University of Twente Student Theses


The road to become a preferred customer in the construction sector : Part II: Internal maturity assessment of relevant business processes

Smits, J.M. (2018) The road to become a preferred customer in the construction sector : Part II: Internal maturity assessment of relevant business processes.

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Abstract:The construction industry is a highly complex industry wherein performance is lagging behind from other traditional industries. Various authors investigated this lagging performance and advocate that cooperation within the supply chain should focus on moving away from adversarial practices and move towards more integrated cooperation between the various entities within a supply chain. Moreover, the structure and relations within the industry are also changing. Firms are increasingly outsourcing their work and reducing their supply base at the same time. The result is a shift in the power dynamic within the industry. Traditionally, buyers are the most powerful party in the relation, however due to the changes in market and power dynamics, suppliers and subcontractors gain power and become the focal firm within the relation. In addition to these changing circumstances, the introduction of Best Value procurement also increased the need for managing contractors to focus on what suppliers want instead of executing coercive power to get the preferred result (often the cheapest). The quantifiable performance information of excellent suppliers and subcontractors is becoming a competitive resource for managing contractors within construction tenders and thus, Strukton wants to become a preferred customer for their excellent suppliers to gain access to this information and remain competitive within the construction market. This report contains the second stage of the research. The first stage of this research (external perspective) used a quantitative approach to define the antecedents of supplier satisfaction and preferred customer status in the construction sector. The first stage concluded that supplier satisfaction within the construction industry is mainly influenced by the (1) relational behaviour and (2) operative excellence of the managing contractor. The antecedents of a preferred customer status are defined as; (1) growth opportunities, (2) support & involvement of suppliers and (3) innovation potential. Additionally, the first stage research defined a step-by step framework to become a preferred customer in the construction sector and develop long-term relations with excellent suppliers and subcontractors. The three steps within this framework (see Figure 2) are defined as; (1) initial performance (e.g. supplier satisfaction), (2) engagement (e.g. preferred customer status) and (3) sustainability (e.g. partnership). The second stage of the research (this report) used the results from the external analysis (stage 1) to define and asses relevant processes and formulate improvements for these processes to become a preferred customer and establish long-term relations. This thesis used a qualitative approach to develop a new maturity model which includes all relevant processes connected to the antecedents found in the first research stage. The development of the model followed the design science approach defined by Hevner, March, Park, & Ram (2004). The design science approach consists of three blocks and is shown in Figure 1. Following the design science approach, a new maturity model is developed. This new maturity model consists of 33 processes which are related to the five antecedents of supplier satisfaction and preferred customer status. The application of this model within the case company (Strukton) yielded an overview of the maturity levels of the business processes related to the development of (long-term) buyer-supplier relationships. Highly mature processes were mostly related to the company wide innovation strategy, preferred supplier lists and the handling of problems and risks. Low scoring aspects were mostly related to the partnering aspects within the model such as mutual objective setting and joint improvement programs. None of the 33 processes which were analysed was at the highest maturity level. Figure 2 shows a consolidation of the results from both the internal analysis (this thesis) and the supplier satisfaction survey (research stage 1). The mean maturity level of the first phase was assessed at 55%. The mean maturity for the second phase was assessed at 40,3%. This shows that the processes related to relational behaviour and operative excellence are more mature than the processes related to growth opportunities, support & involvement and innovation potential. These results are in line with the results from the supplier satisfaction survey (research stage 1) which shows a higher mean score for the phase 1 antecedents opposed to the phase 2 antecedents. Based on the internal assessment of the business processes, several improvements and barriers are identified. The improvements can be categorized into two main themes; (1) improvement of existing processes and (2) the development of a formal supplier management process. The first category improvements include aspects like communication guidelines to ensure equal treatment of suppliers and the adaptation of the supplier evaluation and selection categories. The second category improvements include all relevant aspects for the formulation and development of a supplier management process. This process must at least include a process for (1) selecting suitable long-term partners based on the overall mission, vision and strategy of Strukton, (2) mutual goal setting, (3) information and knowledge exchange procedures, (4) a strategic framework contract and (5) evaluation based on pre-defined objectives & goals. The main barrier identified for successful implementation is the, still prevailing, traditional approach of managing contractors towards sub-contractors and suppliers. This traditional approach mainly uses the power of a managing contractor to steer sub-contractors and suppliers into the preferred direction. This preferred direction is often the direction which costs the managing contractor the least money. Hence, there is very limited focus on the relationship itself. However, since the power dynamics in the industry are changing, this traditional approach may backfire and is thus considered to be the main barrier for successful implementation. Education and a change of mindset at the managing contractor are therefore deemed necessary to be able to have successful long-term relations in the construction sector. This thesis contributed to an expanding stream of literature into long-term partnerships within the construction sector. By exploiting two major literature streams (e.g. preferred customer status & partnerships), this thesis explained both the internal and external perspectives on the road to become a preferred customer in the construction sector. The main contribution of this thesis for both practitioners and researchers is the step-by-step framework presented in Figure 2 in combination with the newly developed maturity model. This framework shows that building long-term relationships in the construction sector consists of several steps rather than a single decision to enter in a collaborative partnership. Moreover, this framework also shows that each of the steps requires a different focus. Lastly, this thesis proposes two company specific roadmaps to increase the maturity of the processes related to supplier satisfaction and preferred customer status within Strukton Civil.
Item Type:Essay (Master)
Reef infra, Oldenzaal, The Netherlands
Faculty:ET: Engineering Technology
Subject:56 civil engineering
Programme:Construction Management and Engineering MSc (60337)
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