In much of my material on specification strategy I emphasise the importance of relationships. On one level this is about becoming the Trusted Advisor, with strong relationships at Client, Architect, Engineer and Contractor level. It is also about understanding the relationships that exist throughout the supply chain, knowing which organisation works with which and the implications this has for your business.
The theory of Supply Chain Management is that an integrated supply chain, with long term relationships between the parties, will lead to added value for the client. It is for this reason that most leading contractors will have sections on their websites about their supply chain strategy. Of course, it is also about improved profitability for them. Many will have agreements with manufacturers and distributors which earn them significant amounts in rebates. This can also muddy the waters concerning the cost of products, as the price paid by the sub-contractor may not be a true reflection of the actual value enjoyed by the supply chain.
For these reasons the term “Supply Chain”, like “Value Engineering” often has negative connotations for manufacturers, suggesting specifications will be switched for cheaper alternatives.
It is to be expected that contractors, and clients, will enter into supply chain agreements with the manufacturers of the products that they regularly use. For example, the client Land Securities operate Project Rio which includes the procurement of key product groups used on their projects. In Design & Build, the contractor will often have lists of approved products that the architect should use. Product lists will be developed around products that are reliable, easy to install and give a price advantage.
So should the manufacturer invest in these supply chain agreements? Often it can lead to additional work, but it can also require considerable supervision. For example, in the housebuilding sector the manufacturer is often responsible for policing sites to ensure that sub-contractors are using designated products. A labour and administratively intensive activity.
From the specification manager’s perspective it is important to be aware of this influence on specification, and there are two approaches to adopt:
1. Understand the supply chain relationships and use these to maximise your return
Build a good understanding of relationships using past project history and note where supply chain agreements are in place. The architect should know if the Client has a supply chain agreement covering your products, similarly for Design & Build he will have been briefed by the main contractor concerning approved products and should know where agreements might extend to the stockists to be used.
If your products are excluded consider entering into a supply chain agreement, or recognise a lost cause and focus your effort elsewhere.
2. Ensure strong specifications which do not allow switching for inferior products
If a Traditional contract, then specification by the architect will take place before the contractor is appointed. Should the contractor then try to implement a supply chain agreement which works against your product, the importance of a well written specification is key, be it a named product (or equivalent) or a performance specification. Identify the unique benefits of your product and develop performance specification clauses which describe these. Well written generic specifications which describe key performance features of your product are the best way to protect against specification switching as it makes it difficult, or impossible, for the contractor to demonstrate that his alternative is equivalent or equal – especially if you are the Trusted Advisor advising the specifier in the background.
Remember that while a supply chain agreement will be a strong driver to product selection, the overpowering consideration should be that the best outcome is delivered for the client.
As Building Information Modelling (BIM) is adopted we can anticipate that the current supply chain relationships will change. BIM promises greater transparency and less risk in the construction process and discussion about product selection should take place at Stages 2 or 3 of the Plan of Work. But as the industry learns how to use BIM it remains to be seen if theory will become reality and when this happens.
See the Constructing Excellence fact sheet Supply Chain Management