e-Commerce Applications in Construction

RT-180 Topic Summary
RT 180

Overview

The web based interaction/collaboration for facilitating exchanges between buyers and suppliers may be referred to as eProcurement, eMarketplace, or eCommerce. eCommerce is a new and rapidly changing platform that is predominately being driven by the owners and has initially been most successful in the MRO (Maintenance, Repair, and Operation) areas that revolve around commodity type items. eCommerce platforms and processes are not an easy solution to implement as it requires support from several supply chain areas as well as a cultural shift in the typical buyer/supplier interaction.

The construction industry is uniquely positioned to take a quantum leap from its current processes to a highly integrated Web-enabled collaborative and procurement environment. E-collaboration and e-procurement application in the construction industry are still evolving, and the tightly integrated procurement and collaborative environments currently being implemented in the manufacturing industry can serve as the vision for evolving technologies in construction.
 

Key Findings and Implementation Tools

1 : Barriers

Cultural Barriers are a primary hurdle to overcome in implementing an eCommerce solution. Top management must be engaged in supporting the implementation of an eCommerce solution. However it is equally important that the change be managed and communicated not only through-out the implementing organization but also with the ancillary stakeholders such as the suppliers themselves. (RS180-1, p. 5)
Reference: (RS180-1)

2 : Integration Challenges

Standardization is an extremely important area that will require review and modification accordingly. This area has (2) primary aspects for review: business processes and information technology systems integration.

  • Business processes will need to be reviewed in relation to the procurement aspects that are subject to automation and therefore subject to a change in work process.
  • Information technology systems will need to be reviewed to ensure they are (or can be) integrated to meet the needs of the changing business processes. Many large ERP solutions may lack the ability to accept a new interface or in the instance where they do accept the interface it may be found that future updates are severely hampered.

Expecting the eCommerce tool to “magically” resolve inadequate or unmodified work processes or IT tools will not yield the desired benefit. (RR180-11, p. 67)

Reference: (RR180-11)

3 : Supplier Resistance

Pressure may be applied to the overall effectiveness of the supply chain when suppliers must conform to the numerous eCommerce systems being implemented by the owners. The suppliers are obligated to utilize these new tools but due to the lack of a standardized solution this may require suppliers to learn many different systems and processes. This is referred to as the “one-to-N” issue. The problems are magnified with local or regional suppliers that are unable to map their catalog to each of the buyer’s catalogs. (RS180-1, p. 5)
Reference: (RS180-1)

4 : Need for Future Research

This is a rapidly changing area and the construction industry as a whole lags the manufacturing industry, which have had success with eCommerce platforms, by 10-20 years. As technology changes and the adoption rate increases more updates will be necessary. There were no best practices available at the time of this research since eCommerce was too immature to have any actions or processes as a "best practice." (RR180-11, p. 99)

eCommerce cannot to be dismissed as a fad.

Reference: (RR180-11)

5 : Remember Relationships

Relationships are an important aspect of the buyer/supplier relationship and it is necessary that any IT based solution still allow the human interaction. This can be accomplished by including the suppliers in the scoping, design, and implementation phase of the eCommerce solution as well as engaging suppliers more strategic activities requiring face to face interaction such as long-term contracting strategies. (RR180-11, p. 98)
Reference: (RR180-11)

6 : Learning Points

Owner A found several key learning points, including:

  • First was the need to assess the current organization and processes thoroughly. The focus was on purchasing of raw materials, equipment, construction services, and indirects. In this regard, it found that a centralized purchasing structure favors e-procurement and vice versa. 
  • Second was to build an eProcurement strategy to match the needs of the organization and its projects, which includes business drivers, cost, global needs, among others.
(RS180-1, p. 10)
Reference: (RS180-1)

7 : Case Studies

Describes how four companies in the construction industry have implemented e-procurement initiatives. Case studies examine topics that include: (RR180-12)

  • Deployment strategy and metrics
  • e-Procurement of catalog-type items
  • Reverse auctions
  • Private third-party exchanges
Reference: (RR180-11)

8 : Implementation Tool #1

RR180-11, E-Procurement Scorecard

A robust scorecard of performance measures is essential for monitoring key drivers of e-procurement adoption, and ultimately at improving e-procurement adoption. A scorecard captures actual results and key performance metrics related to the progress and success of a particular program. Scorecards are frequently used to assess the status of the project over time and across comparative categories of performance.  (RR180-11, p. 90)
 
Reference: (RR180-11)
RT-180

Key Performance Indicators

Improved cost

Research Publications

E-Commerce Applications in Construction - RS180-1

Publication Date: 11/2002 Type: Research Summary Pages: 15 Status: Archived Tool

State-of-Practice of E-Commerce Application in the Construction Industry - RR180-11

Publication Date: 10/2002 Type: Research Report Pages: 126 Status: Archived Reference

Case Studies of E-Procurement Initiatives - RR180-12

Publication Date: 10/2002 Type: Research Report Pages: 94 Status: Archived Reference


Presentations from CII Events

Session - E-commerce

Publication Date: 07/2002 Presenter: John Voeller Number of Slides: 17 Event Code: AC02


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