Impact Of Downturn On The Fall Of Construction Output

RMM is a privately owned company that manufactures construction equipment, adding the functional body and operational control systems to a customer-provided chassis and front end. RMM has their major share of business in North America and United States and are planning to increase its market share in North America by 25 per cent in the next five years and also to expand to South America and Mexico.

As pricing books are printed, the information contained within them is naturally historic. Therefore in a volatile market, rates may quickly be outdated by the end of the year. So items are more exposed to inflation than others and may distort any cost pricing. As identified by (Kirkham, 2007, p. 219), that ‘in periods of rapid inflation or market changes they have suffered the drawback of having to prepare their information well in advance of the year of publication’. this could lead to cost data being misaligned with current market rates and will not reflect the true value in construction.

The construction industry is currently in a state of turmoil – as the economic situation begins to improve, we are finding that the challenges of securing contracts and motivating people throughout the recessionary period are being replaced with different challenges including retaining people, maintaining the business ethos and controlling growth in what remains an incredibly competitive industry. Through recession and as we exit, a strategic approach to business management is key to longevity and sustainability of an organisation. In the context of Read Construction Holdings Ltd (the writer’s organisation), there are significant changes currently underway – a new business plan targeting significant growth over 3 years, new directors and

A supply chain is a net work of firms. Thus, each firm in the chain should build its own supply chains to support the competitive priorities of its services or products. Two distinct designs used to competitive advantage are efficient supply chains and responsive supply chains. Efficient supply chains work best in environments where demand is highly predictable. The focus of the supply chain is on efficient flows of services and materials keeping inventories to a minimum. The firm’s competitive priorities are low-cost operations, consistent quality, and on-time delivery. Responsive supply chains designed to react quickly in order to hedge against uncertainties in demand. Work best when firms offer a great variety of services or products and demand predictability is low. Typical competitive priorities are development speed, fast delivery times, customization, variety, volume flexibility, and top quality. Tables below show the environments and design features that best suit each design.

As higher demands continued to be placed on GMM’s production and distribution operations, its transportation network lacked collaboration. In effect, each operation was making individual logistics decisions, creating costly redundancies and inefficiencies throughout the supply chain. However, On-time delivery is critical in their business, and they consistently meet their customers' requirements. With cost, service and punctuality always at the forefront, consolidates shipments, manages carriers, and optimizes air, sea and ground routes. (Penske, 2010)

Since for the companies in the construction industry it is not typical to bind their customers with long-term contracts and similar measures, it can be conclude that the switching cost of this industry is relatively low. The customer himself does not have a problem to change his supplier whereas on the market operate quite a large number of firms. The market is fragmented into more businesses offering similar products, respectively same and homogenous. The level of customer information rate is also fairly high. Thus the assumption is that the bargaining power of customers is rather high and hence

The major political influences on the construction industry in London at the moment are the Mayor of London’s Sustainable Design and Construction Supplementary Planning Guidance to the London Plan, the Climate Change Action Plan, and the Governments lack of response to the effects of the recession. The recession has almost completely stopped the building of new houses and has led to the mothballing of most of the

: QMJ ZG621 : SUPPLY CHAIN MANAGEMENT : Open Book : 60% : 3 Hours : 05/04/2009 (AN)

Following the paradigm shift on the role of logistics management in the recent decades, there has been a wide recognition of this as a very important aspect a business strategy in general. However due to the numerous factors promoting complexity of logistics management companies have adopted the idea of outsourcing their logistic activities to Third Party Logistics (3PL) providers. Hence, 3PLs have taken a critical role towards supply chains of heir customers.

There however are challenges in the industry occasioned by uncertainty on future spending on construction projects by the government. Moreover, the cost of doing business and the ability to increasingly make revenue have created a challenging environment for the construction firms. Therefore stakeholders in the construction industry are concerned with whether the government would increase its spending and whether the public construction projects will be available in the future since less than 10 percent are currently financing their clients.

Managing and implementing sustainability requires the commitment of all stakeholders and new ways of working, thinking and learning. [4]” The paper highlights the importance of a coordinated supply chain action in the construction sector and emphasizes the need for construction companies to train and invest in resource- efficient building methods and practices. This will manage the balance between stability and change [4].

Opening new production sites or distribution centers closer to dispersed customers is one way to reduce the lead time and transportation costs. However, the acquisition of such facilities in the oil and petrochemical industries, if feasible, is typically very costly and often results in higher inventory and operating costs (Hebert, 2004). Red Cavaney, president of the American Petroleum Institute, said “Most companies are unlikely to undertake the significant investment needed to even begin the process” (Hebert, 2004) These factors are pushing oil and petrochemicals companies to either absorb the increase in costs or pass the costs on to customers who are already facing increasing prices. Companies therefore have recognized that improved supply chain efficiencies represent a huge area for cost savings, specifically in the logistics area; they are estimated to be an average between 10 and 20 percent of revenues (Hamilton, 2003). Also, companies believe that the supply chain in which they participate as customers and suppliers is what creates competition rather than individual companies (Whitfield, 2004; Lange, 2004; Morton, 2003; Bianchi, 2003; Collins, 1999; Coia, 1999). Despite the importance of the petroleum industry in our daily life and the operational challenges it involves, unfortunately the topic has received very little attention in operations and supply chain management literature. The objective of this paper,

improving their strategic position within Taneja’s Saras aircraft supply chain, namely through reducing costs both by considerable changes in organization and management and by establishing their own subcontractors network, onto which they shift a share of the cost increase. This aspect clearly shows that the adoption of an MRP system at Taneja’s Saras aircraft has two implications on the supply chain: It imposes more stress in the supply chain. Subcontractors have to both reduce costs and meet Taneja’s new requirements; it is actually supportive of relations between customers and subcontractors. Through changes in Material requirement planning professional skills and information, subcontractors establish a strengthened relationship with the customer.

The construction industry much like other industries is dependant with the distribution of “scarce resources” (Drake,1994). Many of its resources known as the factors or production i.e. labour, capital, land etc. are limited (Gregory-Mankiw, 2008), however, wants and desires within the industry are infinite (Myers, 2013). Kishtainy notes that this creates two problems; at any given time, there will be a fixed number of resource, against numerous wants. Sloman 2003 adds that in an effort to rectify this, he argues that we must make choices, in terms of choices within the construction industry Myers suggested that firms need to considered their investments made, how they construct and for whom they construct for.

The relationship between the price and the commodity price is a recurring theme in the economic literature. McConnell et al (2009) shows that the price levels of a commodity are dependent on the demand of that particular commodity. The construction industry also follows the same model; the construction price levels are dependent on the demand for construction. It is also suggested that a fluctuating demand for construction leads to fluctuating prices and vice versa suggesting that the demand for construction may depend on the relative price of construction. A common measure of trends in price in the construction industry is the tender price index, which measures the treads in the cost of construction to construction clients and reflects the trend in the accepted tender prices. Therefore we can say that the construction price of built facilities determine the demand of the built facilities, because when the price goes down the demand goes up.