Using Transport to Quantify the Impact of Vertical Integration on the Construction Supply Chain: A New Zealand Assessment

Abstract

New Zealand (NZ) construction is highly fragmented, comprises primarily micro small and medium enterprises (MSMEs); 32.5% of approximately 67,000 operating businesses are ‘small’ (up to 19 employees), while 65% are sole traders. The construction supply chain (CSC) is extensive, prone to inefficiencies at segmental boundaries accentuated by project-centric delivery. Conversely, it presents significant opportunity for consolidation and improved efficiency. Vertical integration and CSC management from the supplier-end rather than the project-end enable component elements to be individually independent in terms of ownership, while integrating their management above the tactical CSC level. This leads to improved operational philosophy and employment. Quantifying impacts, however, is a challenge due to lack of tangibility. This can be effectively overcome using quantifiable parameters associated with the CSC’s transport component. The paper investigates transport operations in a narrow NZ CSC segment over a three-month period to quantify improved performance using operational data and further potential for resource optimisation using operations research-based planning. Research outcomes point towards: (i) Fleet management strategy; (ii) Integrated planning and operational delivery; (iii) Non-price attributes in tendering/contracting; (iv) Change in the delivery model of manufactured construction products; (v) Information and communication technology-based solutions; and (vi) Integration of reverse logistics.