Contractor-Supplier Relations in a Large Contractor Organisation

Licentiate thesis, 2009

Even though contractors purchase over 70 percent of their turnover from suppliers, both the construction industry and construction research ignore the contractor-supplier relations. In order to realise the potential related to development of contractor-supplier relations, the aim of this thesis is to explore and increase understanding of the relationship between contractor and supplier. The findings are based on a two-year case study of a large Swedish contractor, where field observations and in-depth interviews with individuals at the purchasing department, the production management and within a supplier’s organisation have been carried out and have been complemented by group discussions and review of documents. The results show that there is high uncertainty in the demand from the contractor, which leads to highly flexible solutions from the suppliers. This flexibility is costly. In order to change this situation, relationship enablers, such as total cost focus, aligned core values and willingness and capability to collaborate, need to be committed by both parties. This must be grounded in a long-term thinking. However, several perceived constraints have been identified. These relate mainly to the contractors organisation and behaviour and also to the large diversity in the supplier market in construction. To conclude, three recommendations for major contractors are presented: they need to concretise and visualise their relationships with suppliers, they need to build a united interface towards the suppliers and they need to dare to commit long-term. Contractors who take on these recommendations will gain valuable competitive advantages.