Supply Chain Management in the Vietnamese Construction Industry

Abstract

Supply Chain Management (SCM) is extremely current due to its success in other industries and therefore considered to be the future of construction. In production operation, the implementation of SCM has been proved to achieve cost saving, facilitate innovation in organizations, increase productivity and profitability, and improve organizational competitiveness. However, its application in construction is relatively new and the construction industry has been slowly developed in deploying this concept as compared with the manufacturing industry. This may be caused by barriers against its implementation. Moreover, a lack of understanding about the benefits of the SCM implementation may be one of the causes that lead to lack of active interest of the parties towards the deployment of construction supply chain management (CSCM) practices in their projects. Comparing with other industries, the construction industry is project-based temporary organization and discontinuous nature, project-unique design and material specifications with little or no repeatability. The construction supply chain is volatile, unpredictable, and the product environment is relatively unstable. Therefore, the SCM implementation in construction might be more difficult and it is impossible to use SCM principles from other industries to apply the same for the construction context. In the world until now just limited studies and researches have been performed about SCM in construction. Therefore, the need for more studies on SCM in construction is expected. Although there are studies about CSCM however, most of the previous studies focused on other objectives rather than discovering the benefits and barriers of the CSCM implementation. Therefore, they did not aim to identify benefits, barriers and only gave some elements as an example. In summary, the benefits, barriers found from the previous studies were not enough. Moreover, there was a lack of analysis. As known, construction projects often deal with the poor performance such as schedule delayed, quality defects, and cost overruns. The main cause for the occurrence of the poor performance in the project results from the deterioration of SCM. There are few studies have addressed the impact of supply chain relationships on project performance in construction. Based on the above, there are five objectives outlined in this study are: (1) identify and investigate the benefits of SCM implementation in construction; (2) identify and examine the barriers to the SCM implementation in construction; (3) identify and discover key factors affecting supply chain relationships in construction; (4) develop a structural model to test the influence of supply chain relationship traits on the project performance (cost, quality, and time); and (5) develop a framework for evaluating the CSC relationships. The findings are based on literature review and the survey questionnaires that filled by the respondents from industrial practitioners. This study identified twenty benefits and twenty two barriers to the CSCM implementation. These benefits and barriers were ranked from the perspective of owners, contractors, designers, and consultants. These groups generally had a convergence of perceptions on the identified benefits and barriers. They agreed that “increase speed of project construction”, “reduce project cost”, “improved margins profit”, “efficiency in utilizing the resources and skills”, and “improve project quality” were the most significant benefits. The four factors of benefits were extracted investigated: (1) systematic business system, (2) organization management and business strategy, (3) improved project performance, and (4) win-win outcomes among the parties. The findings showed that the implementation of SCM in the construction projects will bring the most significant gains relating to the improved project performance followed by systematic business system, and organization management and business strategy, whereas the win-win outcomes have not been emphasized by the parties. Regarding the barriers to the CSCM implementation, “lack of effective leadership”, “lack of competence of the parties in SCM”, “lack of understanding the supply chain concept”, “passive sub-contractors and suppliers”, and organizational resistance to SCM” were the five most important barriers to the CSCM implementation. The barriers were grouped into the five factors, namely, (1) lack of support and active participation from parties, (2) confronting culture and adversarial behavior, (3) inherent difficulties in the supply chain, (4) lack of knowledge and competence, and (5) deficiencies in the contract system. Among of them, factor 4, factor 1, and factor 2 are the most significant factors that require immediate attention to promote the development of the CSCM implementation. Based on the literature review, top 12 key factors which have a significant influence on supply chain relationships were identified. This study discovered three constructs of the key factors, namely, “collaboration management in the supply chain”, “support and commitment to the supply chain”, and “sharing the benefits and risks”. The key factors and constructs are the important elements to support the development of the structural model for testing the influence of the supply chain relationship traits on the project performance. They are also main criteria and sub criteria to establish the framework for evaluating the supply chain relationships in construction. A two-step SEM model is built to test the hypothesized relationship about the influence of supply chain relationship traits on project performance. The results indicated that supply chain relationship traits have a significant influence on the project performance. Moreover, the construct identified in this model may help the parties to identify the factors that may result in the effective performance of projects. It can be shown that collaboration management in the supply chain, support and commitment to the supply chain, and sharing the benefits and risks play main roles to ensure the successful project performance. And the collaboration management in the supply chain plays a decisive role. An evaluation framework was developed for the evaluating the CSC relationships. The development of this framework is based on the AHP method. The proposed framework consists of main criteria, sub-criteria, and assessment matrix. The assessment criteria are organized in a hierarchy structure. Three main criteria are broken down into twelve sub-criteria. An assessment is made against sub-criteria. The evaluation framework hopes to be a useful tool for evaluating the degree of the relationship among the parties in the supply chain. The evaluating the individual relationships of each party in the supply chain facilitates to have an overview about the entire supply chain relationships. This study contributes to the body of knowledge relating to the CSCM. The findings could be useful for similar studies in other countries for international comparison. It can be a document for construction practitioners to understand the key issues of good SCM and how they can manage supply chains better. By using the evaluation framework of CSC relationships, construction organizations and project teams can evaluate their current relationship with others in the supply chain and then to determine key areas that need to be improved better for a long-term cooperation planning in the future.