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Logistics Analysis of a large Construction Project in Western Australia

SCM in the Construction Industry

An analysis of the logistic activities within a very large construction project based just off the coast of Perth, WA, Australia with focus on the issues affecting incoming goods shipments along with a broad look at SCM in the construction industry as a whole.

Logistics Analysis of a large Construction Project in Western Australia

Contents
Abstract ................................................................................................................................................... 2 Title: Logistics Analysis: SCM within the Construction Industry .................................................. 2

CA as tasked: ................................................................................................................................... 2 Word Count: 5,444 (on editing) .................................................................................................. 2

Grade Received: 95% ................................................................................................................... 2 Summary of content: .......................................................................................................................... 2 Introduction ............................................................................................................................................ 4 The Problem ............................................................................................................................................ 6 The problem as posed......................................................................................................................... 6 The problem as analysed .................................................................................................................... 9 The Way Forward Proposed Solutions ............................................................................................... 11 Inventory control system implementation ....................................................................................... 11 Incoming Receiving Practises ............................................................................................................ 13 Supplier Practices and Co-operation ................................................................................................ 14 Procurement Practices ...................................................................................................................... 16 Logistics Project Sub-Division/Cross Functional Training and Co-operation .................................... 17 SCM in the Construction Industry ......................................................................................................... 18 Development Issues of SCM according to Lin and Shaw (1998) ....................................................... 19 Conclusion ............................................................................................................................................. 20 Bibliography .......................................................................................................................................... 21

Logistics Analysis of a large Construction Project in Western Australia

Abstract
Title:
CA as tasked: Within a company of choice, through a contact within this company, discuss and analyse issues faced within the logistics activities of this company before proposing solutions to overcome these problems. Word Count: Grade Received: 5,444 (on editing) 95%

Logistics Analysis: SCM within the Construction Industry

Summary of content:
As tasked this report focuses on logistic issues faced within a company of choice with an outcome of proposed solutions for possible implementation at the companys discretion. With that being said, the company of choice is one of the worlds largest construction companys and more specifically within their very large Liquid Natural Gas (LNG) construction project, a massive investment and contract by any standards. The reason for this is in the hope of gaining an insight into what belonging logistics and supply chain management (SCM) may have within what externally seems like a somewhat inefficient yet highly profitable industry. Having made contact with a chief engineer tasked with logistic responsibilities for this project (although not in any way titled or figure-headed as such) a general overview of applicable activities was gained along with posed issues for analysis. However it was immediately obvious that within this project there was little to no logistical focus, expertise or strategy with no resemblance of an SCM ethos in existence. With the necessary primary research and knowledge on hand this report analyses both the efforts currently in effect and the problems faced, to not only propose solutions but also a more in depth base of issues that both cause the already obvious shortcomings in their logistics efforts but also majorly hinder an overhaul of them. It is these deep rooted issues that highlight a severely negative correlation between logistics and the construction industry but ironically in a way the possible need for a concerted effort to instil a SCM approach with this industry, and most certainly this project.

Logistics Analysis of a large Construction Project in Western Australia


With this in mind it was important to not get lost in the philosophical argument of the existence of logistics within construction but to also face the task at hand, that is propose implementable solutions with a strong cost benefit ratio to make these solutions worthwhile. The proposed solutions are implementing procedural and specific efforts within these as follows; MRP system implementation Incoming receiving practises Supplier practises and co-operation Procurement practises Logistics project sub-division/cross functional training and co-operation.

By considering the cost to implement versus the perceived benefits to be received from this these solutions allow a way forward that is not only cost effective but with an almost cyclically codependency between each, may go some way towards solving/negating the underlying issues at hand. Beyond the initial broad nature of this tasked assignment, this report delves into a territory of interest and worthy consideration; is there room for logistics or SCM within the construction industry, and if not then why not? Where a company in this industry to establish a dedicated logistics/SCM platform within their operations would they not gain an immediate competitive advantage?

Logistics Analysis of a large Construction Project in Western Australia

Introduction
Logistics can be considered to be the total SCM (Supply Chain Management) objectives and activities within an organisation. It entails controlling and adding value to all areas of the supply chain beginning with suppliers through to inventory and production and also to the customers, not only in terms of a delivered product or service but also information, to and from and involving all areas of the supply chain. With this in mind logistics management, or SCM when implemented fully, can be seen metaphorically as an all inclusive net encompassing all impacting areas within the company in a rejuvenating fashion as all areas impact on, are related to or depend on all other areas, maintaining continuity. What does this mean? Basically SCM can be either a business philosophy or methodology that can help control, measure, add value to and monitor success of the logistic functions within a company and as such is important across many industry sectors worldwide.
Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. (Hines, 2004)

Its clear that logistics, or SCM, is a very broad and dense topic with its methodology incorporated into many industrial sectors and activities and with many examples worldwide. So where does one to begin to look to get a personal and practical insight into the world of logistics operations in a company, and where to begin to present any more value to the supply chain of such a company. The most general and supply chain focused sectors are retailing, production, manufacturing, warehousing and transportation but logistic operations are evident across many more industrial sectors such as this. With that in mind, this report will focus on one of the most heavily and consistently active and highly funded and invested in sectors globally, the construction industry. This may seem a little irregular but the supply net and requirements within the construction industry are huge and operate worldwide on anything from a miniscule level to an almost incomprehensibly massive level. Also within this sector jobs or projects are generally individualised and not related to other projects within the same company, and similarly within the one project, different project areas or focuses may again be separated and non-related to others giving a lack of fluidity and continuity which is generally one of the notable trends of SCM, continuity and sustainable operations. Combined with

Logistics Analysis of a large Construction Project in Western Australia


the finite operational activity of construction, when a job is finished it is finished, this somewhat both appeals to and conflicts with the methodology of SCM, which may lead to many logistics orientated issues needing analysis and appraisal, and an interesting subject matter if nothing else. This report will focus on a Liquid Natural Gas (LNG) Project; based offshore of Western Australia, by one of the worlds largest construction and engineering companies. This is the biggest resource project in the history of Australia and has been on an operational level since September 2009. Having made contact with (name removed on editing), a project engineer based on a logistics focused mainland, off-site port and dockyard dealing with all material requirements for the off-shore project, this report will give an outline of his role and how it is related to the logistics operations of the company. This report will then field the problem that (name removed on editing) posed before proposing what will hopefully be applicable and considered options to successful improve the supply chain as well as adding value to it within this project.

Logistics Analysis of a large Construction Project in Western Australia

The Problem
The problem that was posed initially and the actual issue analysis and resolution suggestions are somewhat of a different scale and scope entirely. The initial problem was a basic and broad one, with an overall enclosed need for resolution. However it is so related to and rooted in fundamental flaws in other co-dependent activities within the supply chain function that it was necessary to delve into them also, analysing their operations and activities and suggesting possible overhauls here also. This will then, in somewhat of a domino effect, un-earth other faults and flaws in other aspects of the supply chain management activities within this project, but this report does not go down the road of individual resolutions as that would be far too great and specific a task but rather propose a small number of applicable actions to resolve the initial issues and then give an account for the existence, or lack of existence, of SCM as a methodology within the construction industry.

The problem as posed


When shipments are received, generally on a sea-barge, they must be checked and all parts identified and accounted for according to the suppliers manifest for the said shipment. This is a general task within any supply chain however this can be a very difficult and complicated process within this project. There are a number of reasons for this; the main ones being: All parts, as listed on the manifest, are to be labelled with an identification no. (GS no.) corresponding with the manifest. This is to enable easy identification and then adequate processing of all elements of the shipment. However, frequently many parts of the manifest are not labelled with a GS no. and as such identification is almost impossible. In this instance the project engineer, a person skilled in other areas, must photo the un-identifiable parts and email the suppliers and the project area specialist that ordered these parts asking if they can identify them. This is a frustrating and time wasting task and adds greatly to the inefficiencies of the goods receiving practises. Another major issue in this respect is in the instances of kits or of an overall part being made up of a number of different elements shipped as different pieces while being manifested as one overall unit. For example, as can be seen in the manifest provided there is included in the manifest a recycling plant listed as 1 piece, and it has the GS no. 181. However, on inspection of this shipment it was found that this was in fact made up of more than 5 individual parts that upon assembly made up the overall unit that is the recycling plant. Only one part was labelled with the GS no. and it wasnt until having realised the extra no. of

Logistics Analysis of a large Construction Project in Western Australia


items on the barge and having requested instructions from the project area design specialist that the receiving crew and the project engineer, (name removed on editing), were able to figure this out and act accordingly. The only thing that may alert the receiving operative to this is the weight of the item, 11 tonnes, which the labelled item clearly was not, but how many other pieces that belonged to it could not be assessed without major delays. A lack of any particular or pre-defined receiving practise makes each shipment a new challenge and somewhat un-coordinated if not for the overall and individual control of the project engineer, which would be unnecessary should procedures and preset guidelines be in place. This makes the intake, processing and storage of these incoming shipments messy and in efficient, with little coherent relation to future or past activities. These issues lead to very complicated and inefficient goods inward and outward activities within what is effectively the logistics provider for the off-shore project site.

Company Logo removed on editing

Figure 1: Copy of actual shipping manifest (altered to remove names & dates)

Logistics Analysis of a large Construction Project in Western Australia

Figure 2: Different elements of part listed 'Recycle Plant' as 1 unit (note: yellow label on products are supplier labels that have no reference for receipt)

Figure 3: Example of incoming barge shipment with a variety of parts and supplies

Logistics Analysis of a large Construction Project in Western Australia

The problem as analysed


As previously entailed in the problem as it was posed, there is a clear lack of any outlined SCM structure or methodology within this constructions project and this is obvious upon first inspection and discussion of the activities. However this raises the question of SCM within the construction industry; does it belong and can it co-exist and develop amongst more traditional and already established practises. This is an issue this report will discuss briefly after first outlining other more initially impacting issues on the fore-mentioned activities that can be revealed upon inspection and analysis of them. The main issues for consideration when suggesting possible immediately implementable options are as follows: The myopic and independent procurement procedures that are in place throughout the entire project, and presumably the company. In effect what is currently in place is that each individual project engineer over different areas of the project on the off-shore production site are responsible for the ordering of whatever parts, supplies and equipment they may need for the completion of their area of the overall project. This can be seen to lead to multiple orders of the same products from manufacturers in differing batches and shipments, which are then in turn forwarded on individually to their respective order origin, or stored when necessary albeit in possibly an uncontrolled and unrelated fashion. There is no co-ordination between different areas of the project to correlate and group orders so as to reduce costs, wastage and inefficiencies. The unplanned and unorganised ordering and shipment of goods between project area engineers and suppliers leading to scattered and organised deliveries, storage and inventory procedures. Basically due to a number of individual area requirements orders are frequent and somewhat erratic in that some parts are ordered very far in advance and are then left in unnecessary storage or in extreme cases forgotten about, whilst other times parts are not ordered soon enough to account for manufacturer lead times. Due to no overall responsible procurement specialist this is a very unorganised and chaotic approach. Coupled with a lack of supplier communication parts are often manufactured and shipped according to supplier convenience and preference rather than the timely fulfilment of the project requirements. Again this leads to dramatic wastage and inefficiencies. The complete inexistence of any inventory control system. There does not existence a project wide ERP (Enterprise Resource Planning) or more applicably in this case a MRP (Material Requirements Planning) system to coordinate and control the inventory of the 9

Logistics Analysis of a large Construction Project in Western Australia


company. When goods are received they are coordinated with those that ordered them and they are then shipped on in time for when they are required but, as previously mentioned, if parts have been ordered too far in advance then they may be forgotten about. Also with multiple orders of the same products wastage is high as each individual order entails a buffer stock along with the multiple storage and shipments issues this brings. Another issue that is apparent, and which is understandable due to this being within the construction industry, there is no experienced and trained logistics professional to control and manage the SCM efforts and to coordinate and maintain organisation of them. What exists currently are able but not experienced construction professionals that with a little training could increase efficiencies and reduce costs and wastage and implement a successfully operational SCM methodology.

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Logistics Analysis of a large Construction Project in Western Australia

The Way Forward Proposed Solutions


Obviously within such a large scale and expensive project as this, and within such a huge company as
(name removed on editing), then the expense of the suggestions are not as impacting as on other

smaller scale and cost restrictive operations, however cost versus value is a factor which still must be considered. Other considerations exist within the problems themselves and within the industry. One of the main impacting considerations that must be accounted for when proposing realistic solution options is that of the nature of the industry, such as the construction industry being based upon project and job work rather than a continuity of sustained procedural and operational activity in which SCM practises are so particularly successful. So when setting out the final list of implementable proposals it was very important for us to be realistic and considerate of impacting issues upon our solutions. With that being said what now follows is a list of proposed solutions based around different areas of the logistics function whilst addressing each of the previously mentioned issues that exist within these areas. Each of these solutions are of individual and separate consideration on their own merits and with their own implementation, however they are in another sense highly interdependent and for one to be truly successful and beneficial to the company it is important to embrace the SCM and logistics concept and focus behind them as a whole. These solutions are: MRP system implementation Incoming receiving practises Supplier practises and co-operation Procurement practises Logistics project sub-division/cross functional training and co-operation

Inventory control system implementation


MRP (Material Requirements Planning) is a production, inventory and manufacturing control system used to control manufacturing processes. It is generally software based and it is generally a production industry concept within the SCM spectrum and it can be, admittedly, limited in its applications and has undoubtedly been in most instances outdated by MRP II system (Manufacturing Resource Planning) and more so by ERP (Enterprise Resource Planning). Both MRP systems are generally an inventory control and production schedule control system that allow for smooth operations within a manufacturing environment, while ERP is a much more incorporative system that integrates management information across an entire organisation, including finances, sales, 11

Logistics Analysis of a large Construction Project in Western Australia


production, CRM (Customer Relationship Management) etc. These systems are founded and successful within the SCM methodology and approach and if either of them where to be implemented in this project they would also need to embraced by more than just one area or activity. Having said that it can be seen the inadequacies and efficiencies that exist throughout the logistic activities of the (name removed on editing) as a whole and most other proposals within this report are founded on the opinion that for any supply chain changes to be truly made and successful than an investment, in belief and effort as well as monetary, must be made to provide a fruitful foundation and such an inventory control system is important. Having already mentioned that the nature of the construction industry if one where jobs exist in projects to be completed fully and then wound up it may be seen that the implementation of such a system may be somewhat futile and lack little value to cost. This is an arguable point and correct in some ways however on such a large scale operation and company such as this being focused on, a system implementation in regards to cost will be miniscule to the overall value added in terms of efficiencies, lack of wastage and general supply chain operations. This will especially be the case if an MRP system were to be implemented, with proposal to that of the WHS inventory and warehouse control system. This is a cost effective and highly adaptable solution that will provide an operationally successful system within this project. The WHS system is one that records and monitors all stock levels and locations, can perform many audit and inventory control measures as well order shipment and clearance. The system can be adapted to individual projects and requirements as well as to individual user abilities depending on their responsibilities and skill sets. It is an MRP system that can also be integrated with finances and more importantly with suppliers ordering systems making incoming shipments and product identification easy and more efficient. This WHS system would be particular successful should the logistics activities be considered a sub division of the projects activities, as will be discussed in more detail later, with stock being recorded as receipts from suppliers and then stock being forwarded to the off-shore project site being shipped as fulfilled orders from clients, and as such giving a more controllable and maintainable level of efficiencies. Another option as opposed to an MRP system is an ERP system, as previously mentioned, such as SAP which would need to be incorporated and embraced throughout the entire organisation. This would be a major overhaul of any conflicting system that may currently be in place in other areas of the company, such as sales or finances, and it is considerably more costly, but whereas WHS would need to be re-adapted and effectively restarted for each individual project, an ERP system would be continually operational throughout the entire companies operational activities and would offer

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Logistics Analysis of a large Construction Project in Western Australia


greater operational fluidity, efficiency, value and cost effectiveness in the long run. Although for this to be truly successful it would take a complete belief and change over to the SCM methodology throughout the entire company which in this industry would be incredibly difficult and no doubt would provide many short term issues and teething problems. However on the scale of this project alone the suggestion would be to implement a more cost effective and easily implementable system such as WHS that will still offer value to other projects through re-adjustment and calibration and also the approach that it will enthuse in those that have become familiar with it and believe in this SCM concept. Also for such implementation to be truly successful and beneficial it would depend on the implementation of the other suggestions of this report such as incoming shipment practices and procurement practices, of which are also dependent on the implantation of this suggestion, showing a correlation and interrelation within the SCM spectrum that is so clearly lacking in this project currently.

Incoming Receiving Practises


The initial and most impacting issue on the forefront of the logistics operations is the difficulty with which it is to receive and process shipments incoming from suppliers. This is due to a number of reasons but one of the most obvious states of inefficiencies is the lack of any predefined procedural receipt of goods and supplies, with no outlined practices and performance targets. Without any inventory system in place this would be difficult but not impossible to implement and as such it is somewhat dependent on the implementation of other suggestions within this report. One of the initial factors that should be dealt with it is to incorporate a SCM approach in the outlook and method to dealing with incoming shipments. Incoming transports should be offloaded, parts identified, any issues dealt with, all accountable parts recorded and when the manifest has been worked through bit by bit then it should be fully processed and cleared. This is all not so simple to do as it needs to be outlined, defined and organised with the correct equipment, systems and able workers. This will need to be broken down into a suggested outline or plan for continual incoming shipment receipt practises: For smooth receiving activities it would be beneficial for an allotted area be set aside whereby a container, barge or any other transports can be offloaded whereby the personnel can be afforded enough time and space to correctly and accurately identify, process and record the received shipment and manifest.

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Logistics Analysis of a large Construction Project in Western Australia


There should be trained staff able to work consistently in the outlined manner that will consistently meet performance targets and without constant need to involve the project engineer who realistically has need to focus their attentions elsewhere on more important matters. These staff should have the equipment and systems necessary to process all shipment and manifest receipts o In particular an option available is to introduce mobile scanners for identifying and recording products; these can be radio or Bluetooth based depending on the required distances needed from the operational device. Such a device would also need a labelling system, primarily a bar coding system to be co-operated with the suppliers. However the cost and effort necessary to do this is very low in relation to the reward and value. There should be the availability of a supervisor capable of dealing quickly and efficiently with any issues that may arise with any manifested parts, as has been the case frequently until now in this project. There should be pre-defined locations for stock storage once the parts are processed and recorded onto the inventory system so as to make inventory control efficient, accurate and maintainable Stock should be fully recorded when received from a supplier, when sent on to be used in the off-shore project site or if any parts or supplies should be in turn returned from there Obviously these are not practices, although only briefly outlined as they are, that can be implemented without investing in training of the relevant staff, preparation of the relevant floor areas and introducing the relevant systems and equipment as well as sufficiently embracing the relevant SCM methodology, creating a whole new impetus and focus within the logistics activities. However they are practices that will show an instant return of value for the investment as efficiencies will increase and wastage and costs will reduce significantly, particularly if these are implemented along with making parts identifiable, labelling or bar-coding by suppliers and manifests more detailed so as to remove the initial issue of confusion and over complication.

Supplier Practices and Co-operation


One of the impacting generalities within the construction industry, particular within the smaller construction company, is a lack of co-operation and structure between the company and their supply manufacturer. In the case of (name removed on editing) and the (name removed on editing) , due to the sheer size of the operations and undoubted customer importance they hold with their 14

Logistics Analysis of a large Construction Project in Western Australia


supplier, it should be relatively easy to establish good communications with their suppliers, and to have them meet some requirements and considerations on their behalf that would make ordering, receiving and identifying shipments much more efficient and easier on the part of the logistics activities. This is especially applicable in regards to the initial problem posed in this report, identifying unlabelled parts and parts manifested as 1 piece that are in fact consisting of a number of elements. So much value can be added to the supply chain by improving relations with the suppliers, getting to meet certain requirements and also to adapt certain practices. In particular this can be done by: Ensuring all parts and pieces are labelled correctly is the least to be expected. Realistically it should be demanded of the supplier to label each part with a unique label fitting the needs of this project, ideally with a bar code for the newly implemented inventory systems, but at least with the product name, description, code and corresponding manifest no. in clear view. Ensuring that a more detailed or effective manifest is in place that makes it easier to identify parts and that will list the no. of elements in a kit item such as the previous example of the recycle plant. If possible should a kit item such as the recycle plant, be in a shipment it could be organised that such a kit or no. of related elements are housed in a purpose built container/cage or design that will keep them as one in transport making for much easier identification, receipt and storage. Setting up a professional and positive relationship with the supplier by involving a dedicated procurement professional so as to lead to more harmonised operations, leading to efficiency benefits, cost reductions and joint success for both companies. An accessible product database, either an available file or hyperlink, whereby if necessary a product picture can be viewed to allow identification if still unable although the implementation of the previous points As previously mentioned some suppliers in the construction industry can operate in a manner that is inconsiderate to their customers requirements by operating to their own considerations rather than fulfilling the customers prioritisation or time requirements needs. Such practices should be discouraged in the companies suppliers can be influenced by having a good working relationship and mutual consideration as per the previous point. Within the SCM methodology it is important to have a good relationship and professional working appreciation and joined efforts where possible with ones suppliers. This is especially the case within the JIT management but this is also applicable for this project as the immediate impact of improved

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Logistics Analysis of a large Construction Project in Western Australia


manifests and part identification is enormously valuable for both parties, albeit mainly for (name removed on editing) .

Procurement Practices
As previously analysed the procurement activities within the (name removed on editing) are somewhat chaotic, un-communicative, myopic and unorganised. It is an area that needs obvious attention if an overall efficient and successful logistics operation is to be in place and will go a long way in assisting the successful implementation of the other suggestions. One of the most fundamental and important suggestions of changes to be implemented in this area are the placement of a dedicate purchaser, a procurement professional that can be imperative and effective in many areas throughout the company, such as: Co-ordinate all procurement efforts with individual project area engineers to fulfil their supply needs and to order at a level that is most efficient and cost effective for the company Co-ordinate with the logistics and receiving team so as to deal with any shipment issues or any foreseeable issues that should be made aware to either party Co-ordinate with an overall logistics manager, should one be in place, to ensure all needs and performances are being met along with bridging the gap or any divide that may exist between the construction interests and original parties of operations with the newly interlaced logistics focus and approach so as there is no animosity or ill-feelings leading to as smooth a transition as possible, should that be the approach that is taken of course. Cooperate and communicate with suppliers so as to ensure all company demands and requirements are being met and to a sufficient standard while maintaining a positive and jointly successful relationship so as to make future changes easier and more approachable for both parties. A procurement specialist really can add value to the logistics function of any company and within pretty much any industry, however it would be extremely beneficial within this project as it would go along to resolving the part identification and suppliers manifest issues, as well organising the somewhat erratic methods currently in place for ordering of supplies. Although the nature of the construction industry being project based would lead to a company in this industry to keep away from employing a specialist in this field for when the project is finished it is an extra liability however in such a big company as (name removed on editing) it is a consideration that could easily be accommodated and add great value to their operations especially where they to adapt an SCM approach to their logistic activities. 16

Logistics Analysis of a large Construction Project in Western Australia

Logistics Project Sub-Division/Cross Functional Training and Co-operation


As mentioned in the previous suggestions, it is important for one aspect to work that as many of the other options are implemented with full belief and backing so that all can operate and take effect codependently and successfully. This is also true in the suggestion to implement a full logistics operation within the organisation, a sub-division that stands on its own classification as a function within the (name removed on editing) to co-ordinate and control all logistics activities throughout the project, adding procedural efficiency and inventory accountability and accuracy and value consideration throughout all activities. This can be implemented by the hiring of a dedicated logistics professional to implement their own logistics structure within the organisation, training individuals for positions were needed and possible, introducing an SCM methodology and process outlines were applicable. This would be a less dramatic and less offensive of adapting to the logistics platform and as such would not cause as many interruptions or encounter as many refusals to this. Due to the fact that this project is in operation for quite some time and a more aggressive approach might cause unrest and more harm than good this report would suggest this as the best option, to hire a couple of logistics experienced professionals to shore up the faltering logistical platform that is already in place. Alternatively the company could go for the more aggressive approach and introduce an entire new logistics team, focus, and methodology, and completely rehashing the current operational activities. This would offer benefits in the long term as it is an approach that must be committed to and although maybe not the best for this particular project it may have much more beneficial applications in future projects. But again as previously suggested this seems to be an inharmonious and unnecessary approach to take, when by cross training amongst the different sectors and areas a healthy and efficient logistical structure can be achieved for this project and future ones.

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Logistics Analysis of a large Construction Project in Western Australia

SCM in the Construction Industry


Within the construction industry there are many practices that are still very inefficient, wasteful and myopic in their outlook and focus. The nature of the industry itself leads to it being project based and goal orientated whereby performance is measured in what is effectively job lots, moving from job to job. This seems to have manifested itself to a more short term scale also where by an overall project is again goal orientated and short sighted in planning, with engineers, builders, tradesmen alike all focused on the next goal at hand and co-ordinating around that with little regard for the inter-dependencies and relationships that exist throughout the overall operation. This leads to many short falls in consistency, fluidity, efficiencies and cost control. This is highly contradictive and counter to the methodology and focus of SCM and as such it is not compelling for the possible success of SCM within this industry. It also reasons why SCM should be invested in, believed in, and implemented within the construction industry, especially in larger companies and projects such as the (name removed on editing) where the sheer scale of activities allow SCM principles to add great value across all activities of the project. Some areas of application of SCM within the constructions, which may be, and to a certain extent have been subjected to SCM, include the reduction of costs (especially logistical costs) and inventory in the supply chain. In view of the large share of these costs in construction, this focus is often fully appropriate. The focus may also be on the impact of the supply chain on site activities. Here, the goal is to reduce site costs and duration. In this case, the primary consideration is to ensure material flows to the site for the sake of avoiding disturbances in the workflow. Also, the focus may be on transferring activities from the site to upstream stages of the supply chain, the goal is again to reduce the total costs and duration. In practice, these areas are intimately interrelated. It is often difficult to improve the dependability of the deliveries of a supply chain without addressing the total supply chain. If activities are transferred from site upstream the supply chain, it is necessary that the resultant, more complicated supply chain is properly managed, implemented and improved so as to have the benefits and successes that are possible. This is a conflicting consideration, to think that it should not work and is polar to the current activities but that its approach is the tonic that many of the flaws within this industry need in order to reach through profitability and success. If SCM were to be implemented than obstacles to its adoption as a management philosophy certainly do exist within the construction industry.

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Logistics Analysis of a large Construction Project in Western Australia

Development Issues of SCM according to Lin and Shaw (1998)


Development Issues Order Information Transparency Description of the development The issue is how to manage the order information propagation to improve the supply chain. It is not rare to find that the placing of a subcontract or material order is delayed due to price negotiations. As a result, the order information propagation is effectively halted. Reduction of Variability The issue is how to reduce variability and how to make the supply chain robust when facing uncertainty. Synchronisation of Material Flows The issue is how to synchronize the availability of materials for assembly. It is not uncommon to see that materials are produced in an order suitable for the supplying factory, and delivered to the site in a mode minimizing the transportation costs. Thus, other considerations than the needs of assembly dominate. Management of Critical Resources The issue is how to identify critical resources, lay out a critical path network and put the effort on reducing the workload of critical resources. In the traditional design-bid-build procurement in construction, where the parties are selected based on price, it often is impossible or difficult to objectively identify critical resources of the supply chain in advance. Configuration of the Supply Chain The issue is how to evaluate and then change the chain. This kind of continuous and long-term improvement of the supply chain is out of question, because for each project, a new supply chain is configured. Although this does not include all points of the issues regarding the logistics activities within the (name removed on editing) it does highlight the variability procurement processes that are involved in the actual construction practices as well as the nature of the industry and how this contradicts the long-term continuity of the SCM concept. This table can be seen to show that actual practice in construction not only fails to address issues of supply chain, but rather follows principles that make supply chain performance worse. 19 Changes to orders, originating from the sphere of the client, the design team or the main contractor, are quite usual. Actual Construction Practise

Logistics Analysis of a large Construction Project in Western Australia

Conclusion
SCM can play major roles in construction. The principle roles of SCM are covered by the generic SCM methodology. The SCM offers general guidelines that can be used to analyse, reengineer, properly coordinate, and constantly improve virtually the complete construction supply chain, resolving basic problems and the myopic control that have been plaguing the supply chain. This would be practically impossible to realise in the short term. Therefore, initially, the SCM methodology is properly deployed on a lower scale, addressing partial supply chain problems, involving a limited number of supply chain activities. This is particularly pertinent in this project and within such a company, as although initial improvements in terms of shipments, part identification and manifest accuracy may be made immediately without any great difficult or repercussion the overall adaption the SCM philosophy and methodology is a very difficult one which should be performed incrementally and not instantly in the short term but will have major long term benefits for a company of this scale.

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Logistics Analysis of a large Construction Project in Western Australia

Bibliography
Hines, T. (2004). Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier. Lin, F-R., and Shaw, M.J. (1998). Reengineering the Order Fulfillment Process in SupplyChain Networks. Intl. J. of Flexible Manufacturing Systems, 10 (1998) 197-299. Murray & Roberts. (2011). About Us - Overview. Retrieved May 10th, 2011, from Murray & Roberts: http://www.murrob.com/au_overview.asp Murray & Roberts. (2011). About Us - Strategy. Retrieved May 10th, 2011, from Murray & Roberts: http://www.murrob.com/au_strategy.asp Murray & Roberts. (2011). Project Portfolio - Gorgon LNG Project. Retrieved May 10th, 2011, from Murray & Roberts: http://www.murrob.com/projects_detail.asp?project=22

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