fcee 2005-06-203-216 logistics of construction

7/28/2019 Fcee 2005-06-203-216 Logistics of Construction

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F O U N D A T I O N S O F C I V I L A N D E N V I R O N M E N T A L E N G I N E E R I N G

No. 6 2005

Publishing House of Poznan University of Technology, Pozna 2005ISSN 1642-9303

Anna SOBOTKA, Agata CZARNIGOWSKA, Krzysztof STEFANIAK

Lublin University of Technology

Institute of Construction and Architecture

LOGISTICS OF CONSTRUCTION PROJECTS

The paper discusses selected aspects of logistics with regard to a construction

company as an organisation and as a participant in a construction project. On the basis

of a recent research in Poland, patterns of development of logistic systems and relations

between the participants of construction projects have been presented. The project

delivery systems and their connection with possible supply models have been analysed

focusing on supply logistics. Experience of construction companies and comparison of

supply systems cost simulations point out, that outsourcing of supply logistics processes

may significantly reduce total logistic costs.

Key words: logistics in construction, construction project, delivery systems inconstruction, logistic centre

1. INTRODUCTION

The tendencies towards efficiency improvement and risk control in project

management indicate the significance of logistics, i.e. a branch of knowledge

applying new concepts to control material, service, information and finance

flows between suppliers and customers. In the field of construction, procurement

planning and execution (ordering, reception, transport and storage) dominates

the logistic processes [7].Following the example of other industries, there are attempts to integrate

construction logistics into logistic chains of suppliers and customers, from the

suppliers of raw material, manufacturers, distributors, to the end-users. Logistic

processes, being crucial for successful completion of the project but in fact

auxiliary, are often entrusted to external professionals specialised in logistic


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204 Anna Sobotka, Agata Czarnigowska, Krzysztof Stefaniak

services, such as logistic centres [1, 2, 3] and this tendency is also to be observed

in construction. Traditionally, each contractor taking part in a project was

responsible for his/her individual supply chain to provide materials and services

required within his/her scope of works. At the present time of well-developed

market for building materials and services, centralising and outsourcing the

project supply logistics is seen as a more cost-efficient solution facilitating

project control. With the development of project delivery and management

systems, and as the choice of suppliers is considered, traditional decision-makers

(designers and contractors) are replaced with new ones: project managers or

even owners select materials and suppliers.

The paper focuses on a number of aspects of logistics and its specificfeatures regarding a construction company as an organisation and as a

participant in a construction project. The results of a ten-year survey of changes

of construction supply systems are presented and analysed in relation to the

project delivery system as a premise for the selection of the supply system. The

enclosed simulation-based calculations of logistics expenses present the impact

of supply organisation on costs.

2. BASIC FEATURES OF CONSTRUCTION LOGISTICS

Logistics is often defined as managing the supply chains, the latter being

a network of organisations linked by material and information flows bounded

with a product (project) life cycle (from the procurement of raw materials

through processing and handling the products and the final product, distribution

and sales to the end-user and finally, to waste utilisation). All the processes and

relations concerning the above flows form a logistic system. A company, being a

member of a larger supply chain of suppliers and customers, has its own system

of internal logistics also in the form of supply chains (Fig.1)

Fig. 1. A building contractor within a supply chain of materials and participants of a project


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Logistics of construction projects 205

Logistic processes are present in various fields of activity within

a company (purchase, production, sale etc.). Isolating and integrating logistic

tasks performed by all organisational units of a company results in creating

logistics departments that co-ordinate all the flows. Three basic models of

logistic systems are to be observed in building companies:

x informal, where co-ordination of logistic tasks of separate departments and

fields of activity is enforced within the existing organisational structure of

the company,

x semiformal, where a logistics manager takes the responsibility for the co-

ordination of logistic processes of the company, but is not in charge of the

departments, where these processes are conducted,x formal, where a separate department takes over all the logistic processes of

the company.

The particular model of logistics is selected according to the current

organisation structure of the company, its targets and management strategy. The

actual size of company is also important. 97% of all Polish contractors employ

up to 20 people and, therefore, have no logistics department in their structure.

The semiformal model with a single specialist is preferred. Larger enterprises

that used to have well-developed logistics departments tend to go back to the

semiformal model (reduce the number of employees) or decide to outsource their

procurement. Numerous surveys on logistic systems in construction indicate

dynamic changes in this domain [3,4,7,9].

Contractors are usually only single links of logistic chains that providea project with products, services, information and finance. In contrast to

manufacturing industries, which profit with long-lasting partnership with

suppliers and customers, logistic chains in construction are considerably more

difficult to manage and to optimise. This results from:

x diversification of projects (various materials, methods, location of each

project means a new constellation of supply chain members each time)

x technical complexity of a project,

x number of participants in the project,

x domination of the bidding system of contractor acquisition (random

partnership within the chain),

x

difficulty in adjusting each members logistic routines to the logistic systemof the project.

Therefore, the co-operation within the framework of the project supply

chain is short-term. The participants of a construction project (builders,

suppliers, employer etc.) tend to compete among one another to make the most

of the project. For the next enterprise they are going to join new partners and

form new supply chains [11]. Construction logistics may be considered in

a number of aspects [6, 11], e.g.:


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x the building site as a production system and a member of many logistic

chains, where complex processes are executed within time, space and budget

constraints whole project logistics,

x supply chains delivering products from external sources to the building site

(supply logistics),

x co-ordination of material flows on the building site (on-site logistics),

x participants of the construction project as separate entities participating in

other projects at the same time.

As the success of the project depends on the co-ordination of the on-site

and external logistics in all above aspects, a considerable managerial effort is

required to bring the efforts of all participants of the project in consonance andto reach the synergetic effect [10]. The construction project comprises a number

of stages from its conception to commissioning. Each stage involves logistic

processes. Serra and Oliveira [6] propose a set of guidelines (table 1) for the

preparation and implementation of an integrated logistic plan of a construction

project.

Table 1. Logistics production plan guidelines [6]

Project phase Guidelines and tools

Design

Logistic guidelines for the conception

Analysis of technological alternatives

Definition of the plan of attack for on-site work

Production design, site designAs-built design

Planning

Gantt physical chart

Gantt materials consumption chart

Gantt equipment chart

Histogram of own labour

Gantt subcontractor chart

Gantt chart of implementation of work safety-related preventive

measures

Supplies

Materials specification

plans for materials delivery to the site

Gantt chart of the start-up of the purchasing process

Materials/supplies purchasing rules

Materials and services suppliers qualificationGuidelines for equipment purchasing or leasing

Use of indices of material losses and wastage

Execution

Plan for the execution of work

Documentation, implementation and maintenance of the

information system

Use of labour and equipment productivity indices

Work safety and health rules


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A carefully developed logistic plan accounts for all possible relations

among the participants of the project: the project owner and management,

designers, contractors, suppliers of services and products, insurance companies,

financial institutions and regulatory bodies [6].

3. CHANGES AND PATTERNS OF SUPPLY SYSTEMS IN

CONSTRUCTION

The chapter presents results of a ten-year survey of logistic systems of

building contractors and construction projects [9]. Considering contractors, thedata were collected in years 1992 2003 and relate to: sources of supply,

delivery contract routines, criteria of suppliers selection, reasons of delivery

inaccuracies, bases of material demand forecast and distribution of responsibility

for logistic decisions.

Figure 2 presents an average share of value of purchase according to

source of supply for years 1996 2002. There is a tendency of decreasing direct

purchase from manufacturers for the benefit of wholesalers. This is related to

other trends of reducing own transport and using suppliers delivery services.

Manufacturers often concentrate on production and offer no transport services.

Fig. 2. Share of value of purchase according to the type of supplier in 1996 and 2002

In most cases, delivery contracts concern single projects and there are no

exclusive suppliers, but a long-time co-operation with a number of suppliers

occurs quite often. Such partnership allows the contractor to negotiate better

terms of contract (discounts, terms of payment). The long-time contracts usually

regard selected ranges of goods. Figure 3. shows the proportion of long and

short-term delivery contracts.


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Fig. 3. Share of long and short-term delivery contracts in Polish construction (2002)

The co-operation between contractors and suppliers tends to grow. Thesuppliers offer additional services of warehousing and deliver on request in

batches. Each batch may be paid separately.

The criteria of supplier selection are presented in Figure 4. Figure 5 shows

methods of supplier acquisition.

Fig. 4. Criteria of supplier selection in Polish construction companies (2002)

Fig. 5. Methods of supplier acquisition used by Polish contractors (2002)


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Delivery inaccuracies occur quite often in spite of the consumer

domination in the market. Basic grounds for them are the financial difficulties

caused by employers delay in payment and change of sequence of works on the

building site. Further reasons are errors in the design, errors in orders, difficulty

in obtaining non-typical materials. Typical supplier failures such as problems

with transport are rare. Bases of contractors forecast of material demand are: the

construction schedule (57%), the bill of quantities (14%) and experience (29%).

As for logistic decisions, there are usually a number of decision-makers

within the organisation whose scope of actions differ according to the structure

of the enterprise. With regard to the supplies, most decisions are made by

construction or site managers and purchasing departments (Fig. 6)

Fig. 6. Distribution of responsibility for logistic decisions in Polish construction

companies (2003)

The results of the survey also point at the changes in the contractors

supply system, consisting in the reduction of the scope of logistic tasks

performed by their own departments. Firstly, own transport and warehousing are

being kept to the minimum. Secondly, processes connected with information

flows, e.g. supplier selection, are being limited.

These tasks and functions are often taken over by the members of the

external logistic chains such as transport companies, wholesalers or

manufacturers. The stock stored traditionally on the building sites is often kept

by the suppliers and delivered on request in batches. The project management,

designers or even employers often select materials and suppliers. Also the

project management, hired logistics professionals or specialised wholesalers take


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over the supply planning and scheduling. Therefore, more participants are

involved in a construction project. The relations among them evolve

continuously (Fig. 7) and further specialisation is to be observed [3,4].

Fig. 7. Relations among members of a project supply chain [4]

It is clear that there is no typical or best system of project logistics. In

a longer perspective each system must be readjusted to the external conditions or

even completely redesigned. New, effective solutions have to be implemented to

reach the expected efficiency of a project. Currently, the employer dominates the

highly competitive construction markets and his decisions are binding for anyactions of designers, contractors and suppliers, which reflects in the network of

relations of project participants. The ultimate relation model depends also on the

delivery system of the project.

4. DELIVERY SYSTEMS AND LOGISTICS SYSTEMS OF

CONSTRUCTION PROJECTS

The logistic system of a construction project influences considerably the

projects time and cost. The selection of the logistic system depends, however,

on economical, physical and organisational conditions of the project e.g. scopeof the project, location and delivery system. Any arrangements concerning the

project delivery system are meant to be most economic for the owner and allow

him to be involved in any decisions he wishes to influence. The most common

delivery systems in construction are [12]:

x the design-bid-build systems

x the design and build or turn-key systems

x the professional construction management systems


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The design-bid-build system requires the owner to manage the planning

phase, to hire an architect and then to select and hire contractors or a general

contractor to execute the designed works. The three main actors of the project

(owner, designer and contractor) work separately within their scopes of

responsibility (Fig.8). The whole process is sequential: first comes the design,

then bidding and finally the construction.

Fig. 8. Schematic diagram of the relations within the design-bid-build system with

independent contractors (left) and with a general contractor (right)

In the case of the design and build or turnkey systems, the owner

employs a single contractor providing managing, design and construction

services (Fig. 9), acting as a general contractor or hiring contractors. There is

only one contractual relationship involving the owner. The contractor takes over

the whole responsibility for the completion of the project. The design and

construction processes may be conducted simultaneously (within one team or

one company) and therefore improve information flows and shorten the time of

the project delivery. Traditional conflicts between designers and contractors are

eliminated.

Fig. 9. Schematic diagram of the relations within the design-build system with and

without a general contractor

Professional construction management systems introduce another party to

the traditional triangle of the owner, designer and builder - a professional whose

task is to represent the owners interests, integrate and manage all the processes


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and to co-operate with the designers and the contractors. The manager offers his

expertise to support any decisions from the conceptual phase to the

commissioning of the project and to co-ordinate planning, design and execution

activities to reach the synergetic effect and to shorten the projects completion

time. The manager may enter the project as a consultant with or without being at

risk (i.e. entering contractual relationship with contractors or not Fig. 10).

Fig. 10. Schematic diagram of the relations within the construction management (left)

and management contracting systems (right)

Regarding the project logistics, four basic models of supply systems are

possible:

x independent supply chains for individual contractors, where selection of

suppliers, supply planning and scheduling is the duty of each contractor,

x centralised supply system managed by general contractor or other party

managing the whole project, by means of their own logistics departments,x centralised supply system managed by an external logistics company,

x combination of the above.

Supply systems based on independent chains or services of an external

logistics company are possible in any type of project delivery systems. In the

case of delivery systems with a general contractor or other party that disposes of

necessary logistic resources, it is reasonable to use them to create and manage

the whole project supply system. Such party benefits directly from any

improvement of logistics. Integrated logistics for the whole project means the

possibility of optimising supply chains and co-ordinating deliveries, which is

significant for sizeable construction projects that involve many contractors

working in confined space. Shifting responsibility for supplies to many

subcontractors may result in the building site congestions, excessive expensesand delays.

Business organisations offering service in the field of logistics may exist

in the form of independent companies or be created specially for the needs of a

construction project. According to their scope of activities they may take over all

the logistic processes within the projects life cycle or focus on some functions,

e.g. supply control, transport and warehousing. The complete logistic service of

a construction project may comprise [2]:


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1. Developing logistic concepts for designing and planning:

x feasibility study of logistic alternatives,

x plans of logistic processes and information flows,

x economic efficiency study,

x environmental impact assessment.

2. Developing strategic guidelines for bidders:

x preparing bidding requirements,

x assisting bidders and supervision over their logistic solutions,

x evaluating bids, participating in contractors selection.

3. Assisting bidders (potential suppliers, forwarders and contractors) in bid

preparation:x developing specific logistic solution to improve the quality of service,

x developing logistic standards for bid preparation.

4. Developing plans of the building site logistic and supervising their

execution, integrating purchase, transport and execution of construction

works:

x creating operational logistic centres servicing a complex of projects,

x implementing IT systems,

x constructing IT networks to improve information flows and to optimise

them,

x implementing ideas of the supply chain management on the building

site.5. Controlling

x developing and implementing systems of quality assessment for logistic

processes,

x recording feedback information on the effects of implementing

integrated logistic systems.

6. Optimising supply and purchasing process

x within the scopes of manufacturers, general contractors and

subcontractors,

x benchmarking logistic systems of other industries.

The scope of the above logistic services partly complements and partly

overlaps the constituents of the logistic plan for the whole construction project

life cycle as presented by Serra and Oliveira [6].

Centralisation of logistics is meant to lower total cost of the project,

improve quality of works and reduce the project completion time. As the Polish

construction companies keep no account of material cost (and buying cost)

according to the source of their origin, it is not possible to specify the cost of

supply logistics directly on the basis of the account. If a material is delivered by

a number of suppliers and also by means of the contractors own delivery

services, it is only possible to estimate buying costs.


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A simulation of acquisition costs of a single building material (bricks) [9]

has been based on two supply models:

1. three contractors use the service of a logistic centre,

2. the contractors supply themselves individually.

The prices, discount rates for bulk purchase, storage, transport and

unloading costs and charges assumed for the simulation base on real market

conditions in the Lublin region in the last quarter of 2002, the material

consumption is a random variable for the period of simulation. The results of the

simulation (Table 2.) show that using the common supplier for this particular

material allows the customer to save 6% of acquisition costs. The logistic centre

is able to negotiate better discounts and offers lower buying costs, but itsaverage stocks are heavier and the cost of frozen capital grows. There are also

costs of internal transport (from the logistic centre to its customers).

Table 2. Results of supply cost simulation [9]

Individual supply cost [z]Cost

type

Centralised

supply cost

[z]Contractor

1

Contractor

2

Contractor

3

Total

Advantage

of logistic

centre

services

[z]1 2 3 4 5 3+4+5 (3+4+5)-2

Material

value

540 960,00 193 660,00 38 640,00 308 660,00 540 960,00 0

Buying

cost

3 627,45 2 469,87 1 478,40 2 952,40 6 900,67 3 273,20

Price

discount

-51 744,75 -5 809,80 0,00 -15 433,00 -21 242,80 30 501,90

Cost of

shipping

26 460,00 12 630,00 2 520,00 20 130,00 35 280,00 8 820,00

Int.

transpor

t

1 563,72 0,00 0,00 0,00 0,00 -1 563,70

Frozen

capital

(stocks)

13 176,28 2 117,09 648,46 2 843,90 5 609,45 -7 566,80

Total 534 042,70 205 067,16 43 286,86 319 153,29 567 507,32 33 464,62

The advantages of logistic centres are not limited to cost reduction. The

quality of service is also higher due to specialisation of logistic organisations.

Logistic centres are able to co-ordinate and optimise their transport and therefore

diminish the traffic loads (important in cities) and reduce air pollution.


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5. SUMMARY

Construction logistics deals with many technical, organisational and

environmental issues affecting the cost of a project, time and quality of

execution. Traditionally, each contractor uses and manages his own supply

chains. In the case of larger projects involving a number of contractors,

incompatibility of logistics concepts and lack of co-ordination results in serious

disturbances in material and information flows. According to modern ideas of

management, centralisation of logistic functions and management allow many

actors of a construction project to reach the synergetic effect of their efforts.

Implementation of integrated logistic systems such as these offered by logisticcentres may be particularly effective in larger construction projects located in

city centres (confined space, limited transport possibilities), where massive

flows of material have to be managed (e.g. extensive earthworks requiring

transport of excavated material). The main task of an integrated logistic system

is to provide just-in-time deliveries, eliminating most of material handling and

storage on site, to shorten the time of project completion by eliminating reasons

of work stoppage, to minimise disturbances in local traffic and air pollution due

to exhaust gases emission. Shifting most of the logistic processes on logistic

professionals allows construction companies to reduce their fixed costs and to

concentrate on the development of their core competencies.

REFERENCES

1. Baumgarten H.: Erfolge mit zukunftsorientierter Baustellenlogistik, Bereich

Logistik, Technische Universitt Berlin, Berlin 1998.

2. Baumgarten H., Penner H.: Baumstellenlogistik Potsdamer Platz,

Technische Universitt Berlin, Fachbereich Wirtschaft und Management,

Berlin 1997.

3. Buszko A.: Modele wsppracy przedsibiorstw logistycznych, Gospodarkamateriaowa i Logistyka, 8 (2003), 15-20.

4. Buszko A.: Zmiany w logistyce dostaw materiaw dla wykonawczych firm

budowlanych w latach 1992-2002, Gospodarka Materiaowa i Logistyka, 4(2003), 2-7.

5. Poortman E.R., Bons H.N.M.: Information for the management of the

building-materials flow. Engineering Construction and Architectural

Management, 1/2 (1994), 139-140.

6. Serra S.M.B., Oliveira O.J.: Development of the logistics plan in building

construction. System-based Vision for Strategic and Creative Design,

Bontempi (ed.), Lisse, Swets&Zeitlinger, 2003, 75-80.


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7. Sobotka A.: Wraliwo decyzji logistycznych w przedsibiorstwiebudowlanym, Wydawnictwa Uczelniane, Lublin, 2000.

8. Sobotka A.: Simulation modelling for logistics re-engineering in the

construction company. Construction Management and Economics, 18

(2000), 183-195.

9. Sobotka A., Stefaniak K.: Zmiany w organizacji zaopatrzenia

materiaowego przedsiwzi inwestycyjno-budowlanych), PrzegldBudowlany (in press).

10. Stevans G.C.: Integrating the supply chain, International Journal of Physical

Distibution and Materials Management, 19, 8 (1989), 3-8.

11. Veiseth M., Rostad C.Ch, Andersen B.: Productivity and logistics in theconstruction industry, Conference Proceeding, Nordnet 2003, Oslo

26.09.2003.

12. Tenah K.A.: Existing and emerging delivery systems for construction

projects. System-based Vision for Strategic and Creative Design, Bontempi

(ed.), Lisse, Swets&Zeitlinger 2003, 151-156.

A. Sobotka, A. Czarnigowska, K. Stefaniak

LOGISTYKA PRZEDSIWZI BUDOWLANYCH

S t r e s z c z e n i e

Artyku zawiera omwienie wybranych aspektw logistyki i jej specyfikiw odniesieniu do przedsibiorstwa i z punktu widzenia przedsibiorstwa budowlanegojako uczestnika przedsiwzicia, a take zachodzce zmiany w logistyce na podstawiebada. Zwrcono uwag na zaleno modelu obsugi logistycznej od systemu realizacjiprzedsiwzicia. Dokonano analizy systemw zarzdzania przedsiwziciem w aspekciewyboru modelu obsugi logistycznej. Zaczony przykad obliczeniowy przedstawiawpyw modelu obsugi logistycznej na koszty logistyczne przedsiwzicia.

Received, 02.06.2004.

fcee 2005-06-203-216 logistics of construction

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