Partnering with suppliers – an untapped opportunity for the construction industry

Report, 2015

The way forward is to increase the interaction between companies. There are three forms of expanded collaboration with suppliers:
Increased interaction in the framework of the individual construction project
Increased interaction between projects managed by the same company
Increased interaction in permanent network

Increased interaction in an individual project may lead to advantages if the cooperation begins at an early stage. If the supplier and sub-contractors
are involved already at the drawing and planning stage, many of the problems which are currently resolved during production could be avoided.

Increased interaction between projects managed
by the same company generates potential for improvements. By having more or less fixed constellations of sub-contractors it is possible to ensure that the same company and individuals meet in several projects – and hence there is no need to start a new learning curve on each occasion.

Another type of increased interaction is collaboration between several, simultaneous projects in the same company. This is also based on close relationships with a small number of suppliers with a basic concept of pooling purchases from several projects in order to achieve economies of scale.

Increased interaction requires increased centralization, which encroaches on the autonomy of the individual project. The implementation must therefore be cautious in order to avoid jeopardizing the benefits of local decision-making. The crucial challenge is to find a balance between centralization and decentralization.

With increased interaction in the permanent network, a “strategic partnership” is achieved. The principle is based on a long-term and in-depth cooperation between construction companies
and suppliers. Research about customer-/supplier relationships in other industries shows that interaction in permanent networks creates commercial relationships which support efficiency and innovation. The companies make mutual adjustments, over time, to improve the use of common resources and interests.

It is very hard to change deeply rooted traditions and work methods, since it involves re-examination of principles that have been applied for a long time. The transition to a focused partnering will be very demanding, both in terms of time and resources. Consensus and courage of all parties involved
is a requirement – from the construction site to corporate management – as well as a challenging and inspiring leadership.

Despite current practice in the construction industry, a more long-term and in-depth approach is entirely possible. This would require doing away with prevailing decentralization to individual projects and traditional competitive tendering procedures for selection of suppliers. Great potential for improvement, benefiting all parties, would be the result. Partnering with suppliers represents an untapped opportunity in the construction industry!