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Supply Chain Management in the Building Construction

Industry: Linking Procurement Process Coordination,
Market Orientation and Performance

Article · June 2010

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 Journal of Surveying, Construction & Property Vol. 1 Issue 1 2010
ISSN: 1985-7527

Supply Chain Management in the Building Construction

Industry: Linking Procurement Process Coordination,
Market Orientation and Performance
Akmal Aini Othman1 & Sofiah Abd Rahman1
1
Department of Building, Faculty of Architecture, Planning and Surveying,
Universiti Technology MARA, 40450 Shah Alam Selangor Malaysia,
akmalainiothman@yahoo.com

Abstract

Supply chain (SC) is basically a network of firms involved in complex activities and
multi processes. With such complexities, this management of interdependencies require
to be coordinated to improve the performance of SC i.e. on flow of information,
services, money and material. Various areas of supply chain management (SCM) have
been explored by the researchers including supply chain coordination (SCC) and
managing supplier relations. The initial part of this paper presents a conceptual
discussion and framework of the link between market orientation, procurement process
coordination and performance in the construction industry. It is supported with the
result from a pilot case study in the building construction sector. The discussion from
the pilot case study concentrates on the importance of market orientation and each
activity in the procurement process coordination. Finding from this study illustrates that
the importance of procurement process coordination in the construction industry slightly
varies from manufacturing. While, several means of coordination could be adopted,
information sharing and supply contract were demonstrated to be visible.

Keywords: Supply Chain Management, Market orientation, Procurement, performance

& construction

1. Introduction
With the increase of competition and technology enabling, many firms turning to supply
chain management as a central part of strategic competence, which is believe would be
able to create competitive advantage (Sheth & Sharma, 1997). On the same line of
thought firms are increasingly exploring ways to leverage their supply chains and
particularly to systematically evaluating the role of suppliers in their activities. As cited
by Kannan & Tan (2006), leveraging supply chain allows the firms to exploit the
capabilities, expertise, technologies, and efficiencies of their suppliers.This is supported

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ISSN: 1985-7527

by the claim made by Cousins, Lawson, & Squire (2008), that close links between
buyers and suppliers are increasingly cited as a critical differentiator of high and low
performers in global supply chains.
Wisner (2003) in his study on SCM strategies and firm performance, described
SCM as the integration of key business processes among a network of interdependent
suppliers, manufacturers, distibution centers and retailers in order to improve the flow
of goods, services, and information from original suppliers to final customers with the
aims of reducing system wide costs while maintaining required service level. From
here, several issues of SCM could be discussed further. Among those crucial issues are,
SCM itself involves integration of business processes, consists of several players and
the objectives is to improve the firm performance. Theoretically, the value chain is too
complex to attain a full integration of all business processes within it, in order to gain
the benefits offer by SCM (Tan, 2001). This leads to a second narrower perspective of
SCM that is the integration of the various functional areas within an organisation to
enhance the flow of goods from immediate strategic suppliers through manufacturing
and distribution chain to the end user (Houlihan, 1987). With such perspective on SCM,
it’s not surprised that various areas of studies have been explored by the researchers in
SCM. Along with are: managing supplier, managing process and activities in the supply
chain (SC), integration and coordination of key processes, coverage in form of end-user
to initial supplier and value creation. Apart from that, there are other means of
classifying SCM literature, for instance it can be classified according to the integration,
(i.e. internal chain, dyadic relationship, external chain and network suppliers and
customers) among supply chain members (Harland, 1996; Tan, 2001).

2. Procurement in SCM
The discussion of this paper will concentrate on one of the processes in SCM, that is
procurement or also known as supplier relationship management (SRM) from the
perspective of dyadic relationship between the contractor (building construction) and
the supplier, with the emphasis given on the coordination effort in this process.
Although several attempts have been made to study this area, the study contributes to
the development of knowledge by detailing the activities involved in procurement
process instead of to analyse it in a general setting. This will allow greater

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ISSN: 1985-7527

understanding on the effect of each activity in procurement process coordination or

SRM to performance in the Resource Based View (RBV) framework. Apart from that,
this particular study will highight potential enablers such as market orientation that
might play as an input for successful supply chain coordination (SCC).
Applying SCM to sectors such as manufacturing, retailing and distribution is
not a new pheneomenon, where past studies in these areas have shown that SCM leads
to improving a firm’s competitiveness and profitability (Mentzer, 2001). However,
adopting this concept into the construction industry is a new issue and it is a challenging
due to the nature of the industry such as specialisation of work and the fragmentation of
the overall process among supply chain members. For example, in comparing with other
industries such as manufacturing, construction involved range of component parts with
unique degrees of site or project requirements. With the immobility and size of the
product in the construction, it requires to be assembled at the point of consumption
(Gann, 1996). On top of that, it involves numbers of expert groups in a project like the
engineers, designers and suppliers in completing a specific task or project. Thus it is not
possible to assume a single firm would have the power or the ability to individually
coordinate the whole supply chain, but every member can influence and be influenced
by the whole supply chain (Isatto & Formoso, 2006). Therefore, this particularly study
would help to fill the gap.
Initially, this paper will discuss from a conceptual point of view, with some relevant
previous studies are briefly analysed. Then, the results of pilot case study conducted in
the building construction industry are presented.

3. Construction Industry and Its Characteristics

The construction industry can be divided into three broad sectors: (1) Building
construction; (2) Heavy and civil engineering construction; (3) Specialty trade
construction. Building construction itself consists of residential and non-residential such
as commercial and industrial building (CIDB-Local Contractors, 2008).
It has been argued that this industry is a leader in term of outsourcing where it intensely
relies on subcontractors and suppliers of building materials (Dubois & Gadde, 2000). It
is also been perceived as to be distinct itself from other industries, for example it is
inherently a site-specific project-based activity (Cox & Thompson, 1997; Dubois &

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ISSN: 1985-7527

Gadde, 2002). With such discrete characteristic, it forced the industry to view the
relationship between channel members from two perspectives. Like what have been
pointed out by Welling & Kaman (2001), SC partnership in construction industry can
take place at the project level and firm level. This project level relationship is seen as
temporary or short-term working arrangement that normally will hinder from innovation
creation. Conversely, firm level relationship permits for long-term relationship building
which may lead to the establishment of innovation for competitive advantage (Dubois &
Gadde, 2002). Besides these findings, more recent studies show that there are
movements towards a relationship approach to the construction supply chains where it
is shown that this industry engender specific relationship marketing (RM) practice in
their project environment (Davis, 2008; Errasti, Beach, Oyarbide, & Santos, 2007). As
have been revealed by Errasti et.al. (2007), it is a matter of time before the ability to
craft and sustain effective partnering relationships will become a precondition of doing
business in the construction industry. They also added that, significant improvements
may be feasible if contractors give attention to purchase volume on fewer suppliers and
employ a partnership development process.

4. Underlying Concepts
Conceptual model of building procurement system in figure 1 consists of antecedent
(market orientation); mediator (procurement process coordination) and consequence
(performance). The model proposes that performance is influenced by the extent to
which procurement process coordination (PPC) develops between contractor (buyer)
and their supplier. The extent of PPC developed in this dyadic relationship depends on
intensity of market orientation.

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 Journal of Surveying, Construction & Property Vol. 1 Issue 1 2010
ISSN: 1985-7527

Procurement Process
Coordination

-Supplier Selection &

Development
Performance
-Supply Contracts
-Operational
Market Orientation -Order Management Performance

-Joint Operation Planning -Market-Based

Performance
-Relational Development

Figure 1: Linking Market Orientation with Performance via

Procurement Process Coordination

4.1 Procurement Process Coordination

As mentioned in the earlier discussion, coordination has been recognised as a crucial
SCM concept. This is supported by Ballou, Gilbert & Mukherjee (2000), where
coordination is perceived as a central lever of SCM. Even so, it may be difficult to come
out with an exact meaning of coordination since there is no distinctive perspective on
coordination. As nicely portrayed by Ashinder, Kanda, & Deshmukh (2006) words such
as integration, cooperation, collaboration and coordination is perceived as
corresponding to each other and it is easily be regarded as part of SCC when used in the
context of SC. In a nutshell, all are considered as components of coordination in which
integration is referred as combining to an integral whole, collaboration (working jointly)
while cooperation is viewed as joint operation (Arshinder, Kanda & Deshmukh, 2008).
Due to its crucial contribution in the SC, several scholars have appeared to
develop the concept of coordination in the SC, for instance they looked into the inter-
firm coordination process by focusing on several characteristics such as effective
communication, information exchange, logistic synchronisation, incentive alignment
and performance monitoring (Stank, Crum & Arango, 1999; Lee, 2000; Simatupang,
Wright &Sridharan, 2002). Besides that, a comprehensive study that based on
coordination theory by Arshinder, Kanda & Deshmukh (2008) proposed a model of
supply chain coordination index in which it consists of four selected coordination

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mechanism: (1) supply chain contract, (2) information technology, (3) information
sharing, (4) joint decision making. The discussion of the above literature demonstrates
that the tendency of previous research on SCC attempts to focus on three or four key
elements of coordination. Among those elements, information sharing seems visible.
Hence, it would be safe to claim that the basic dimension of coordination is the sharing
of information between functions or firms. Indeed, information sharing provide
visibility into supply chain process used to coordinate the flow of product (Simatupang,
Sandroto, & Lubis, 2004).These literatures somehow help in defining recent perspective
of SCC as well as provide a guideline in measuring it.
In this proposed study, SCC is conceptualised as a process coordination
capability. SC is basically a network of firms involved in complex activities and multi
processes while SCM is increasingly being acknowledged as the integration of key
business processes across SC. Thus the interdependencies need to be coordinated to
enhance the performance of SC (Mentzer, 2001). Taking into account the whole
processes of SCM in this study would be a perfect choice in order to portray the true
picture of the phenomenon. However, due to the constraints, this proposed study will
only focus on the procurement process or supplier relationship management process
(SRM). It will concentrate in the procuring process of building construction sector.
Procurement or SRM process is one of the processes in SCM process in which it is
considered crucial and as an initiator to other processes (Arshinder et al., 2006;
Lambert, Cooper & Pagh, 1998; Xue, Li, Shen & Wang, 2005). In the construction
industry, cost of building materials accounts for 50% - 60% of the total building costs
while other costs such as labour contributes 30%; heavy equipment 5% and construction
management and supervision accounts for 15% (Bartelsen & Nielsen, 1997). Ironically,
some studies in the construction industry explained that these resources, especially
building materials are not sufficiently managed and in order to address this problem it
has been suggested that there should be a close cooperation between the supply chain
members (Bertelsen S., 1993; Bertelsen & Nielsen, 1997).
Five sub-processes activities of procurement or SRM process that has been
identified by Arshinder et. al. (2006) are: (1) Supplier selection and development; (2)
Supplier contracts; (3) Order management; (4) Joint operation planning; (5)
Relationship development. If right decision is taken to each, these five activities or sub

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processes are considered critical for the continuous improvement in performance

(Arshinder et. al., 2006). For this proposed study, procurement process coordination
(PPC) is conceptualised as the degree to which a focal firm (contractor) coordinated its
procurement processes with its supply chain partner (supplier). In this respect, key to
executing SCM depends on critical SC members and key business processes along
which the partners are coordinated. These processes include procurement and other
crucial processes and such SC related capabilities are widely acknowledged as source of
competitive advantage, which leads to performance and this is consistent with Resource
Based View (RBV) approach (Lamber, Cooper & Pagh, 1998; Lynch, Keller & Ozment
2000; Srivastava & Fahey, 1999).

4.2 Market Orientation

Most widely used category in studying marketing resources, namely market orientation
can be prescribed as a set of organisational behaviours devoted to the acquiring and
utlising of market information for the purpose of achieving customer satisfaction
(Narver & Slater, 1990; Jaworski & Kohli, 1993). Apart from viewing market
orientation as a set of organisational behaviours it can also be regarded as culture where
it comprises of customer orientation, competitor orientation and inter-functional
coordination (Narver & Slater, 1990). This dimension is one of the main concepts to
marketing thought and practice and is related to firm performance (Greenly, 1995;
Matanda & Mavondo, 2001; Navar, Slater & MacLachlan, 2004). It is perceived to be
important factor to promote individual firms’ coordinated activities inside and outside
the firms to accomplish customer satisfaction at a profit (Min, 2001). This is consistent
with the concept of SCM which stress on integrative philosophy to manage the total
flow of distribution channel (Ellram & Cooper, 1990).

5. Methodology
To support this paper, a pilot case study with six selected G7 building construction
firms, through in-depth interviews was carried out. Based on Construction Industry
Development Board (CIDB) Malaysia, contractors in Malaysia are graded into seven
classes. G7 are those big contractors with value of project RM10 million and above
(CIDB-Local Contractors, 2008). According to Yin, (1989) a case study is described as

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ISSN: 1985-7527

methodology based on interviews, which are used to examine technical aspects of an

existing phenomenon with its real life context; when the boundaries between
phenomenon and context are not clearly evident. This case study helps to demonstrate
the consistency of the conceptual framework used in this study with the current practice
in the construction industry. At the same time, it helps to test the validity of set of
questions which are going to be used in the next step of the study, namely survey
research. A set of questionnaire is used as an interview protocol, were asked to all key
informants in the same order. As mentioned earlier, six representatives from building
construction were selected to represent this sector. Since the questions are mostly
related to strategic area and procurement related, the respondents were those who are at
the managerial level and above with involvement in the purchasing or procurement.
Due to confidential reasons, the company names are not revealed. They are only
identified as Company A-F. Table 1 depicts the breakdown of the companies involved
in this study.

The questions covered these two main areas:-

1. The importance of market orientation and its adoption in the building
construction industry
2. The importance of procurement process coordination (supplier relationship)
and its adoption in the building construction supply chain

Table 1: Company Types and Respondent Position

Company Company Characteristics Respondent/
Interviewee Position
Company A Local construction firm Project Manager
Specialised in residential building
Company B International construction firm Project Manger / Quantity
Involved in commercial and Surveyor
residential building
Company C Leading construction firm Operation Manager
Specialised in residential building
Company D Multi-national construction firm Administration Manager

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Involved in industrial and commercial

building
Company E Large corporate construction firm Quantity Surveyor
Involved in commercial and
residential building
Company F Local construction firm Director
Involved in industrial building

6. Finding and Discussion

The research findings are discussed and presented in a sequence order based on the
areas covered in the questionnaire.

6.1 Procurement Process Coordination

a) Buyer-supplier Relationship
From the feedback, it makes obvious that majority of the respondents indicate the
understanding of supply chain management (SCM) is mainly related to the supply side,
though in reality the concept of SCM encompasses the entire cycle of procurement,
delivery and consumption (Mentzer, 2004). In relation to that, all respondents perceived
relationship with supplier as essential in which this may lead to better operation with
greater coordination, consistent with the findings of Ashinder, Kanda, & Deshmukh
(2006) and Simatupang, Sandroto, & Lubis (2004). As mentioned by Company A, “we
view our suppliers as team member. It is crucial for us to have good working
relationship with suppliers since it may influence the price and quality of product to our
clients”. Company D and E however draw attention to other channel members, like for
example the designer and the expert group besides the suppliers. This might be due to
the nature of the project involved, more technical and complex, thus vastly need greater
coordination with other channels members despite the suppliers.

b) Bonding
Although numerous studies portray adversarial relationship take place in this industry
which largely due to its project based approach (Dubois & Gadde, 2000; Dubois &
Gadde, 2002; Farmoso, Soibelman, De Cesare, & Isatto, 2002;), the current study

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indicates that not all companies in this industry practice the same. In a nutshell,
partnership is not temporary. There is a tendency towards long term bonding between
the contractor and suppliers. This is consistent with what have been identified by
Welling & Kaman (2001), SC partnership in construction industry can take place at the
project level and firm level. As been expressed by most companies “despite the fact that
we involve with various projects, we prefer to deal with the same supplier. It makes our
job easier since we are familiar with them and they know us well. Better deal is
expected from such transaction”. However, Company E did mention that, ‘while we
prefer to deal with the same suppliers, certain requirements from the clients enforced us
to work with other suppliers, we have no choice”. Nonetheless, such findings lead us to
another important issue, which is the element of trust. This long term partnership is seen
as an essential instrument for building trust (Khalfan, McDermott, & Swan, 2007)

c) Trust and Cooperation

Besides loyalty, there is a sign that element of trust appears in the relationship. Even so,
the degrees of trust between the companies were varied. Company A, B and F for
instance, said, “we have faith with our suppliers, they somehow helped us in getting the
contract/tender. Though we have been dealing with them for quite sometimes, formal
written contract do involve in our transaction. It is a company procedure somehow and
sometimes it does help”. Company A added that, their suppliers provide them more than
just valuable information, at certain point they share plans and designs. On the other
hand, Company D revealed that, it is a risk to be attached to a particular supplier. “Too
much relying on specific supplier might put the company in jeopardise. They may
simply leave us, and we are not of their intention. Formal agreement with appropriate
written contract may help both parties to achieve stated objectives while at the same
time continue good relationship”. This mixed findings show that the concept of trust is
somehow intricate and difficult to interpret. As what have been discussed in their paper,
Moberg & Speh (2003) and Yi, Tao, Li, & El-Ansary (2008) highlighted the
questionable of trust among channel members and how this element affect relationship
and SCM.

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ISSN: 1985-7527

d) Supplier Selection
All respondents have no doubt with the elements of price and quality as pre-requisite to
supplier selection. Even so, some of them do agree with other factors that should be
taken into account in the selection process. Supplier’s capability of information sharing,
flexible contract and continuous improvement are also perceived to be essential in the
selection of supplier by most respondents. “We wish to deal with those suppliers that
have the credibility to offer us with better package. Their input such as price, to better
decision is crucial to us. Suppliers that could offer greater flexibility in term of payment
especially, is preferable. During hard time, with cash flow and time constraints, working
with such suppliers is a blessed”, revealed by most respondents. This claim highlights
the importance of selecting the right supplier as been mentioned by (Kannan & Tan,
2006). In other words, it emphasises on selecting supplier as source of value added
where this may lead to success of buyer-supplier relationship and eventually firm
performance. However, not all respondents appreciate “joint decision and plan” as
important elements. This is consistent with the earlier finding on the confident level of
the contractors towards their supplier.

e) Supply Contract
Not all respondents agree with the first statement on ‘no power domination between
contractor and supplier in contract preparation’. Company A, B, C & E admits that for
certain products that are considered as standard products, less control made by both
parties. Oppositely, when it comes to more complex and technical which require greater
customisation and with only limited number of suppliers can offer, the tendency of
imbalanced power is significant. As noted by Company D, “given that we involve with
heavy and technical projects, the requirement for much specialised suppliers are
essential. With their know-how, they normally have greater say than us, but since we
have been working with them for quite sometimes, this barrier is able to handle fairly”.
In other issue, most respondents agree that contract helps their company and supplier to
work towards desired goals.

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f) Order Management
Another mixed result from the respondents, in this section. The different opinions
basically due to the nature of product or service involved. Since this study doesn’t
specify types of product or service offer by the supplier, a considerable difference of
opinions can be seen from the feedback. For the record, questions used in this case
study in principal were based from the literature which mainly comes from the
manufacturing industry. In the construction industry, it was found that numerous types
of suppliers involved in the channel system. As pointed out by Company D, “we deal
with various kinds of suppliers in order to accomplish the task. These involved those
who offer heavy equipment and machinery, labour, building material, service expertise
etc.” Company F who also involved in geotechnical works and instrumentation
specialist reported that, “we have good contact with our supplier and working closely
with them. In fact we are given exclusive right to carry supplier’s name in marketing
their instrument. While we have our own information system to connect and distribute
project related information particularly between staffs in the organisation, we don’t
have any exclusive information system that links our company with the supplier. We
don’t really require such system to keep track with the order since it doesn’t involve
continuous transaction. Ordinary means of communication, such as email, telephone,
and fax will be adequate”.
On the contrary, Company A and B who involved with residential and
commercial building construction and deal with material building suppliers have
stressed on the importance of continuous connection with their suppliers. Company B
explained that they do take the initiative to employ ordering system that could link their
company with their building material supplier. “Despite the fact that it is difficult to
create a holistic ordering system that could be linked with various parties and
information, our company updates each other with the supplier by having a system that
allows us to get access to the inventory level of building material. Just like
manufacturing, the issue of inventory management is crucial since it contribute to cost
creation. We may not that good in adapting Just-in-Time (JIT) concept as to compare
with manufacturer; nonetheless we do take this into account in our inventory managerial
process”.

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g) Joint Decision Planning

As compared to other activities, joint decision is shown to be a bit selective in its
adaptation by majority of the respondents. Despite the fact that information sharing is
considered crucial, joint decision with the suppliers on certain aspects isn’t well
accepted. For example, Company C said, “we agree that joint decision is vital in order
to coordinate process between our company and supplier, however, not all of the areas
of joint decision could be easily accepted”. Company B noted that, “to make sure that
required items reach to the right destination at the right time etc., we do participate in
decision collaboration with our supplier. Joint decision in scheduling delivering and
inventory planning are normal. Building materials products such as cement, sand and
concrete blocks are basically standard items, thus decision on product and process
design is largely depend on the supplier”.

6.2 Market Orientation

Irrespective of types of company, all approached respondents agree that client
satisfaction is the priority. As mentioned by one of the respondents, in order to stand out
of the crowd, company needs to offer some of value to the client. “All contractors can
build building, but not all contractors can deliver it at the right time and required
quality. Thus, serving customer at its best through closed monitoring their requirement
and better than competitors is the answer to this game”. Such claimed correspond with
those findings by Greenly (1995); Matanda & Mavondo (2001); Navar, Slater &
MacLachlan (2004) that market orientated practices lead to certain result such as
improvement in its operation performance.
Apart from that, most respondents highlighted the competitiveness of the
market has pushed the construction companies to be more aggressive, in the sense they
are more alert to the market requirement and proactive in action. The requirement of the
ISO standard by the CIDB is perceived by majority of the respondents as a driving force
to the G7 companies to be more systematic in running their business. “Though it is
painful to attain the ISO standard, the reward from the adoption seems to be fruitful to
the company as a whole. Indirectly we are forced to work in an organised manner. We
are forced to plan ahead, to keep our records accordingly etc.” Such feedback on ISO
gives an indication that enforcement on certain established system may indirectly

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encourage the contractors to be more responsive to the requirements of the market. As

mentioned earlier, this systematic approach proposed by ISO is seen to be parallel with
market orientation that emphasises on customer satisfaction and inter-functional
coordination. This apparently may contribute to better performance to the operation of a
firm and eventually is seen to encourage industry efficiency. As such, there is a need to
persist with this ISO enforcement.
The above discussion demonstrates that the adoption of market orientation is
not only restricted to certain industries, like for instance manufacturing and services, but
construction industry, particularly the big players are increasingly adopting such
orientation in facing the competitive environment.
Table 2, 3 and 4 indicate inputs from six selected companies.

Table 2: Input on Procurement Process Coordination from Different Companies

Compan Procurement Process Coordination
y

Supplier Supply Order Joint Relationship

Selection Contract Managemen Decision Developmen
t Planning t
Company Importance Contract is No online Involved in Dealing with
A of considered system join the same
informatio important connecting decision suppliers for
n sharing to meet with supplier planning different
and defined but able to with projects
flexible goal and keep track supplier. Have long
contract in prefer to with the Areas such term
supplier have some inventory as building commitment
selection. rooms of level and material and trust
flexibility ordering demand each other
in certain information. forecasting,
areas and
scheduling
activities
are
important.
Company Importance Contracts Connected Joint Continuously
B of are not with the decision working with
informatio rigid with supplier via planning same
n sharing some online limited to suppliers
and changes ordering scheduling regardless of
flexible could be information delivery project
contract in made due system. activities awarded.

36
 Journal of Surveying, Construction & Property Vol. 1 Issue 1 2010
ISSN: 1985-7527

the to certain Different only This long

selection constraints departments term
of supplier . It’s an in the commitment
important organisation leads to trust
tool. are and risk
connected to sharing.
ordering
information
system too.
Company Favour to Contracts The Participate Dealing with
C work with are company and in certain the same
suppliers planned suppliers activities of suppliers for
that can jointly but have access joint different
provide sometimes to building planning projects
input for due to material with Do trust each
better some order suppliers other but at
decision. restraints, tracking and but a bit the same
Payment supplier updating worried on time aware
flexibility will do the each other the risk with the risk
is critical lead. continuously. involved involved.
too. due to
information
leakage to
the
competitors
.
Company Quite Contracts Various Joint Admit that
D selective in are departments decisions not only
supplier perceived in the are supplier
selection as organisation considered relationship
and choose important are crucial, but is crucial, but
to work in connected to at certain other supply
with those managing the ordering point, chain
who could suppliers. information there’s no members are
provide Any system. need to important as
better offer changes in Order have the well in
than other price tracking on supplier to achieving
suppliers. should be building be involved defined
made material is partly goals. Quite
agree by accessible because of sceptical in
both for both the time dealing with
parties. company and constraints limited
supplier. and the number of
company suppliers due
have more to certain
say. risk.
Company Suppliers Contracts Suppliers Involved in Prefer to deal
E who could are used to continuously join with the

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 Journal of Surveying, Construction & Property Vol. 1 Issue 1 2010
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offer more guide maintain scheduling same

value channel adequate activities suppliers but
added members. level of but lack in sometimes,
service They inventory other area. due to client
such as permit based on requirement
informatio changes information limits
n sharing which due provided continuous
and to through relationship
expertise unexpecte order
are more d events. tracking
preferable. system.
Company Informatio Have long The need for Supplier Dealing with
F n sharing is term continuous involve in the same
crucial. contract. ordering join suppliers for
Supplier is Carry online scheduling different
also supplier system is activities, projects
expected to name. limited due forecasting Have long
actively to the nature and even term
involve in of product promotion. commitment
join provided by Limited and trust
activities the supplier. involvemen each other
such as However, t of the
promotion. inter- supplier in
departmental product and
information process
system is design
well
connected.

Table 3: Input on Market Orientation from Different Companies

Company Market Orientation
Company A Stress the importance of client and supplier satisfaction and
monitoring competitor actions.
Company B Client satisfaction is important. The needs to monitor competitors’
actions.
Company C Client satisfaction is important and rapidly respond to competitors’
action
Company D Competitive market requires proactive action in managing clients
and suppliers
Company E Client satisfaction is priority with high degree of inter
departmental connection
Company F Respond to clients needs and good relationship with channel
members is crucial

Table 4: Input on Effect to Performance from Different Companies

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Company Performance
Company A Having good relationship with high degree of cooperation with
channel members such as supplier would encourage better decision.
Such relationship encourages knowledge transfer which is perceived
could influence the operational performance especially.
Company B Good connection with suppliers is perceived to enhance operational
performance and eventually to meet the market needs. This helps in
meeting product specification and cost reduction.
Company C Flexible contract through supplier relationship building permit the
company to meet required performance like meeting the deadline,
reduction of defective rate and ultimately client satisfaction.
Company D Greater flexible contract allows unforeseen forces to be handled
effectively. Hardly faced problem in meeting the timeline and product
specification. Numbers of client complaints are considered low.
Company E With appropriate selection of suppliers, this will help the company to
work effectively with suppliers and gain advantage through this
relationship. Information sharing with greater understanding between
firms leads to efficient outcome such as meeting clients’ needs and
reduce defective rate...
Company F Benefits of relationship building with supplier are perceived to
influence the cost and quality of a project. Input generation through
joint decision between firms allow better decision and eventually
influence performance.

7. Way Forward
From this study it may be observed that coordination in the procurement process or
SRM is perceived to add value to the construction industry, particularly in the building
sector. It has been shown to influence performance mainly in the operational and
market-based aspect. This is attained through coordination effort of various activities in
the procurement process and continuous commitment that eventually engenders trust,
and result to satisfaction. Marketing orientation that stress on client focus and
coordinated approach too has been perceived as crucial and was found to be widely
adopted by the contractors especially when time are tough. In other words, competitive
forces do shape the industry to be more focus on crucial elements such as client needs
and managing business in more efficient and effective manner. This brief explanation
on the general findings of the present study leads to several pertinent points that require
attention for further investigation. These include those crucial elements related to the
current study which embrace the issue of coordination, trust, commitment, IT and
degree of procurement activities.

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Further result from the above pilot case study indicates that there is willingness
and effort moving towards meaningful business relationship with the supplier in this
industry. This is parallel with recent literature in construction industry by Davis (2008),
demonstrated that players in this construction supply chain, namely the upstream and
downstream are in the direction of relationship marketing (RM) approach, with
emphasising on trust, commitment and long-term relationship. As mentioned by Davis
(2008) in his discussion on a study carried out by Green, Newcombe, William, Fernie,
& Weller (2002), this relationship-based supply chain approches have a tendency to
generate knowledge benefits which is crucial in a competitive advantage building. Thus
it is vital for a contractor to understand the essential of relationship building and its
contribution to the firm performance. As such further investigation is required to
examine how these elements of relationship building in the construction supply chain
could be developed further. This is consistent with the previous reports which called for
industry improvement via‘Rethinking Construction’ (Egan, 1998; Latham, 1994). Apart
from that, there is a need to investigate further the issue of trust and commitment in this
relationship building since both are considered crucial and were found to be inticate. No
doubt that various studies have been carried out in these areas (Bennett & Gabriel,
2001; Eriksson & Laan, 2007; Khalfan, McDermott, & Swan, 2007; Kingshott &
Pecotich, 2007; Yi, Tao, Li, & El-Ansary, 2008) notably in the mainstream research,
nonetheless, adopting research technique from successful disciplines into this field
(construction) is considered critical.
Another interesting finding that requires bringing to light is the degree of
importance of each activity in the procurement process to the firm performance. While
most respondents agree with their involvement in various activities in procurement
process, the level of importance varies. This study does not mirrored to the study in the
manufacturing industry which conducted by Ashinder, Kanda, & Deshmukh (2006)
where the involvement of the contractor and supplier are more towards information
sharing and contract management. Such result echoed to the finding on limited adoption
of information technology (IT) in this industry. It was observed that IT adoption is
relatively restricted, particularly when dealing with inter firm connection between
contractor and the supplier. Since IT has been highligted by many researchers as an
input to improve inter-orgnanisational coordination (Co, Patuwo, & Hu, 1998; McAfee,

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2002; Sanders, 2008; Small, 1999), there is a need to look into this issue in a more
comprehensive manner. Further research should address questions on what are the
barries that may hinder and factors that may drive to the adoption of IT principally in
this construction sector. Answers to such questions are seen to be critical in the
adoption of this coordination concept and ultimately to the performance improvement
of this industry.
Although relationship development with supplier was identified to be apparent,
not all activities in the procurement process work the same. In this study, joint operation
planning is seen to be reserved in its adoption with limited collaboration activities take
place between the channel members in the procurement process. Only selected areas of
collaboration come into picture where scheduling deliving activities and price
forecasting seem to be noticeable. However, these collaboration activities mainly occur
in the procuring process for building materials. Such result indicates the relevancy on
the proposed procurement process concept in managing building materials. Thus there
is a requirement for further research to be carried out in this sector which may focusing
on the procurement process of building material

Besides those findings, it has been shown that the benefits of coordination in
the procurement process can be grasp, but the degree of importance of each activity is
perceived as varies in this construction industry. Despite the fact that most activities in
the procurement process coordination are perceived to contribute to better firm
performance, the degree of importance of each activity and the mechanism of
coordination adopted in this construction industry may influence the result. Hence it is
crucial for the management to understand which of these activities of procurement
process coordination contribute the most to firm performance and which are lacking in
this industry. In this study, it has been shown that there is lacked of adoption of
collaboration effort such as joint decision making as compare to supplier relationship
development and supply contract. Since this paper is noticeably only a conceptual paper
with some supportive input from a pilot case study. Much work need to be done through
empirical testing for further confirmation to be revealed. Such understanding may help
the management in term of why and where to place the effort and to invest resources,
apart from what to expect as reasonable return on this investment.

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