Culture and activities
Tools and techniques
|2.1||Material suppliers and customers must determine the value of incorporating an intermediary in the supply chain from both a tactical and strategic perspective.Intermediaries must decide if they are prepared to play a more collaborative role within strategic supply chains.By pursuing strategic supply chain partnerships, intermediaries have the potential to move from their traditionally low-level distribution role to a strategic one where they plan, manage and support complex supply chain systems as part of multi-tier, integrated construction solutions.||
Material suppliers and customers must determine:
Intermediaries must determine:
Whether they are prepared to make the cultural, operational and financial commitment to working in close interaction with suppliers and customers as part of integrated supply chains. This will necessitate creating the necessary trust with partners and might, for example, involve:
i. entering new areas of service
ii. developing expertise in specialist fields of relevance such as common quality standards and communication systems
iii. taking a more pro-active involvement in product design and specification.
As a manufacturer, an intermediary is worth considering when you have a standard (non-customised) product but lack:
i. Determine your market share and research the potential for growth. If you have a high and profitable market share without using an intermediary you probably do not need one.
ii. Conduct cost/risk/benefit analyses to determine whether an Intermediary can add value to your business and to the rest of the supply chain.
iii. Review your organisational structure
Where a manufacturer adds an intermediary into the supply chain, it will often call for an organisational and structural review of the manufacturer’s business.
Construction procurement teams/professionals
Contractors, subcontractors, designers and end-users have traditionally made extensive use of intermediaries since they offer the only realistic method of sourcing a wide variety of products in the volumes/timescales that are required. In the emerging construction landscape, however, intermediaries will have the potential to play a much more pivotal supply chain co-ordination role. Construction procurement teams must therefore consider the usage of intermediaries when developing their procurement strategy and, where appropriate, seek to integrate them as early as possible.
Conduct cost/risk/benefit analyses to determine whether an intermediary might add tactical and strategic value to the procurement and supply chain process.
|Tip: It may be beneficial to conduct this using independent external expertise.|
|2.2||Core principles/cultural requirements for partnering with intermediaries||
Construction procurement team
Most contractors and subcontractors use intermediaries, but few realise the potential capabilities of the intermediary as part of an integrated procurement chain. This partly due to the fact that true supply chain integration is still in its infancy and partly because, historically, the relationship has tended to be governed by price rather than value.
It is imperative the construction procurement team not only demands ‘best value’ from their intermediary partners, but also insists on engaging only with intermediaries that can demonstrate their commitment to true supply chain integration and the principles that underlie it. Only by doing so can the collaborative benefits outlined in this Toolkit be realised.
It is important the company personnel pull together to achieve the partnering objectives. Change management will be necessary if the manufacturer has not used an intermediary network before and must not be underestimated. Failure to deal with this aspect may have negative repercussions on the business.
In all cases, to ensure the full benefits from integration are realised, a clearly defined strategy must be established that sets out the aims, objectives and long-term goals of the relationship and generates:
|2.3||Planning stage (detailed review of operational changes needed to achieve this state)|| Having made the decision to use intermediaries, both manufacturers and construction procurement teams must:
(i) Public and Private sector/utility construction and term maintenance/Facility Management, etc.
(ii) New Build /Refurbishment/ re-active maintenance.
(iii) PFI/PPP/Design and Build/traditional tendered contracts
Review the number of intermediaries required:
(i) Do you want a choice?
(ii) Can the intermediary offer the required service?
(iii) Will an exclusive Intermediary offer advantages or disadvantages?
(iv) Flexibility to expand or reduce the number of intermediaries.
Define the desired functional characteristics of the ideal intermediary partner:
As a manufacturer seeking to establish a partnering relationship with an Intermediary you need all available marketing analysis information to hand & should complete a SWOT analysis covering the following issues.
Construction procurement teams
As a contractor, subcontractor, designer or end-user you may already have experience of sourcing through Intermediary channels. However, if you are now setting up, or participating in, fully integrated supply chains you will need to satisfy yourself that your existing or prospective intermediary partners have the requisite skills, resources, cultural philosophy and commitment to meet the challenges presented.
Consider what contractual arrangements you will want to have in place with your intermediary partners. In many cases this will take the form of a partnering charter. Many partners find that the real value in drawing up this document rests in the process itself and that it forms a visible expression of mutual commitment to the aims and aspirations of the relationship. A ‘Service Level Agreement’ defining the expected standards of service may form part of, or run parallel, to the Charter document.
A typical partnering charter might include:
|2.4||Selecting intermediary partners||When selecting intermediary partners manufacturers and construction procurement teams must review and select candidates with respect to the criteria mentioned in the Introduction above. Note that manufacturers and construction procurement teams may have to sell the business case for integrated supply chains to prospective partners, e.g. strategic advantage, profit opportunities, increase sales, margin, exclusivity, support, long-term relationship, cost savings, etc.||Whether you are a manufacturer or a construction procurement team, the selection of the right intermediary partner(s) is absolutely fundamental to the success of the exercise. While it may be prove possible to retrospectively embed and cultivate the necessary cultural characteristics in an otherwise suitable intermediary partner, there is no guarantee this will happen. Mistakes at this stage might prove commercially disastrous.
Tip: If you are unfamiliar with intermediaries and intermediary distribution it might prove advantageous to invite prospective intermediary partners to introductory, no obligation seminars or one-to-one meetings to discuss the possibilities and gauge their abilities and commitment. Assess candidate using a rigorous quality-based selection system covering both quantitative and qualitative criteria.
|2.5||Address relational/process interface issues|| In most construction procurement scenarios, transactional and process-related improvements offer huge scope for cost/efficiency gains. In some cases involving intermediaries, where mutually beneficial relationships are well established, the necessary systems and procedures are already in place. In new partnering relationships these must be developed but have the advantage of being able to embrace the latest technological developments and build on existing experience.Intermediaries have been quick to embrace Information Technology, allowing suppliers and customers to reduce their supplier base and providing the opportunity to develop:
|| For details on how to achieve savings through transactional efficiency see Module 1: Customer/supplier procurement integration
Tip: The construction procurement team should ensure their intermediary offers them a personal contact (account manager), who works along with them to develop and monitor the Partnering and Service Level Agreements between the two parties.
|2.6||Agreeing measurable objectives(determination of Key Performance Indicators)|| Establish short- medium- and long-term targets distinguishing between global supply chain objectives and company-specific objectives that are mutually agreed, measurable and realistic.Targets might include:
Intermediaries should be able to offer specific KPI data to their customers:
|Ensure that all parties are an integral part of the benchmarking process, measuring as well as being measured.Publicise the benchmark results and discuss with your partners. Use these results to strive for continuous improvements in the process.
Tip: Hold regular operational-level workshops to review progress against KPI objectives and obtain feedback on lessons learned. In addition, ensure, through regular communications such as face-to-face meetings, conferences and newsletters, that everyone involved in the manufacturing organisation and its distribution network are fully aware of the KPIs and their significance.For information on generic construction KPIs see the KPI Zone website.
|2.7||Management and communications throughout the supply chain(controls that will ensure this partnership is working for you)||Manufacturers and construction procurement teams must ensure the intermediary plays its full part in an integrated supply chain and the full benefits are realised.Ensure that an open management process is in place to engender trust, commitment, enthusiasm and network ‘ownership’.Establish a mechanism for driving the partnering relationship and the maintenance of good communication throughout all links in the supply chain. The aim is to oversee the integration strategy with your partners, and to guide and monitor implementation.Ensure cultural transformation through ongoing training programmes aimed at different levels of staff within the participating companies.
Establishing partnering relationships is not about risk transferral; it is about risk management and removal. At this stage, the parties to the relationship should set out the basis for sharing risks. The correct management, monitoring and measurement systems will ensure that risk is identified, minimised and shared equitably.
|It is vitally important that regular review meetings between the intermediary and its supply chain partners take place.Tip: Manufacturers and construction procurement teams should establish, or facilitate the establishment of a joint review team to review compliance with both the Partnering Charter and the Service Level Agreement. This will also assess progress against the agreed objectives and KPIs, determine new objectives and resolve contentious issues as they arise.Prepare a joint training programme in accordance with the commercial, technical and cultural aspects of the programme and in line with the agreed KPIs. It is essential that a mutual understanding of each partner’s business and technical capabilities developed.
Tip: Hold regular, at least annual, network conferences to foster team spirit and trust, share knowledge, exchange information, educate and motivate.
Tip: Encourage network social and team-building events.
Tip: Give consideration to an awards scheme to honour best performance; celebrate success and foster competition amongst the intermediary network.
Tip: Consider introducing a self-financing incentive scheme tied to:i. achievement of business targets, andii. exceeding KPI targets.
Continuously review and audit supply chain performance. Don’t compromise on quality or commitment. If an intermediary consistently fails to deliver against its agreed objectives then:
a. reconsider the objectives to determine their validity/attainability. Adjust if necessary.
b. discuss the requirements with the intermediary in question with a view to rectification
c. if all else fails, terminate the relationship in accordance with the termination terms contained within the contractual agreement or Partnering Charter.
|2.8||STEPS FORWARDProduct co-development and innovation||
There is a lot to be gained in terms of cost savings, speed to market, efficient resource allocation and effective risk sharing by pooling expertise in the generation of creative yet workable solutions. A mature supply chain will develop the trust, confidence, mutual respect and interdependence to allow collaborative improvements to processes as well as product development programmes, e.g:
|As the link between the Manufacturer and the rest of the supply chain, intermediaries can play an important role in product development programmes.Tip: Consider regular development workshops with the aim of reducing waste, improving quality, simplifying interfaces and producing value-engineered solutions.Start small and concentrate on easy-to-implement and cost-efficient product/process enhancements rather than long-term R&D programmes.Design for installability, manufacturability, sustainability, rationalisation, standardisation, simplification and safety.|
|2.9||Collaborative marketing||Manufacturers in particular can collaborate with intermediaries in promoting their combined ‘competitive advantages’ to clients and the rest of the supply chain.In an integrated supply chain scenario, the intermediary can beneficially join forces with its supply chain partners in jointly promoting the benefits of the integrated team to clients, lead contractors and others.||Collaborative marketing is a key benefit that can be developed with any intermediary outlet. Indeed this aspect will often be a deciding issue at the strategy stage.Joint promotional programmes might include:
|2.10||Refine, improve and develop||Continually apply the lessons learned from feedback, reviews, successes and failures. Improve, improve, and improve! Integrated supply chains are an evolutionary species!|