Managing Materials Vendor Risks for Improved Project Operational Performance

Abstract

Highlight: Sound risk management implementation is well noted for helping organisations to overcome operational inefficiencies. However, the management of risk associated with construction materials vendors, and how they impact project operational performance appear to have not been extensively researched. Goal: In this study, the effect of materials vendor risk management (vendor risk identification and vendor risk prevention) on project operational performance (project quality and scheduled completion time) was investigated. We also interrogate the mediating role of risk-oriented culture in the relationship between vendor risk management and operational performance. Design/Methodology/Approach: The target population was all 1,044 registered public construction firms under the Urban Regeneration Programme in Nigeria. The cross-sectional survey design was adopted, and random sampling was used to select 173 project managers, engineers, surveyors, vendors/contractors, and store representatives. Primary data was collected through the structured questionnaire, they were analysed via the Structural Equation Modelling (SEM) technique. Results: Three main conclusions are made about managing vendor risks: First, properly identified materials vendor risks (in terms of material handling issues, price escalation, non-compliance to specification, delivery delay, and sharp procurement practices) is positively related to operational performance. Second, implementing context-specific risk prevention measures (prior assessment score, vendor financial capacity, warranty policy, continuous monitoring, technical capacity) positively enhances operational outcomes. Third, paying attention to risk culture orientation of project stakeholders positively impact their risk prevention capability and operational performance of construction projects. Limitations: Study was limited to few operational performance indicators in project management. Future study could include other performance indicators. Practical Implications: The results can help project operations managers in industry address numerous risks associated with materials vendor. Originality/Values: The numerous abandoned and failed construction projects in developing countries as a result of less attention to vendor risks management prompted this study.