1. Project/Ad Hoc Supply Chains
Sam Ervin, International MBA Candidate
Presented to BASF
Global Supply Chain Strategy Development Team
Ludwigshafen, Germany - July 2015

2. Contents
• Fisher`s Model of Segmentation
• Defining and characterizing a Project-Based
Supply Chain
• Challenges in a project environment
• Project-Based Supply Chain Management
• Cases: Yacht Building; Electrical Switchgear
• References
Click here on any slide
to switch to German

3. Fisher`s Model of Segmentation
• Construct the Supply Chain based on product
demand
• Functional products (steady demand) call for
focus on physical function of supply chain
• Innovative products (unpredictable demand)
call for focus on market mediation
Fisher (1997)

4. Lean (Efficient) Supply Chains
• Emphasize minimizing costs (physical function)
• Plan-Source-Make-Deliver flow of goods as
efficiently as possible
• Optimizing flow of information through use of
MRP Systems
Fisher (1997)

5. Agile (Responsive) Supply Chains
• Emphasis on flexibility
• Quick reaction to market signals
• Strategic positioning to hedge against
uncertain demand
Fisher (1997)

6. Capable ("Leagile") Supply Chains
• Hyrid model with characteristics of both
categories of Fisher`s Model
• Emphasis on delivery capability/shelf
availability
• Characterized by predictable quantity but with
variable timing

7. Temporary multi-organization supply chains […] which arise at the beginning
of the project and disband at the end of it. Ponticelli et al. (2013)
…a temporary supply chain producing one-off construction projects…
Vrijhoef & Koskela (2000)
Engineer-to-order (ETO):
• Construction Projects
• Shipbuilding
• Heavy Equipment (Switchgear Case)
Mello et al. (2015)
What is a project-based supply chain?

8. The "construction factory" is set up around a single product…
…typical make-to-order supply chain, with every project creating
a new product or prototype.
Vrijhoef & Koskela (2000)
…the need for the development of appropriate relationships; the
problems of unreliable supply; the different degrees of control
between the firms, and the difficulties due to the temporary
nature of a project based industry.
London & Kenley (2001)
Characteristics of Construction Supply Chains

9. "Managerial Paradox"
Fisher`s Model based on demand forecasts using past,
present, and future states
Project-based supply chains are inherently only in the
present-state
Sanderson & Cox (2008)

10. Product type and demand predicability in
project environment do not align with
traditional definitions of lean and agile supply
chains
For example, subassemblies may be functional
but highly variable in design and specification
Challenging Fisher`s Model
Sanderson & Cox (2008)

11. Example: Plasterboard
Highly standardized product, but with custom sizing for a
construction project; this would call for a leagile supply chain
with a decoupling point when the plasterboard is cut to size.
Less time-consuming for producer to cut to size, but then this
product may not be used to fill other customer orders (reduced
flexibility).
Delays at the construction site due to other supply chains create
interruptions in plasterboard supply chain, despite it being a
standardized product with highly detailed production planning.
Bankvall et al. (2010)

12. Example : Shipbuilding Cables
Sanderson & Cox (2008)
The cables have characteristics typical of both funtional and innovative products and
therefore do not fit nicely into one supply chain model category.

13. Example : Shipbuilding Cables
Sanderson & Cox (2008)
The supply strategy for the cables includes elements of both ideal lean and ideal
agile supply strategies.

14. Challenges in an Project Environment
• Difficult to predict demand
• Long-term perspectives, continuous improvement
mentality becomes irrelevant
• Difficult to build trust in relationships between actors in
the supply chain
Temporary
Nature
• Difficult to achieve systems view or end-to-end perspective
• Interdependencies result in conflict
• Large number of actors in the supply chain make effective
communication difficult
Complexity
• Due to inherent need for customization in each project
• Complexity and higher degree of customization result in
increasing uncertainty
Uncertainty

15. Interdependencies
• Pooled: shared resources, space, equipment
• Sequential: production process order
• Reciprocal: e.g. heating, ventilation, electrical
• Synchronic: integration, timing, e.g.
synchronized deliveries to a site
Bankvall et al. (2010)

16. Challenges in an Project Environment
The challenge is that ETO supply chains
have to cope with diverse customer
requirements and deliver the highest
quality of product in a highly uncertain
environment.
Mello et al. (2015)
Too much focus on the individual
chain can be negative for the total
project.
Bankvall et al. (2010)
The construction supply chain is typified
by instability, fragmentation, and
especially by the separation between
the design and the construction of the
built object.
Vrijhoef & Koskela (2000)
Any managerial philosophy, such as
´just-in-time´, applied to one site for
one project in the construction
environment, is problematic due to the
temporary nature of project
organizations.
London & Kenley (2001)

17. Managing Project-Based Supply Chains
Common recommended strategies include:
• Accepting and properly managing uncertainty
• Developing effective communication
• Integrating engineering and production
• Maintaining a leagile mindset

18. Accepting Uncertainty
The approach advocated in the present review is to accept the characteristics
of the real world in the first instance and the inherent structural
characteristics of a project based industry, as opposed to a process based
industry, rather than attempting unachievable, inappropriate and unrealistic
changes to an idealistic model of a supply chain.
London & Kenley (2001)
The inherent characteristics of a temporary project-based supply chain
prevent it from functioning like an ongoing supply chain would. Instead of
attempting to eliminate uncertainty, project managers should optimize
responsiveness by building capabilities to respond to it.

19. Effective Communication
Complex network of contractors and
subcontractors requires high level of
coordination, such as with flow of goods
Bankvall et al. (2010)
Internal, multidirectional communication
from both ends of the supply chain
(customer to supplier) could prevent
problems and reduce changes
Vrijhoef & Koskela (2000)
Project
Contractor
Contractor
Contractor
Contractor
(other projects)
(other projects)

20. Integration and Trust
In order to achieve higher levels of supply chain integration […]
the need to facilitate inter-firm relationships, achieve mutual
benefits and build trust at key interfaces in the supply chain.
[…]
It is crucial to take away the ingrained barriers of traditional
relationships and the adversarial culture in construction practice.
[…]
This calls for intensive co-operation, co-ordination and
communication in the network of firms.
Voordijk & Vrijhoef (2003)

21. Production Integration
Extensive case study of 6 shipbuilding projects demonstrates how a greater
degree of integration between engineering and production resulted in greater
ability to handle customer order changes.
This is not the same as overlapping these two activities, which required too
much effort, created further interdependency, and did not reduce lead time.
The findings of the study are that the integration of engineering and
production as well as production capability are the two most critical elements
that contribute to coordination.
Mello et al. (2015)

22. "Leagility"
Critical question: where should the strategic placement of the decoupling point between the two
supply chain models fall?
The positioning of the decoupling point therefore depends upon the longest lead time a end-user is
prepared to tolerate and the point at which variability in product demand dominates.
Naylor et al. (1999)

23. …the complex peculiarities resulting from the combination of both luxury and
project environments, such as the temporary supply chain configuration, the
high production uncertainty, and the complex network of subcontractors that
is involved in each project.
• Temporary multi-organization supply chains
• Discontinuous information, material and financial flows
• Change inertia (tend to be conservative)
• High customer influence
• Transactional buyer-supplier relationships […] focused on the
short-term and strained by conflict and mistrust
Ponticelli et al. (2013)
Case: Yacht Industry

24. SCM Practices in Yacht Industry
• Concurrent Engineering: customer and contractor inclusion in
design stage to enhance customer responsiveness, reduce
demand uncertainty, and reduce time-to-serve
• Information & Communication Technology Integration:
aligned use of technology among SC members to enhance
communication, increase information sharing and synchronize
activities
• Network Coordination: orchestrating the transfer of
information and flow of materials, increasing flexibility to
respond to sudden demand changes
Ponticelli et al. (2013)

25. Case: Electrical Switchgear
In an ETO Supply Chain, the emphasis for improvement is on lead
time, by reducing either mean lead time or lead time variation.
Delays in manufacturing process
allows for engineering uncertainty,
which in turn creates further
delays in manufacturing.
Elfving et al. (2002)

26. Reducing Lead Times
However, according to Mello
et al. (2015), "overlapping
engineering and production
may not reduce lead time,
due to increasing effort to
coordinate customer order
changes."
Elfving et al. (2002):
"Overlapping requires good
communication between the
task members."
Elfving et al. (2002)

27. End-to-End Mindset
"Protectionism" - Fragmented supply chain members
lack systems view.
For example, some members profit from change orders,
which create uncertainty.
Local optimization without considering impact on
entire process results in the "vicious cycle."
Elfving et al. (2002)

28. References
• Bankvall, L., Bygballe, L. E., Dubois, A., & Jahre, M. (2010). Interdependence in supply chains and projects in construction. Supply Chain
Management, 15(5), 385-393. doi:10.1108/13598541011068314
• Elfving, Jan, Iris D. Tommelein, and Glenn Ballard. "Reducing lead time for electrical switchgear." Proceedings of the 10th Annual
Conference International Group in Lean Construction (IGLC 10), Gramado, Brazil. 2002.
• Eriksson, Erik. "Improving construction supply chain collaboration and performance: a lean construction pilot project." Supply Chain
Management: An International Journal, 15.5 (2010): 394 – 403.
• Fisher, Marshall L. "What Is The Right Supply Chain For Your Product?." Harvard Business Review 75.2 (1997): 105-116. Business Source
Complete. Web. 13 July 2015.
• London, K. A., & Kenley, R. (2001). An industrial organization economic supply chain approach for the construction industry: a review.
Construction Management & Economics, 19(8), 777-788. doi:10.1080/01446190110081699
• Mello, Mario Henrique, Jan Ola Strandhagen, and Erlend Alfnes. "Analyzing The Factors Affecting Coordination In Engineer-To-Order
Supply Chain." International Journal Of Operations & Production Management 35.7 (2015): 1005-1031. Business Source Complete. Web.
13 July 2015.
• Naylor, J. B., Naim, M. M., & Berry, D. (1999). Leagility: integrating the lean and agile manufacturing paradigms in the total supply chain.
International Journal of production economics, 62(1), 107-118.
• Ponticelli, Simone, et al. "Supply Chain Implications For One-Off Luxury Products: Cases From The Yacht Industry." International Journal
Of Retail & Distribution Management 41.11/12 (2013): 1008-1029. Business Source Complete. Web. 13 July 2015.
• Sanderson, Joe, and Andrew Cox. "The Challenges Of Supply Strategy Selection In A Project Environment: Evidence From UK Naval
Shipbuilding." Supply Chain Management 13.1 (2008): 16-25. Business Source Complete. Web. 13 July 2015.
• Vrijhoef, Ruben, and Lauri Koskela. "The four roles of supply chain management in construction." European journal of purchasing &
supply management 6.3 (2000): 169-178.
• Voordijk, H., & Vrijhoef, R. (2003). Improving supply chain management in construction: what can be learned from the aerospace
industry?.

30. Inhalt
• Fishers Segmentation Modell
• Definition und Eigenshaften einer Projekt
Supply Chain
• Herausforderungen in einer Projekt Umgebung
• Management der Projekt Supply Chains
• Cases: Yachtbau; Elektrisches Schaltgerät
• Literatur
Click here on any slide
to switch to English

31. Fishers Modell
• Supply Chain Struktur unter Berücksichtigung
von Nachfragecharakteristika
• Funktionelle Produkte - beständig Nachfrage
• Innovative Produkte - unbeständig Nachfrage
Fisher (1997)

32. Lean (Effiziente) Supply Chains
• Betonen Kosten Minimierung (materieller
Schwerpunkt)
• Planen-Beziehen-Herstellen-Liefern (PSMD):
der Materialienfluss so effizient wie möglich
gestalten
• Optimaler Strom der Information durch die
Verwendung von MRP Systemen
Fisher (1997)

33. Agile (Reaktionsfähige) Supply Chains
• Schwerpunkt auf Flexibilität
• Schnelle Reaktion auf Absatzmarktsignale
• Strategische Positionierung um gegen
unvorhersagbar Nachfrage abzusichern
Fisher (1997)

34. Fähige ("Leagile") Supply Chains
• Mischform mit Eigenschaften von beider
Seiten des Fisher Modells
• Schwerpunkt auf Lieferfähigkeit/Verfügbarkeit
• Gekennzeichnet von vorhersagbarer Menge
aber mit variablen Zeitfenstern

35. Temporary multi-organization supply chains […] which arise at the beginning
of the project and disband at the end of it. Ponticelli et al. (2013)
…a temporary supply chain producing one-off construction projects…
Vrijhoef & Koskela (2000)
Engineer-to-order (ETO)
• Bauprojekte
• Schiffbau
• Großes Gerät (Elektrisches Schaltgerät)
Mello et al. (2015)
Definition einer Projekt Supply Chain

36. The "construction factory" is set up around a single product…
…typical make-to-order supply chain, with every project creating
a new product or prototype.
Vrijhoef & Koskela (2000)
…the need for the development of appropriate relationships; the
problems of unreliable supply; the different degrees of control
between the firms, and the difficulties due to the temporary
nature of a project based industry.
London & Kenley (2001)
Eigenschaften von Supply Chains in der
Bauindustrie:

37. "Managerial Paradox"
Fishers Modell fordert Nachfrageprognose basierend
auf Vergangenheit, Gegenwart, Zukunft
Projektbasierende Supply Chains bestehen nur in der
Gegenwart
Sanderson & Cox (2008)

38. Produkt Art und Nachfragevorhersagbarkeit in einer
Projekt Umgebung richten nicht nach traditionellen
Definitionen von lean und agile Supply Chains aus
So kann zum Beispiel ein Bauteil funktional sein, aber
auch unterschiedliche Designs und Vorgaben haben
Sanderson & Cox (2008)
Fishers Modell in Frage stellen

39. Beispiel: Gipsplatte
Sehr standardisiertes Produkt, aber maßgeschneidert für ein Bauprojekt;
erfordert ein leagile Supply Chain.
Das braucht weniger Zeit wenn der Hersteller schneidet, aber dann kann das
kundenspezifische Produkt nicht anderweitig benutzt werden. Deshalb wird
die Flexibilität reduziert.
Verzögerungen auf der Baustelle, die durch andere Supply Chains verursacht
werden, wirken sich auch auf die Gipsplatten Supply Chain aus. So kommts es
auch dort zu Verzögerungen, obwohl Gipsplatten ein standardisiertes Produkt
sind.
Bankvall et al. (2010)

40. Beispiel: Kabel im Schiffsbau
Sanderson & Cox (2008)
Die Kabel haben Eigenschaften sowohl funktioneller als auch innovativer Produkte
und passen deshalb nicht wirklich zu einem einzigen Supply Chain Modell.

41. Beispiel: Kabel im Schiffsbau
Sanderson & Cox (2008)
Die Kabel Supply Chain Strategie hat Merkmale sowohl von einer lean und agile
Strategie.

42. Themen in einer Projekt Umgebung
• Schwierig die Nachfrage zu voraussagen
• Langfristige Perspektive und kontinuierliche Verbesserung
werden irrelevant
• Schwierig die Beziehungen zwischen Supply Chain
Einheiten zu entwickeln
Nur
Vorübergehend
• Schwierig die End-to-End Perspektive zu schaffen
• Interdependenzen verursachen Konflikt
• Viele Einheiten im Supply Chain machen effektive
Kommunikation schwierig
Komplexität
• Wegen des Bedarfs für kundenspezifische Produkte für
jedes Projekt
• Die Komplexität und notwendige Anpassung haben
mehr Unsicherheit zur Folge
Unsicherheit

43. Interdependenzen
• Gemeinsame: gemeinsam benutzte
Ressourcen, Raum, Geräte
• Sequenzielle: Reihenfolge der
Herstellungsprozesse
• Gegenseitige: z.B. Heizung, Ventilation, Strom
• Synchronisch: Integration, Timing, z.B.
synchronisierte Lieferungen
Bankvall et al. (2010)

44. Themen in einer Projekt Umgebung
The challenge is that ETO supply chains
have to cope with diverse customer
requirements and deliver the highest
quality of product in a highly uncertain
environment.
Mello et al. (2015)
Too much focus on the individual
chain can be negative for the total
project.
Bankvall et al. (2010)
The construction supply chain is typified
by instability, fragmentation, and
especially by the separation between
the design and the construction of the
built object.
Vrijhoef & Koskela (2000)
Any managerial philosophy, such as
´just-in-time´, applied to one site for
one project in the construction
environment, is problematic due to the
temporary nature of project
organizations.
London & Kenley (2001)

45. Projekt Supply Chains leiten
Manche übliche empfohlene Strategien:
• Unsicherheit akzeptieren und damit umgehen
• Entwicklung der effektiven Kommunikation
• Integration zwischen Engineering und
Herstellung
• Eine "Leagile" Mentalität schaffen

46. Unsicherheit akzeptieren
The approach advocated in the present review is to accept the characteristics
of the real world in the first instance and the inherent structural
characteristics of a project based industry, as opposed to a process based
industry, rather than attempting unachievable, inappropriate and unrealistic
changes to an idealistic model of a supply chain.
London & Kenley (2001)
Die Eigenschaften eines vorübergehenden Projektes verhindern, dass es wie
ein laufendes Projekt funktionieren würde. Statt zu versuchen die
Unsicherheit zu eliminieren, sollten Projekt Managers die Reaktionsfähigkeit
weiter entwickeln.

47. Effektive Kommunikation
Komplexes Netzwerk von Kontraktoren und
Unterkontraktoren fordert eine Starke
Koordination, z.B. im Bezug auf dem
Materialfluss.
Bankvall et al. (2010)
Interne interdisziplinäre Kommunikation
von beiden Enden der Supply Chain (Kunde
– Lieferant) könnte Probleme verhindern
und Änderungen reduzieren.
Vrijhoef & Koskela (2000)
Projekt
Kontraktor
Kontraktor
Kontraktor
Kontraktor
(andere
projekte)
(andere
projekte)

48. Integration und Vertrauen
In order to achieve higher levels of supply chain integration […]
the need to facilitate inter-firm relationships, achieve mutual
benefits and build trust at key interfaces in the supply chain.
[…]
It is crucial to take away the ingrained barriers of traditional
relationships and the adversarial culture in construction practice.
[…]
This calls for intensive co-operation, co-ordination and
communication in the network of firms.
Voordijk & Vrijhoef (2003)

49. Herstellungsintegration
Die Forschung auf 6 Schiffsbauprojekte zeigt wie höhere Integration zwischen
Bautechnik und Herstellung bessere Reaktionsfähigkeit im Bezug auf
Änderungen der Kundenaufträge ermöglicht .
Integration unterscheidet sich von der Überlappung, die zu viel Anstrengung
fordert, noch mehr Interdependenzen schafft, und Lead Time nicht reduziert.
Die Ergebnisse der Forschung zeigen, dass sowohl Integration zwischen
Bautechnik und Herstellung als auch Herstellungsfähigkeiten die zwei
wichtigste Faktoren sind, die die Koordination ermöglichen.
Mello et al. (2015)

50. "Leagility"
Wichtige Frage: Wo soll der strategische "Decoupling Point" zwischen die zwei Modelle liegen?
The positioning of the decoupling point therefore depends upon the longest lead time an end-user is
prepared to tolerate and the point at which variability in product demand dominates.
Naylor et al. (1999)

51. …the complex peculiarities resulting from the combination of both luxury and
project environments, such as the temporary supply chain configuration, the
high production uncertainty, and the complex network of subcontractors that
is involved in each project.
• Kurzzeitig Supply Chains mit einer Vielzahl von Kontrakturen
• Unstetig Informations-, Material- und Finanzströme
• Fortschritt kann langsam sein
• Starke Beeinflussung des Kunden
• Transaktionale Buyer-Supplier Beziehungen[…] auf kurze
Fristen konzentriert und belastet von Konflikt und Misstrauen
Ponticelli et al. (2013)
Case : Yachtbau

52. SCM Anwendung in Yachtbau
• Concurrent Engineering: Kunde und Kontraktur einbeziehen,
um Reaktionsfähigkeit zu verbessern, Nachfrage Unsicherheit
zu reduzieren, und Time-to-Serve zu reduzieren
• Information & Kommunikation Technik Integration:
Anwendung von Technik zwischen SC Mitglieder forcieren, um
Kommunikation zu verbessern, Verfügbarkeit von Information
zu erhöhen, und Aktivitäten abzustimmen
• Netzwerk Koordination: Informationmitbenutzung und
Materialstrom orchestrieren, um Flexibilität und
Reaktionsfähigkeit zu erhöhen
Ponticelli et al. (2013)

53. Case: Elektrisches Schaltgerät
In einem ETO Supply Chain liegt der Schwerpunkt für
Verbesserung auf Lead Time, entweder durch Verkürzung der
durchschnittlich Lead Time oder Lead Time Variation.
Verspätungen in
Herstellungsprozesse bedingen
Unsicherheit in Engineering, die
wiederum Verspätungen in
Herstellung zur Folge haben.
Elfving et al. (2002)

54. Lead Times reduzieren
Troztdem, laut Mello et al.
(2015), "overlapping
engineering and production
may not reduce lead time,
due to increasing effort to
coordinate customer order
changes."
Elfving et al. (2002):
"Overlapping requires good
communication between the
task members."
Elfving et al. (2002)

55. End-to-End Mentalität
"Protectionism" – getrennte Einheiten haben kein
"Systems View."
Zum Beispiel, profitieren manche Einheiten von
Änderungen, die in Unsicherheit resultieren, während
andere darunter leiden.
Lokale Optimierung ohne die gesamte Prozessekette zu
berücksichten kann einen "Vicious Cycle" zur Folge
haben. Elfving et al. (2002)

56. Literatur
• Bankvall, L., Bygballe, L. E., Dubois, A., & Jahre, M. (2010). Interdependence in supply chains and projects in construction. Supply Chain
Management, 15(5), 385-393. doi:10.1108/13598541011068314
• Elfving, Jan, Iris D. Tommelein, and Glenn Ballard. "Reducing lead time for electrical switchgear." Proceedings of the 10th Annual
Conference International Group in Lean Construction (IGLC 10), Gramado, Brazil. 2002.
• Eriksson, Erik. "Improving construction supply chain collaboration and performance: a lean construction pilot project." Supply Chain
Management: An International Journal, 15.5 (2010): 394 – 403.
• Fisher, Marshall L. "What Is The Right Supply Chain For Your Product?." Harvard Business Review 75.2 (1997): 105-116. Business Source
Complete. Web. 13 July 2015.
• London, K. A., & Kenley, R. (2001). An industrial organization economic supply chain approach for the construction industry: a review.
Construction Management & Economics, 19(8), 777-788. doi:10.1080/01446190110081699
• Mello, Mario Henrique, Jan Ola Strandhagen, and Erlend Alfnes. "Analyzing The Factors Affecting Coordination In Engineer-To-Order
Supply Chain." International Journal Of Operations & Production Management 35.7 (2015): 1005-1031. Business Source Complete. Web.
13 July 2015.
• Naylor, J. B., Naim, M. M., & Berry, D. (1999). Leagility: integrating the lean and agile manufacturing paradigms in the total supply chain.
International Journal of production economics, 62(1), 107-118.
• Ponticelli, Simone, et al. "Supply Chain Implications For One-Off Luxury Products: Cases From The Yacht Industry." International Journal
Of Retail & Distribution Management 41.11/12 (2013): 1008-1029. Business Source Complete. Web. 13 July 2015.
• Sanderson, Joe, and Andrew Cox. "The Challenges Of Supply Strategy Selection In A Project Environment: Evidence From UK Naval
Shipbuilding." Supply Chain Management 13.1 (2008): 16-25. Business Source Complete. Web. 13 July 2015.
• Vrijhoef, Ruben, and Lauri Koskela. "The four roles of supply chain management in construction." European journal of purchasing &
supply management 6.3 (2000): 169-178.
• Voordijk, H., & Vrijhoef, R. (2003). Improving supply chain management in construction: what can be learned from the aerospace
industry?.