Efficiency of supply chain management – case study of construction companies in vietnam

ng supply chain management in construction companies in 
Vietnam, their awareness and activities of SCM, as well as the efficiency of CSCM. 
The detail results of running research model and in-depth interview are presented in 
the next part. 
RESULTS OF CONDUCTING SURVEY 
All concepts (latent variables) in research models used scale of 5 levels with different 
content related to project management model, cooperation, barriers and efficiency of 
supply chain in construction industry (except hierarchical scale of PMMS and PSCM). 
+H1 
+H2 
+H3 
PSCM 
PMMS 
ASCM 
COSC 
BOSC 
-H4 
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The scale of theoretical concepts are tested reliability through explore factor analysis 
(EFA) through SPSS, and estimated the model by using methods of Partial Least 
Square (PLS). Some of the observed variable did not reach the required threshold and 
were removed from the latent variables. 
Through the analysis, we found that construction companies are more interested in 
supply chain management, but their interests have not been so much necessity. Nearly 
43% of the companies answered that they have information about CSCM, and has 
implemented some activities. They also showed that CSCM have been playing 
important roles in the operation of enterprises in the construction industry (24.5%). 
However about 32.5% of the company is quite indifferent and not interested in 
activities CSCM. They thought that SCM applied in construction industry has not been 
necessary and effective. 
The benefits that the construction companies have achieved when they implemented 
CSCM including: cost cutting during construction (85.7% of respondent companies 
agreed); waste reduction during construction (68.5%); timely implementation (85.7%); 
quality and cost estimates of works (81%); timely supply of materials (91.5%); 
inventory control and reduction (77.1%); customer satisfaction improvement (85%); 
risk mitigation (81%); reduction of disputes and conflicts arising between partners in 
the supply chain (91.5%). 
Up to 53.6% of the companies selected traditional project management model for their 
construction works as the perspective approach for CSCM. Nearly 46.4% of the 
companies used modern project management model to manage and control CSCM 
such as owner’s project management model, turnkey contract of project management 
model, and professional project management of construction. 
The majority of construction companies surveyed especially contractors have agreed 
with some barriers and constraints affecting the implementation CSCM such as: the 
nature of the industry, the participation of different stakeholders in construction 
process, the different requirements of construction processes (people, technology, and 
services), the separation of design and construction stage, the different way of doing 
business of each company engaged in the construction supply chain; the poor win - 
win relationships between partners in the construction supply chain; lack of 
commitment and support of leaders in implementing supply chain cooperation; lack of 
trust and information sharing among supply chain partners. 
Most of the enterprises participating in construction supply chain have a normal level 
of cooperation with other partners in the phases of the construction process. The share 
and cooperation to solve the problems arising in the construction, as well as 
cooperation to ensure the progress and quality, and in the budget estimates of works 
was assessed at an average level. Therefore, the proportion of construction works that 
faced the issues of delay, low quality, and over budget has not been low. 
Almost observed variables of the latent variables in the model structure are 
theoretically loading factor with the value greater than the minimum value of 0.6. This 
shows that the observed variables contribute to explaining the latent variables and 
likely to affecting the performance of construction supply chain. Analysis of the 
adjusted model shows the indicators with good quality, high reliability value and 
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greater logical threshold values than suggested ones. This shows a constant appropriate 
model and this research model should be accepted to continuously analyze in the 
structural model in order to test the hypotheses. 
In four theories explaining the impact on CSCM, only two hypotheses are confirmed 
significantly and meaningfully. The degree of cooperation between the partners in 
CSCM (H3: β = 0976, t = 3,971, p <0.001) and the level of awareness of CSCM (H2: β 
= 0.625, t = 2586, p <0.001) were demonstrated to have a significant and positive 
impact on the efficiency of CSCM. This result may have a great significance to 
construction business because by far the development of relations in various stages of 
construction projects between partners has not been measured specifically. Most 
relationships depend more on the traditional opinion of beneficial groups formed in the 
perennial network links. A formal cooperation network needs to be reviewed, set up to 
exploit the efficiency of cooperating partners in the implementation of construction 
activities. 
Hyphothesis 
Evaluation Criteria 
Coefficient T - value Result 
Threshold ≥ 1.96 
PMMS 
PSCM (H1) 
 0.578 1.529 + → Weak, and no 
significance 
ASCM PSCM 
(H2) 
0.625*** 2.586 + → Moderate, and 
significance 
COSC PSCM 
(H3) 
0.976**** 3.971 
+ → Strong, and 
significance 
BOSC PSCM 
(H4) 
0.342 
1.431 
+ → Very weak, and 
no significance 
Note: T –value is calculated following the approach of bootstrapping with 142 
samples and 1000 repeat samples; T - value with two tails 2 control includes p 
value 3.290), p value 2.576), p value <0.05 
(t**>1.960), p value 1.645) 
Table 2: Structural Model and Hypothesis Identification 
The two remaining hypotheses about the relationship between project management 
model and PSCM (H1: β = 0578, t = 1,529, p> 0.1); between barriers of CSCM and 
PSCM (H4: β = 0342, t = 1,431, p> 0152 ) is not determined to be statistically 
significant, although the value is a positive influence. These issues need to be studied 
further with a larger number of samples to make accurate conclusions about their 
impact on CSCM with activity in the construction sector in Vietnam. 
RESULTS OF CONDUCTING IN-DEPTH INTERVIEW 
We conducted in-depth interviews with four companies to have a deeper analysis of 
awareness and practical application of SCM in construction industry. General 
information about the four companies is presented in Table 3 for an overview of the 
business orientation and the main activities. Due to some reasons of trade secrecy and 
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requirements of companies to be interviewed, so the name of the company will be 
encoded in the order of A, B, C, and D. Two companies involved are main and sub 
contractors; a company represents the investment owner; a company is a supplier of 
raw materials. 
Overall, all four companies interviewed responded that they participated CSCM 
activities through cooperation with other stakeholders in the construction supply chain. 
However, the extent of cooperation is quite different. 
Company 
Code 
Description 
Company A: 
Investment 
owner 
Company A is a multi-industrial conglomerate. Currently the 
company is focusing on a real estate business; operating business 
centers, hotels, tourism, health, education, and entertainment. 
Company A is the investment owner of many civil construction and 
leading real estate in Vietnam. Company A has a long-term 
strategic vision for sustainable business development and 
development of strategic partnership. Company A has a financial 
capacity with abundant and stable sources. For this company, the 
factor of quality and progress in construction is regarded as the 
most important ones. The company has applied many modern 
management methods and information technologies into the 
process of managing construction supply chain of their projects. 
Company B: 
Main 
Contractors 
Company B is one of the largest contractors in the construction 
industry in the North. The company has several subsidiaries with 
different scales. The company participated in the construction of 
different types of work with 18 years of establishment and 
development. Many construction projects of the company are rated 
as good quality and schedule assurance, and meet the demands of 
consumers. The company has good relationships with many 
partners in the implementation of their construction packages. The 
company regarded human resources as a leading factor to create 
sustainable development. 
Company C: 
Subcontractors 
Company C often involves in the construction as subcontractors for 
small packages. The company only has about 50 employees 
working in functional departments and various construction teams. 
This company has a good relationship with contractors and 
investment owners to get the effective construction bid package. 
For them the price factor is the most important component in order 
to obtain tenders from contractors and investors. 
Company D: 
Material 
Supplier 
Company D is a company producing construction materials and 
concrete structures in the North. With the strategy to diversify the 
product, the company has expanded its manufacturing business and 
built some factories with modern technological lines. This 
particular company has good relationships with investment owners, 
contractors and subcontractors in the supply of materials and 
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building structures. 
Table 3: information about companies for in-depth interviews 
Among four companies, the companies replied as investment owners and material 
suppliers have clear understanding of the role of collaboration in construction supply 
chain. However, in comparison with the perspective and theory of SCM, companies in 
Vietnam tend to support for cooperative orientation than integration orientation in the 
supply chain. Moreover, the cooperation between the relevant stakeholders in the main 
supply chain has just been formed based on the relationship networks of beneficial 
groups in the construction industry. 
Figure 3 shows the general matrix of reviewing the relationship between the four 
companies with partners in the supply chain of construction. Specific analysis will be 
presented in each of the following specific content. 
5-Scale Measurement to 
evaluate the collaboration in 
CSCM of the companies 
interviewed 
 Very certain 
 Certain 
 Normal 
certain 
 No certainty 
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Investment Owner (Company A) X 
Main Contractor (Company B) X 
Subcontractor (Company C) X 
Material Supplier (Company D) X 
Figure 3: General matrix of reviewing relationship between the four companies 
interviewed with partners in CSCM 
❖ Assessing relationships and collaboration in CSCM at the companies interviewed 
With big investment owners like company A, they have great capacity in developing 
their relationships in construction supply chain with designing and consulting partners, 
project management units, material suppliers, financial providers, as well as main and 
subcontractors. However, the company A also complained about the difficulties in 
controlling the partners’ operations. In construction business relationship following 
supply chain perspective, many partners have not adapted with the spirit of win – win, 
trust development, and information sharing. Therefore, this company have spent much 
money in hiring staff for controlling different processes of construction supply chain. 
Moreover, Company A has invested in building a data bank system of contractors, 
suppliers (with the cooperation and sharing with the contractor) to make the bid 
evaluation criteria by based capabilities to ensure the progress and quality, the spirit of 
cooperation, and price. Suppliers and contractors provide their data on prices, 
commodities, quality, delivery capability through biding file. 
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 In view of other companies interviewed, the link between investors and contractors in 
the preparation phase or first phase of the project (project planning, design consulting 
and engineering) is quite loose. Therefore, some active main contractors like company 
B has offered new approaches when they have chance to meet and consult for 
investment owners in the early stages of the project. These contractors have also tried 
their effort to link with suppliers to explore material suppliers in consulting for better 
materials and equipment with reasonable price in bidding files. 
❖ Evaluation of planning, controlling and administering the supply of resources 
With big construction companies like company A, there is the highly synchronized 
requirement in term of important construction materials. Therefore, company A has 
still managed the purchase and supply of these materials to the contractors. Some of 
these companies like company A have used integrated systems for material plan, 
purchase, supply, and control like BMS (Building Material System) to flow 
information on demand and supply of construction materials in their supply chain. The 
information of construction materials in some big companies has been now integrated 
internally in their own companies, however, the direct integration and the degree of 
sharing with material suppliers has not been stated clearly. This is also a weakness in 
the links of CSCM in construction industry Vietnam. The spirit of win – win and trust 
among partners in CSCM has remained loose, and even rather weak. It is the obstacle 
for the development of CSCM in construction industry in Vietnam. The collaboration 
between partners in CSC to use common data bank on contractors and existing 
material suppliers has been at low level, especially for material demand forecasting. 
The issues in sharing information related to the supply of resources have caused some 
difficulties in CSCM such as construction delay, quality, payment conflict. 
❖ Evaluation of planning, analysis and control of operations in construction in 
companies interviewed 
Related to matters of cooperation to share and solve technical problems in 
construction, each construction project has teams of consulting and supervising from 
both investment owners and contractors. Normally, when construction problems 
appear, the contractors will often communicate directly with supervision and 
consultancy team to find out solutions to release the problems. However, according to 
the interview with four companies, the processes and the ways of collaboration among 
partners to solve technical issues in construction have remained obstacles due to 
different administrative procedures and the shortage of win-win in collaboration 
among partners. Information flow related to the issues in construction operation has 
not been circulated quickly enough to solve the problem in short time. Moreover, the 
collaboration of sharing information and experiences in the use of new technologies 
and construction approaches has been at average level. 
SUGGESTIONS AND CONCLUSIONS 
The research results with both qualitative and quantitative data supported the authors 
to affirm the more important roles of supply chain management in construction 
industry in Vietnam. From the practices of awareness and practices of CSCM in 
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Vietnam, the research group suggests some solutions to improve the application of 
SCM in Vietnam construction industry as follows: 
• Change the thinking and reform the current thinking of partners in the supply 
chain of construction. In partner collaboration, the partners should operate based on 
the spirit of mutual benefit (win-win), the commitment of continuous improvement 
and sharing of benefits by the exchange of relevant information openly and by solving 
problems together rather than looking for new commercial partners. 
• A model of integrated supply chain in the construction industry should be 
recommended and applied. With this model, construction supply chain is represented 
through a network model that enables the participants to understand the complexity, 
support the reengineering and adjustment, determine the remained bottleneck and 
congestion, and allocation of appropriate resources in the supply chain. Due to the 
limitation of papers, we will present this proposal specifically with model and step 
guidance in the presentation. 
• A model of common information exchange and share to form data banks or 
exchange market (reviews, ratings, exchanges) between investors, contractors and 
suppliers in the construction industry should be established and developed to support 
the development of construction supply chain in Vietnam. 
• It should be necessary to implement training programs with appropriate 
contents for different partners of construction supply chain (investment owner, design-
consulting firms, prime contractors, subcontractors, material suppliers and other 
partners). The training programs should complement the system knowledge of MRP, 
MRP II, JIT, SCM, and the importance of relationships among partners in supply 
chain, coordination approaches, change management, risk management, sustainable 
development. 
By studying the theory and practices of CSCM, the article points out the awareness 
level of SCM and the application of CSCM in Vietnam construction industry. Results 
from studies showed that awareness and collaboration in the supply chain have not 
completely based on the spirit of cooperation of mutual benefit (win - win) and 
comprehensive integration. Since then, the authors proposed some solutions to help 
firms in construction industry have fully aware, unified and proper attention to the 
implementation of activities in construction supply chain. 
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