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Construction Logistics Improvements Using the SCOR Model - Tornet Case

Conference Paper · September 2009

DOI: 10.1007/978-3-642-16358-6_27 · Source: DBLP

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 Construction Logistics Improvements using the SCOR
model –Tornet Case

Fredrik Persson, Jonas Bengtsson, and Örjan Gustad

Department of Science and Technology

Linköping University, Campus Norrköping
601 74 Norrköping, Sweden
[email protected]

Abstract. The cost for house production is rising in Sweden. Compared with
other consumer goods, the cost for houses have had a steeper increase over the
last decades. Initiatives such as Lean Construction and Prefabrication have
emerged in the construction industry to reduce the cost of house production and
thereby the cost of the house itself. These initiatives have collected a lot of
ideas and tools from the automotive industry and a lot of good examples are
emerging that leads to cost reductions in construction. In this strive towards
improvement, logistics activities are emerging as important processes and a
potential for cost savings. This paper reports on a project at the construction
company Peab where the SCOR-model (Supply Chain Operations Reference
Model) have been utilized in order to find processes with high cost saving
potential. The result reports on cost savings from the logistics perspective in
different areas of the logistic system.

Keywords: Construction Industry, Construction Logistics, Supply Chain

Management, SCOR.

1 Introduction

During the last decade, construction logistics have become more and more in focus
both from academia but also from practitioners. It is believed that much can be gained
by implementing the ideas and theories from the very broad logistics filed. All that is
needed is a little tweaking to make the theories suitable for the construction industry.
Although there is an increasing interest for research in construction logistics, one can
notice a clear trend in publications. That is the division of on the one hand logistics
from raw materials to the construction site, rather a supply chain management
initiative, and on the other, the construction site logistics, more internal on the actual
site. This research originates in the idea that these two logistics initiatives cannot and
should not be divided, but that the uniqueness of construction logistics is the
incorporation of site logistics into the whole supply chain management theory. With
this in mind, this study of supply chains in the construction industry is a step forward,
both for the definition of construction logistics, but also for the supply chains in the
construction industry.
2 Fredrik Persson, Jonas Bengtsson, and Örjan Gustad

The logistics systems in the construction industry take up a large part of the total costs
and affect the total lead time in any construction project. Large amounts of money can
be saved if supply chain operations can be made in a more standardised way, learning
from previous projects or using standard solutions. Today, however, it seems that
every new building project is reinventing the management of supply chains.
The construction industry is in some countries considered as the backbone of their
economy. This large sector with a highly traditional business approach is closely
interlinked with the rest of the economy [1]. In Sweden (during 2007), more than
73.000 companies compete in the industry with a total turnover of approximately
EUR 37 billions and 225.000 employees [2]. The construction industry is basically a
project based industry. Every construction site is considered a project and many
projects are performed simultaneously. The productivity development in the
construction industry is slow compared to other industries [3]. Much of the blame for
the slow productivity gain is the high cost levels throughout the industry. According
to Vrijhoef and Koskela [3] the high costs are to be blamed on the supply chain and
its involvement of many subcontractors and both local and global suppliers.
Vrijhoef and Koskela [3] propose four roles of supply chain management in the
construction industry covering the supply logistic part of the chain. To some extent
their model has provided useful information regarding coordination between supply
chain and construction site but the model is limited to supply chains and does not
cover supply networks. Vidalakis and Tookey [4] use simulation to study a supply
chain in the construction industry. They draw on the similarities between a
manufacturing supply chain and a construction supply chain. Differences are
functional and located at the end of the supply chains; otherwise they find no major
parts where the two supply chains differ.
The purpose of this paper is to analyse a construction site with a supply chain
management view utilising common supply chain analysis tools, in this case the
SCOR model [5]. Fort the case company, the purpose is to evaluate the use of the
SCOR model and to find areas of improvement that can reduce costs or in any other
way increase profitability or reduce the environmental impact of a construction
project.
The paper is structured as follows. Chapter 2 presents the case company Peab and
the building project Tornet. Chapter 3 is a theoretical outlook into the area of
construction logistics. Chapter 4 is the case study. Chapter 5 ends the paper with some
conclusions and acknowledgements.

2 The Case Company Peab

Peab AB (Peab) is one of the largest companies on the Swedish construction market.
The company has about 11,000 employees and an annual turnover of about EUR 3.6
billions, for 2008 [6].
The building called Tornet (the Tower) is the final stages of construction work
during the summer of 2009. The building is located in Tornby city in Linköping,
Sweden. Peab started to build Tornet in September 2007 and it is planned to be
finished in summer of 2009. The 19 storey high building will rise 64 meters off the
 Construction Logistics Improvements using the SCOR model –Tornet Case 3

ground, which for Linköping is quite high, only shadowed by the Cathedral. . Tornet
will accommodate offices, business apartments and conference facilities.
Material that arrives at construction sites requires human resources for unloading;
mostly there is also need for handling equipment as an aid in this process. This
handling equipment often needs to be rented. When delays occur the equipment
cannot be used, they will generate unnecessary costs. At the construction site The
Tower this has been solved with a nearby handling equipment rental service. Peab has
the opportunity to rent the handling equipment when needed. A bad delivery
performance results in interruptions of the work, the personnel need to unload the
material instead of finishing their planned tasks. Personnel who wait for delayed
deliveries lead to an increased waste of time of the human resources, time that could
be used for value adding tasks. Another problem that can occur is that nobody is able
to receive the delivery.
The products which will be included in this study are plasterboards, doors and
kitchens. The reasons why these particular products have been chosen are the
following: plasterboards are chosen because of the common use of this product in the
construction industry. Doors and kitchens are also chosen based on their
commonality. Also, they have been subjected to delivery disturbances and quality
problems for the examined construction site.

Fig. 1. Tornet (The Tower) during construction

3 The Supply Chain in the Construction Industry

The supply chain in the construction industry varies from the traditional supply chain
in the manufacturing industry, where raw material is delivered to a production site for
further transformation to a finished product and later distributed to the costumers. The
construction industry is characterized by the production site being built up around the
building that is about to be manufactured. The construction industry is also
characterized by temporary supply chains with fragmentation and instability as a
result. Even though some processes in the construction industry seem to be similar,
there tends to be no standard in them [3]. According to Vrijhoef and Koskela [3] the
construction industry is an example of make-to-order, MTO. Other authors consider
the construction industry to be a typical example of engineer-to-order, ETO [7].
The supply chain in the construction industry is in need of change according to
Xue et al. [8]. There are, however, barriers and problems that prevent coordination
4 Fredrik Persson, Jonas Bengtsson, and Örjan Gustad

and integration of the supply chain. Examples of problems are attitude-related

problems, myopic focus, lack of understanding for suppliers and subcontractors.
Furthermore the lack of communication in the construction industry contributes to
inferior transparency in the supply chain. Tight schedules and unrealistic lead-time
requirements for material and equipment lead to further problems [8]. Many of the
problems are caused in earlier stages in the supply chain than where they discovered
[3].
During the work with the case, it became obvious that construction logistics
needed a unique definition since several issues made it difficult to solely rely on
common definitions of logistics for other industries. It became also very clear that
logistics is a too narrow term for the purpose at hand. Although the work still focuses
on logistics improvements, a glance at supply chain management was needed. Stadtler
[9] defines SCM such as: “The task of integrating organizational units along a supply
chain and coordinating materials, information and financial flows in order to fulfill
the (ultimate) customer demands”. Construction SCM can be defined, following
Stadtler’s [9] definition, as: The task of integrating organizational units along a supply
chain, including the construction site and subcontractors, and coordinating materials,
information and financial flows with the project site plan in order to fulfill the
(ultimate) customer demands”.

4 SCOR Mapping of the Supply Chain

A mapping of the material flow of plasterboards, doors and kitchens have been
performed with SCOR in levels 2 and 3. First, the material flow for these particular
items, from supplier to the construction site, has been analysed in the SCOR
methodology in level 2, see Figure 2. The mapping was used to visualize and identify
possible problems within the material flow. To identify further problems in the supply
chain processes at the construction site, secondly, a mapping at SCOR level 3 has
been made for each of the three product types, see Figure 3 for plasterboards. The
mapping for plasterboards is presented in detail in this paper in the following
subchapters.

Plasterboard
manufacturer
Alternative route
M1 D1

Local Wholesaler
S1 D1 S1

M3

Kitchens M2 D2 S2

Doors M2 D2

Manufacturers Suppliers Peab

Fig. 2. SCOR mapping in level 2

 Construction Logistics Improvements using the SCOR model –Tornet Case 5

4.1 Plasterboards

When Peab has been assigned a building project, the process to develop a production
schedule (D3.3) begins, see also Figure 3. The production schedule is based on
backward planning by using a Gantt chart. As the project continues, work on
developing construction plans (M3.1) takes place. The plan enables scheduling of
production activities (M.3.2).

Architect M3.1 Plasterboards

Finalize Production
Engineering / Conti. 
work on drawings

Project‐ D3.3
group Enter Order, Commit 
Resources & Launch 
Program

M3.2 Production 
Production  Schedule Production schedule P3.4
schedule P3.2 Activities
Products in stock 
P2.2, P3.2

Feed back
Building site

M3.3 M3.4 M3.8

Issue Sourced/In‐Process Produce and Test Waste Disposal
Product / Material 
Call off movements on the 
P2.2 building site
Replenishment  Products available in stock 
signal S1.4, S1.1

S1.1 S1.2 S1.3 S1.4 S1.5

Supply plan Schedule Product Receive Product Verify Product Transfer Product Authorize Supplier
P2.4 Deliveries Payment

Fig. 3. SCOR mapping of plasterboards at Tornet

The schedule of production activities (M3.2) is used as a support for the call off
process (S1.1). Another process that supports the call offs is the delivery plan (P2.4).
Call offs for plasterboards are made by mail to the local retailer. The retailer delivers
orders that are below five tonnes in weight, bigger orders will be shipped directly
from the manufacturer. When the plasterboards arrive, the product is considered
received (S1.2). The reception of plasterboards takes place at a nearby yard because
of the lack of space. As the products are received, verification (S1.3) is performed.
After the verification the products are transferred to the construction site with rented
machines. At the construction site, the plasterboards are distributed to the right floor
for assembly (S1.4). The invoice is then compared to the delivered quantity (S1.5).
When needs arise on a floor due to miscalculations, plasterboards are, if possible,
transferred from floors above (M3.3). Assembled boards are inspected by craftsmen
(M3.4). Waste is thrown in a container for landfill (M3.8).
At Tornet construction site most of the deliveries were not time bound. With
current costs, for rental of machines and time bound deliveries, the rent for machines
exceeds the cost for time bound deliveries when delays exceed one hour.
6 Fredrik Persson, Jonas Bengtsson, and Örjan Gustad

4.1.1 Perfect order fulfillment

The data was hard to collect because of the lack of access to documentation. Some of
the gathered data did not include all the desired metrics. This applied to all the
investigated products. Data was gathered from delivery notes that were compared to
the call offs and order acknowledgements; additional complementary data were
obtained from the manager at the construction site. The results for the plasterboards
are as follows:
─ % of ordered Delivery in Full: All orders contained the right products, 95
percent of them also arrived in the right quantity.
─ Delivery Performance to Customer Commit Date: All orders were shipped to
the right geographical location, but only 50 percent were delivered on time. All
the orders that arrived on time were also delivered in full, according to the first
level 2 metric.
─ Documentation Accuracy: The investigation for this metric only included
plans for assembly. This was, however, not relevant for plasterboards.
─ Perfect Condition: There was no information of damaged plasterboards;
however this is not a likely scenario and indicates a lack of documentation.
Because of the lack of documentation when it comes to damaged products, the results
for perfect order fulfillment tend to be higher than the actual value for plasterboards.
The results for doors and kitchens will not be explained in detail but the result is
presented in Table 1.

Table 1. Perfect order fulfillment

Plasterboards Doors Kitchens

[%] [%] [%]
Orders Delivered in Full 95 57 0
Delivery Performance to
50 57 33
Customer Commit Date
Documentation Accuracy - 100 100
Perfect Condition 100 86 100
Perfect Order Fulfilment 50 57 0

4.1.2 Supplier plasterboards

Figure 2 ,that illustrates the material flow to the Tornet construction site, indicates
that Peab is using unnecessary intermediaries. This extra step in the supply chain
generates unnecessary costs. Even though larger orders are shipped directly from the
supplier, the call off is made to the retailer who wants his share. The majority of the
call offs are performed by mail, even though Peab has a purchase and procurement
system. If Peab used the purchase and procurement system (EDI) when ordering
gypsum boards, they would acquire an EDI-discount. With the EDI and quantity
discounts, which they receive when using direct deliveries, Peab obtains a total
discount of 24 percent compared to the retailers’ price. Even though only ten percent
 Construction Logistics Improvements using the SCOR model –Tornet Case 7

of the plasterboard deliveries are ordered from the retailer, there is still a potential
saving see Table 2

Table 2. Savings when using the EDI system and direct deliveries (Costs in SEK).

EDI System Direct deliveries Total savings

Tornet 16 000 22 000 38 000 ( ~4 % )
Total 2007* 106 000 147 000 253 000 ( ~4% )
* For region Linköping, 2007

4.1.3 Handling of plasterboard waste

Peab’s supplier of plasterboards receives and recycles plaster waste as well as

damaged boards. This service is provided without fees as long as the moisture level
for the plaster is less than seven percent. For higher moisture levels a small fee is
charged for each tonne. Currently all plaster waste is sent to landfill. Although the
cost for landfill is almost 1000 SEK per tonne of waste it is currently cheaper than
recycling because of the significant transportation costs.

4.2 Other suppliers and products

The deliveries of doors have often been incomplete and are subjected to delays. The
incomplete orders have generated more deliveries and increased costs due to
increased administration. Another problem with the incomplete orders is that it has
been impossible to follow the production plan. When Peab fails to follow the
production plan, they are forced to keep the received doors in stock. Stocks lead to
increased time spent on searching for the desired product as well as decreased space
and increased risk for damages to the products.
The deliveries of kitchens have also been subjected to delays and incomplete
orders. The most frequent problem concerns the kitchen doors or rather the lack of
them. Not a single delivery that was examined contained the ordered kitchen doors. In
addition the supplier of kitchens has not informed Peab when delays have occurred.
To get the information about the deliveries, the construction site manager was forced
to contact the supplier by himself. These circumstances make it impossible to follow
the production plan and Peab is forced to do a time consuming rescheduling, since the
installation of the kitchens cannot be completed.
Perfect order fulfilment for these two products, doors and kitchens, are presented in
Table 1.

4.3 Consolidation point, terminal

Highly frequent products, such as plasterboards, wood products and isolation, which
are often standardized, can with advantage be kept in stock at a consolidation point, in
this case in a terminal. Using the purchasing and procurement system the call offs in
the region should be consolidated. This would give Peab economy of scale towards
their suppliers. The terminal enables the possibility to consolidate different products
 8 Fredrik Persson, Jonas Bengtsson, and Örjan Gustad

at the construction site, which leads to increased filling ratio in the trucks and fewer
deliveries to the construction sites. Another advantage is the closeness of the terminal
with the possibility of increased delivery precision. Not all the products need to be
kept in stock since the point also enables cross docking.
The establishment of a terminal is a step towards centralization. Centralization
would decrease the total amount of products kept in stock. Fewer products at the
construction site leads to increased space and decreased search time for desired
products. The terminal also becomes a natural consolidation point for the plasterboard
waste. When the waste is gathered, Peab will get economy of scale in the transports to
the manufacturer. The cost for recycling will then be lower than the current costs for
landfill. The greatest benefit from the recycling is, though, the environmental aspect.

5 Conclusions

This case study in the construction industry pinpoints some of the problems
construction logistics (or rather construction SCM) are facing in order to help the
business as a whole to be more productive and to reach lower costs in the future. The
SCOR model proved a useful tool in this case study. However, the use of SCOR was
not straight forward. It is obvious that the SCOR model is not developed and
maintained with the construction industry in mind. The authors would like to thank
Brains and Bricks (B2) who made this research possible (www.liu.se/b2/).

References

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4. Vidalakis C., Tookey, J.E.: Conceptual functions of a simulation model for
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5. SCC: www.supply-chain.org, accessed July 8, 2009 (2009)
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