7 : The Dynamics of the Supply Chain
I do as little as possible for a firm but as much
as I can when I am working for myself
Max Gagg
© Graham M Winch
Mobilising the Resource Base
1
The Dynamics of the Supply Chain
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•
•
horizontal and vertical governance
internal resource mobilisation
shirking
sequential spot contracting
managing the supply chain
managing consortia and joint ventures
the dynamics of supply chains
© Graham M Winch
Mobilising the Resource Base
2
Horizontal and Vertical Governance
• vertical governance
– the project chain
• horizontal governance
– human resources : internal governance
– the supply chain : external governance
• the project value system
© Graham M Winch
Mobilising the Resource Base
3
Horizontal and Vertical Governance in the Project
Value System
horizontal governance
vertical
governance
principal
contract
human
resources
project chain
supply chain
client
second- tier
supplier
first-tier supplier
second-tier
supplier
third-tier
supplier
sub-contract
employment
relation
© Graham
M Winch
first-tier supplier
second-tier
supplier
4
Internal Resource Mobilisation
• internal resources as human resources
– purchase/hire of plant
• employment contracts and commercial
contracts
– contract of service <> contract for service
• governance options
– asset specificity through learning
– uncertainty
© Graham M Winch
Mobilising the Resource Base
5
Governance Options
•
•
•
•
•
sequential spot contracting
contingent claims contracting
authority relations
collegial relations
governing the employment relation
© Graham M Winch
Mobilising the Resource Base
6
Governing the Employment Relation
high
contingent
claims
contracting
collegial
relations
sequential
spot
contracting
authority
relations
asset
specificity
low
low
high
uncertainty
© Graham M Winch
Mobilising the Resource Base
7
Shirking
• the shirking problem
– purchase of capacity for work, not work done
– information advantage lies with employee
– measurement difficulties in work done
• shirking solutions
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–
–
–
© Graham M Winch
spot contracts - piece-work
contingent claims - machine pacing
authority relations - supervision
collegial relations - peer pressure/group bonuses
Mobilising the Resource Base
8
The Role of Sequential Spot Contracting
• the reliance on sequential spot contracting
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–
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casual employment
agency workers
self-employment
gang organisation (the lump)
• the failure to evolve to managerial capitalism
• the failure to control the work process
© Graham M Winch
Mobilising the Resource Base
9
Managing the Supply Chain
•
•
•
•
external governance of transactions
maximising flexibility
benefiting from specialisation
horizontal governance options
– asset specificity
– transaction frequency
© Graham M Winch
Mobilising the Resource Base
10
External Horizontal Governance Options
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•
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spot market sub-contracts
quasi-firm
consortium
joint venture
© Graham M Winch
Mobilising the Resource Base
11
Reasons for High Asset Specificity
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•
•
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supplier owns proprietary technology
nominated sub-contractor
high switching costs
temporal specificity
– the hold-up problem
• regulatory context
– local content
– technology transfer
• governance options
© Graham M Winch
Mobilising the Resource Base
12
External Horizontal Governance Options
for the Supply Chain
transaction frequency
high
low
low
spot-market
sub-contractors
quasi-firm
consortium
joint-venture
asset
specificity
high
© Graham M Winch
13
Managing Consortia and Joint Ventures
• the Jane Austen problem
– wealth
– status
– character
• integrated and separated JVs
• technology transfer
© Graham M Winch
Mobilising the Resource Base
14
The Dynamics of Supply Chains
•
•
•
•
•
the problem of execution variability
the ripple effect through the supply chain
the role of partnering
the role of construction planning
construction clusters
– the organisational principle
– interdependence and information processing
© Graham M Winch
Mobilising the Resource Base
15
The Principle of Construction Clusters
sub-system level
sub-system level
whole
building level
construction
strategy
design
strategy
construction
methods and plans
design
detail
real
prices
overall
cost plan
© Graham M Winch
defined interface
16
The Clustered Project Coalition Structure
client’s team
prime contractor
core team
project level design team
cluster leaders’ team
cluster leader
cluster leader
designer(‘s) suppliers
designer(s) suppliers
© Graham M Winch
clusters
17