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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.
Contents
Abstract ................................................................................................................................................... 2 Title: Logistics Analysis: SCM within the Construction Industry .................................................. 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
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%
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.
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?
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
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.
Figure 1: Copy of actual shipping manifest (altered to remove names & dates)
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
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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
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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
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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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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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