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The road to become a preferred customer in the construction sector : Part I: Exploring the antecedents of supplier satisfaction and preferred customer status in the construction sector.

Smits, J.M. (2018) The road to become a preferred customer in the construction sector : Part I: Exploring the antecedents of supplier satisfaction and preferred customer status in the construction sector.

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Abstract:The construction industry is a very complex industry that deals with one-of-a kind products in local environments by constructing temporary project organizations. The lagging performance of the industry has led to numerous efforts of researchers to increase collaboration and move away from traditional, adversarial practices. One of these efforts is the introduction of innovative procurement methods such as best value procurement. The best value method uses metrics style performance information of managing contractors to award building contracts. This increases the need for managing contractors to work together with the best suppliers and sub-contractors to remain competitive. Many researchers propose partnering with sub-contractors and suppliers as solution to this problem. However, partnering in the construction industry is subject to many constraints and difficulties due to the project-based nature of the industry. Additionally, the road to become a long-term partner in the construction sector remains vague. Another stream of literature, mostly applied in the automotive industry, proposes another type of buyer-supplier relation to remain competitive. This stream originates from two global trends in supplier markets: (1) the increased outsourcing of core business activities and (2) the reduction of supply bases. This increases the power of excellent suppliers to define their resource allocation. This stream of literature advocates that buyer must become a preferred customer for their key suppliers to have access to their resources. Becoming a preferred customer is depending on the attractiveness of the buyer and the satisfaction of a supplier. This thesis explores this type of buyer-supplier relationship in a project-based industry to see whether this new type of relation can yield insights for existing buyer-supplier relations in the construction industry. The results of this thesis show that a change in industry context did not yield substantial differences in the antecedents of supplier satisfaction or preferred customer status. Similar to previous studies, this thesis found that relational behaviour and operative excellence are antecedents of supplier satisfaction. Growth opportunities, innovation potential and the involvement/support of suppliers are antecedents of the preferred customer status. Furthermore, by using these insights, a new step-by-step approach is developed to become a preferred customer/ partner in the construction sector (see Figure 1). The project-based nature of the industry calls for a differentiation between two types of partnering; projectIV partnering and strategic partnering. The new framework proposes three steps to develop long-term relations with excellent sub-contractors and suppliers in the construction industry. The first step advocates that a successful first interaction with a new sub-contractor or supplier must focus on establishing trust in capabilities and behaviour. By establishing that trust, a recurrent relation can be developed. The second step is related to the engagement of both supplier and buyer. The results of the statistical analysis show that involving and supporting suppliers can increase engagement of suppliers. Furthermore, the managing contractor must offer growth opportunities to excellent sub-contractors and suppliers to be attractive for a recurrent relation. Both step 1 & 2 must focus on successful project partnering and execution. Additionally, the engagement phase requires investments from both sides and thus the decision to enter the engagement phase must be well evaluated. The last step in the framework advocates that an overarching agreement must be made between buyer and supplier which focusses on non-project specific aspects such as innovation and the measurement of performance information. This should form the basis for long-term relations with excellent sub-contractors and suppliers and additionally, propose a sustainable framework wherein the buyer and supplier can remain successful in the execution projects. This thesis contributes to the growing knowledge base related to preferred customers and partnerships in construction. By a combination of two well-known concepts, this thesis yields new insights for managing contractors on how to establish successful project and strategic partnerships to acquire a better competitive position in the overall market.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:56 civil engineering, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/76869
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