University of Twente Student Theses


Level of Vertical Integration in tight Buyer-Supplier Relationships for Concept Development in the Conceptual Housebuilding Industry

Burghouts, K.T.J. (2023) Level of Vertical Integration in tight Buyer-Supplier Relationships for Concept Development in the Conceptual Housebuilding Industry.

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Abstract:The housebuilding industry in the Netherlands is stressed due to availability, affordability and sustainability. This leads to a shift towards industrialised housing construction (IHC). MorgenWonen is a company in the Netherlands that has chosen the path of IHC. The current designs of the MorgenWonen houses are a proven concept, however, when engineering changes are made to the designs is unclear how the responsibilities between MorgenWonen and its suppliers are divided. Therefore, this research aims to design an assessment framework for MorgenWonen to manage development, engineering, and production of elements in the design which are affected by engineering changes. The framework focusses on the level of vertical integration that is preferred for the design and engineering part of the redesign. A theoretical framework is drawn up based on the three grand theories in purchasing: Transaction Cost Economics (TCE), Resource-Based View (RBV), and the Knowledge-Based View (KBV). The framework, with the influencing factors, is based on a simplified version of the theoretical framework of Wiegard (2020), who also uses TCE, RBV and KBV to determine the level of vertical integration. This research focusses on four influencing factors: 1) product complexity, 2) closeness to current activities, 3) absorptive capabilities, and 4) supplier specific knowledge. The theoretical implications of the framework are compared to reality with the help of a focus group. It is assessed what the differences are between theory and practice and why these differences are in place. Based on these findings a tailormade assessment framework is made that can be used by MorgenWonen to define level of vertical integration. The level of vertical integration is defined for three engineering changes: 1)add standard recess to interior walls, 2) add prefab meter box, and 3)change entry layout. The results of the practise vs. theory analysis show that product complexity and supplier specific knowledge have the most influence on the sourcing decision. Besides these two influencing factors, another influencing factor was found that was not incorporated in the theoretical framework: buyer specific knowledge. Which is the knowledge from the buyer that the supplier must have to serve the buyer well. In the case of MorgenWonen it refers to the knowledge of the dependencies that is not present at the supplier. The driving forces for changes between practice and theory are given in the figure beneath. From the analysis several conclusions can be drawn. First, large engineering changes with multiple affected elements and involved suppliers should be developed in the structure of a design team. Secondly, small engineering changes that can be developed in isolation from other elements or engineering changes can be outsourced to preferred suppliers if they have the capacity and knowledge in-house. Lastly, completely internalising the engineering work of large engineering changes is not possible, due to the supplier specific knowledge needed to fulfil the engineering tasks.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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