be delayed due to slow development of
internet banking, laggard electronic payment system and
imperfect online pay means. All materials suppliers are
not able to provide materials timely within the guaranty
time due to other uncertain factors. Many factors such as
machine stoppage, delayed delivery of upstream suppliers
and dispute between suppliers and buyers will lead to
delayed delivery.
C. Poor informatization of construction enterprise
Due to low level of informatization and laggard
management methods of construction project, it is unable
to timely know cost occurrence, profit and loss of every
project and unable to realize process treatment of business
and integrated data management of construction projects.
Therefore, project management soft wares shall be
specially researched and developed for the realization of
informatization of construction enterprise, which to a
certain extent increases the cost of construction enterprise.
IV. CONSTRUCTION SUPPLY CHAIN
MANAGEMENT MEASURES
A. Reinforcement of cooperation and coordination
Mutual trust among partner enterprises is the premise
of sharing information for supply chain management of
construction enterprise while the collaborative e-business
is the core of supply chain management of construction
enterprise in e-business era. According to the
investigation sponsored by Gartner Group (U.S.
consultation company), an enterprise based on
collaborative e-business is able to effectively reduce
development cost by 25%, trade cost by 30%-70% and
inventory cost by 25%-40%, which greatly improves
profit. In order to successfully implement supply chain
management in construction industry and make supply
chain management a competitive weapon, isolation
among enterprises must be eliminated and various
business activities within the enterprise and with other
enterprises shall be integrated to form an integrated
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supply chain management system r12l Construction
enterprise can integrate self business process, clients,
suppliers with those of other partners via e-business,
which helps the enterprise to reduce trade cost within self
dominant market, cultivate information sharing,
cooperation and win-win concept to ensure the synergistic
effect along supply chain and improve competitiveness.
With the increase of construction scale and
complexity, coordination has become one of key factors
of construction supply chain management. Production
activities of nodal enterprises of the supply chain shall be
adjusted so as to form an optimized project construction
and operation system and reduce the cost of the whole
supply chain.
B. Well handling of relationship between contractors and
suppliers
Construction contractors shall directly contact with
suppliers in e-business environment since most
construction enterprises subcontract works, so
procurement activities may be used to stir up their
potentials to urge them to continuously innovate to adapt
to self development. Construction enterprises shall not
apply pressure to suppliers or making various unequal
treaties for the sake of low price but take active measures
to reduce logistics cost and improve self competitiveness.
More importance shall be attached to suppliers of
construction enterprises and they shall be cooperators but
not superiors and subordinates.
C. Improvement of third-party logistics and lIT delivery
Utilization of third-party logistics and realization of
JIT delivery is the optimal choice for realizing integration
of materials supply and project construction. Construction
enterprises are able to dedicate to core business and
improve efficiency after subcontracting with third-party
logistics agencies. The third-party logistics may adopt
groupage and integrated transport to economize the
replenishment of small-amount inventory. It is an
inexorable trend to implement construction logistics and
supply chain management.
Zero inventory is an important objective of the
construction supply chain management in e-business
environment. Suppliers and third-party logistics system
exchanges information via e-business platform, make
construction logistics plan and realize JIT delivery. JIT is
throughout the whole production process and covers all
aspects from design to delivery. In addition, it ensures
least inventory, waste and space occupation and its
ultimate objective is to ensure smooth and fast flow of
materials.
v. CONCLUSION
E-business lasts throughout the whole process of
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 construction activities and provides powerful technical construction. Construction Innovation, no.3, pp. 2-14,
support to supply chain management. Construction supply 2003.
chain based on e-business will be a new breakthrough 112JEkambaram Palaneeswaran, Mohan Kumaraswamy,
point for construction enterprise to obtain competitive Motiar Rahman, Thomas Ng. Curing congenital
advantages and definitively influence the development construction industry disorders throughrelationally
and profit of construction enterprise. E-business not only integrated supply chains. Building and Environment,
greatly increases the benefit and improves efficiency of no.38, pp. 571-582, 2003.
construction industry, but facilitates the realization of
transverse combined production of construction enterprise
and benefits the implementation of supply chain
management. Therefore, it is necessary and urgent to
study the application of e-business based construction
supply chain to change low production efficiency, long
construction duration and high cost of China construction
enterprises to optimize use of resources.

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