Construction purchasing and supply chain management

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A Comprehensive Guide to Construction Supply Chain Management

Develop a highly efficient construction supply chain management (CSCM) solution that decreases risk and increases profitability. This authoritative volume provides proven strategies for the lean construction approach, including just-in-time purchasing, supplier evaluation, subcontractor selection, subcontractor relationship management, equipment acquisition, information sharing, and project quality management. There are numerous illustrations and ready-to-use forms-and a step-by-step economic evaluation for equipment acquisition.

Construction Purchasing and Supply Chain Management explains how to achieve maximum integration with upstream and downstream supply chain members using the latest technologies. You will be able to establish a strategic CSCM framework to meet the budgetary and scheduling goals of any project. This comprehensive, step-by-step guide to CSCM is useful for project owners, design engineers, architects, prime contractors, subcontractors, suppliers, and construction managers involved in construction projects throughout the world. Discover how to:

Ensure the on-time and cost-effective delivery of materials,equipment, and services Effectively negotiate with suppliers and subcontractors Manage superior subcontractor and supplier relationships Evaluate and select suppliers based on their value-added capabilities Analyze and negotiate subcontracting services Plan for, purchase, and lease construction equipment Leverage technology, safety measures, and information sharing to increase productivity and profitability Understand the components of horizontal and vertical construction supply chain operating models

Author Notes

W.C. Benton, Ph.D., is the Edwin Dodd Professorof Management and the Dean's Distinguished Research Professor ofOperations and Supply Chain Management at The Ohio StateUniversity.

Linda F. McHenry, Esq., is Vice Presidentand COO for Benton and Associates.

Preface	p. ix
Acknowledgments	p. xiv
1 Introduction to Construction Purchasing and Supply Chain Management	p. 1
Manufacturing Risks versus Construction Risks	p. 2
Types of Construction Projects	p. 7
Preconstruction Design and Contractor Selection	p. 9
Construction	p. 10
Information Management	p. 10
Risk Management	p. 10
Critical Elements for Best Practice Construction	p. 10
Supply Chain Management and Competitive Construction Operations	p. 13
Barriers to Supply Chain Management	p. 14
Supply Chain Partnerships	p. 16
Traditional Construction Supply Chain	p. 16
Benefits of Supplier Partnerships	p. 18
Risks of Supplier-Contractor Partnerships	p. 20
Joint Venture Supply Chain Partnership	p. 21
Conclusion	p. 23
References	p. 24
2 The Construction Supply Sourcing Process and Procedures	p. 25
Objectives and Activities of Construction Supply Sourcing	p. 28
The Supply Management Process	p. 30
Supply Sourcing Dollar Responsibility	p. 32
Competitive Pressures	p. 32
Material Shortages	p. 32
Inflation	p. 32
Complex, High-Value Projects	p. 33
Potential for Profit	p. 33
Purchasing and Competitive Strategy Linkage	p. 34
Competitive Strategy	p. 34
Supply Chain Strategy	p. 36
The Project Sourcing Plan	p. 37
Purchase Order	p. 39
The Subcontract Document	p. 41
The Sourcing Cycle	p. 42
Construction Sourcing Documents	p. 43
Prime Contract	p. 43
Purchase Order	p. 44
Subcontract	p. 44
Leases and other Agreements	p. 44
Subcontracting versus Materials Purchasing	p. 44
The Subcontracting Sourcing Process	p. 44
Materials Purchasing	p. 46
Maintenance, Repair, and Operating Supplies	p. 47
Conclusion	p. 48
3 Construction Supply Chain Relationship Management	p. 49
Construction Supply Chain Relationship Management	p. 50
Subcontractor and Supplier Reduction	p. 51
Four Dimensions of Supply Chain Relationships	p. 52
Supplier Relationship Management Segmentation	p. 53
Preferred Supplier Relationship Management	p. 54
Strategic Supplier Relationship Management	p. 54
Strategic Source Performance Review Process	p. 56
Strategic Supplier Relationship Scoring System	p. 57
Conclusion	p. 59
Tier 1 Supplier Profile Example	p. 60
References	p. 62
4 Construction Supplier Selection and Evalution	p. 63
Construction Purchasing Mistakes	p. 64
Construction Sourcing Success Factors	p. 64
Sources of Supplier Information	p. 66
Strategic Selection	p. 66
Criteria for Supplier Evaluation	p. 67
Three Common Supplier Evaluation Systems	p. 67
Categorical Method	p. 67
Cost-Ratio Method	p. 68
Linear Averaging	p. 70
Single versus Multiple Sources	p. 72
Advantages of Multiple Sourcing	p. 72
Advantages of Single Sourcing	p. 72
Advantages of Dual Sourcing	p. 73
Long-Term Relationship Issues	p. 73
Cross-Sourcing	p. 74
Supplier Reduction	p. 74
Grade	p. 74
Hurdle	p. 75
Certification	p. 75
Conclusion	p. 76
5 Purchasing Subcontracting Service	p. 77
Preliminary Subcontracting Planning	p. 80
Subcontracting Source Selection	p. 80
Preparation of the Bid Package or Request for Quotation	p. 80
Components of the Bid Package	p. 83
Pre-Bid Conference	p. 85
Purchasing/Supply Management (Large Construction Organizations)	p. 86
Evaluation of Bid Packages	p. 86
Submitting Bids by E-mail, Facsimile, and Telephone	p. 86
Contract Types	p. 88
Lump Sum Contracts	p. 90
Unit Price Contracts	p. 90
Cost-Plus Contracts	p. 91
Design-Build Contracts	p. 93
Negotiated Contracts	p. 93
Contract Negotiations	p. 93
Awarding Major Subcontractors	p. 95
Subcontractor and Supplier Quality Assurance and Quality Control Expectations	p. 95
Strategic Construction QA and QC	p. 98
Change Orders	p. 99
Conclusion	p. 100
References	p. 102
6 Construction Equipment Planning, Purchasing, and Leasing	p. 103
Requisition	p. 105
Company Goals and Objectives	p. 105
New Market Niche Ideas	p. 105
Cash-Flow Analysis	p. 108
Economic Evaluation	p. 109
Example: Motor Grader	p. 109
Selection	p. 112
Financial Plan Analysis	p. 112
Implementation	p. 118
Expenditure Control	p. 119
Audits	p. 119
Disposal of Capital Equipment	p. 119
Purchasing New versus Used Construction Equipment	p. 124
Conclusion	p. 125
7 Construction Supply Chain Complexity, Profitability, and Information Sharing	p. 127
Construction Supply Chain Management	p. 128
Information Sharing	p. 129
Project Execution	p. 140
Conclusion	p. 142
References	p. 143
8 Construction Supply Chain Management Business Models	p. 145
Public and Private Sector Heavy Construction and Horizontal Supply Chain Models	p. 145
The Components of the Heavy Construction Supply Chain Model	p. 147
Public versus Private Construction Projects	p. 154
Supply Chain Document Flows	p. 154
Supply Chain Coordination and Information Flows	p. 155
Supply Chain Money Flows	p. 155
Private and Public Sector (Vertical) Construction Supply Chain Models	p. 156
Supply Chain Document Flows	p. 162
Supply Chain Coordination and Information Flows	p. 160
Supply Chain Money Flows	p. 160
Implementation of Construction Supply Chain Management	p. 161
Conclusion	p. 162
References	p. 162
A Joint Venture Agreement	p. 163
B Subcontractor's Bid Package and Pre-Bid Invitation	p. 173
C CD 300, Standard Form of Tri-Party Agreement for Collaborative Project Delivery	p. 191
D Standard Form of Agreement Between Owner and Contractor for Integrated Project Deliver	p. 197
E Construction Management At Risk Contract	p. 205
Glossary	p. 209
Index	p. 233

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