Within the sector of SMEs, Dainty et al., 2001 carried subcontractor interviews and found that most firms held negative perspective on partnering and its Supply Chain Management (SCM). It is assured that when dealing with the main contractors of tier 1, a far more problematic procedure may occur. A misconception by the main contractors is believed to hinder the true understanding of the values and moralities in the supply chain practices of SMEs. This will of course generate barriers of mutual trust, benefits or even assistance in support.
To be able to retain the added value that SMEs provide in the construction industry, a professional SCM must be applied. Several issue factors will be enhanced as a focus implementation, as these include the strategy, waste reduction, leadership, and procurement (Dainty et al., 2001). Although SCM is considered to be a challenge for SMEs in the UK, many benefits will be added as the application of processes. This may include advantages in the cost reductions for the supply chain, shorter project time delivery, and most importantly a customer satisfaction (Vaaland and Heide, 2007).
A few fundamentals of the SCM include regions within the Supply Chain Integration (SCI). The function of this integration is to clearly identify the arrangements of managing resources, decisions, methods or business process regarding the employees, and various stakeholders in the supply chain (Dainty et al., 2001; Thakkar and Kanda, 2008). The use of SCI can certainly support an improvement in the ability to allow efficient teamwork in the supply chain, whilst operating in a continuous manner (Chalmeta and Reyes, 2002). Another key element is the Lean Supply Chain Performance (LSCP). This is known to enhance the procurement strategies and the added values to customers (Afonso and Cabrita, 2015). Therefore the SCM procedures are regarded as strategic strengths for the distinct features of SMEs in the industry (Chin et al., 2012).
Carillion Group is considered to be a great example for a LE that is currently undergoing liquidation due to the high amount of debts exceeding the work capacity limits. This UK example is a major representation of the importance in dealing with SCM in the industry, as cost overruns became a major setback for the firm. The integration of subcontractors in the supply chain of Carillion seems to be disrupted due to the early hazard profit warnings issued back in 2017 (Thomas, 2018).
1.1 Key Performance Indicators (KPI) and SME Engagement
Engagement of SMEs can be perceived differently from various point of views. Though the main ideas discussed in the Institute For Employment Studies, 2012 follow best practices to optimise the engagement of SMEs in the UK construction industry. These factors include:
• A Strategic planning for the encouragement of diversifying supplier options, which tends to link between the organisation goals and business schemes.
• Assessing the monitoring performances (Which can be linked to KPI’s)
• Reviewing procurement policies, practices and general procedures (as discussed in chapter 2.1 and 2.2)
• Involving tier 1 main contractors with the scheme of works, as they may stimulate the supply chain opportunities of tier 2 and 3 positions (as discussed in chapter 2.3).
Key Performance Indicators (KPI’s) are perceived to be the main measurements in monitoring progress. This strategy is particularly aligned with a business perception towards the aims and objectives (Lindberg et al., 2015). The profitability and shareholder values are two main functions that a business could attain from KPI’s. Elements may include outlining the time of the service to process a client’s request or the length durations of fixing any developing defects. Moreover, KPIs can easily evaluate the quality regarding either the service provided or the end product of a project (Towers, 2003).
To put these indicators into practice, the process of measuring performance can be observed as a procedure which completes the SCM opportunities. KPI’s can be split into two main components, either them being Leading (promoting result-oriented concepts) or Logging (process oriented concepts) (Takim and Akintoye, 2002). To be specific, Leading KPI’s mainly focus on the activities or metrics that are fixed at certain levels, to produce certain future outcomes (Kaganski et al., 2014). Examples of these can be areas in the productivity, cost predictability, time predictability or profitability (Egan, 1998).
On the other hand Logging KPI’s may deal with the historical data of the firm, to establish whether targets have been met or not (Kaganski et al., 2014). Examples of these are client satisfaction, project performance, defects, research and development and turnover (Latham, 1994; Construction Industry Board, 1998). As a consequence of KPI utilisation, the project success may reflect upon such strategies on the KPI’s (Takim and Akintoye, 2002). Putting this into perspectives, an outline of an action plan will determine the forward-thinking using KPI’s, to establish values in the SCM (Kaganski et al., 2014).