Criteria for achieving efficient contractor-supplier relations

Journal article, 2011

Purpose – Despite numerous examples of benefits when adapting supplier relationship management in the manufacturing industry, the construction industry still lags behind in such areas as long-term relationships with suppliers and continuous cost-reductions. This may be because the characteristics of the construction industry differ from those of the manufacturing industry due to their project-based structure, its inherent tendency for sub-optimization and the vast number and variety of suppliers. The purpose of this study is to identify criteria for achieving efficient contractor-supplier relations in the construction industry and for large contractors. Design/methodology/approach – The paper draws on the literature on efficiency and differentiation of efficient buyer-supplier relationships as well as a two-year case study based on participatory observations and interviews with strategic purchasers at a large Swedish contractor. Findings – As it not always is possible to increase efficiency in the interface-related value creating processes by only aiming the development and improvement efforts directly at these processes, relationship enablers as total cost focus, aligned core values as well as willingness and capability for collaboration and development must first be in place. In order to achieve this, the contractor has to adopt a long-term orientation towards the relationship with the suppliers which is a decision for the management to make. Practical implications – Drawing from the findings, this paper elucidate the connection between increased efficiency and input variables in the contractor-supplier relationship which might be difficult for contractors to see. Furthermore, contractors need to take responsibility over their own processes in order to be an attractive customer to the supplier. Originality/value – Even though research within construction has focused at relations between different actors, mostly client and contractor, this paper widen the perspective and takes a grasp of the relationship between contractor and supplier.