Construction Supply Chain Improvements through Internet Pooled Procurement

Construction material supply chains have evolved over time to base production and materials management decision-making on demand information from the immediate downstream node in the supply chain. This myopic view leads to demand signal amplification as individual upstream nodes attempt to forecast and fulfill orders. Further compounding this demand distortion is the fact that a great amount of demand uncertainty exists between the supply houses and contractors. Supply houses are challenged to base production and materials management decision-making on orders received from a large number of disparate contractors from diverse trades. The aforementioned demand distortion and uncertainty causes construction supply chain distribution channels to be crowded with unnecessary inventory. This paper investigates a new business model for Internet-enabled pooled procurement in construction supply chains based on research currently in-progress. Through global integration of procurement information over multiple projects, pooled procurement leads to efficiency in material manufacturing and distribution, decreased material costs to contractors and owners, and reduced transaction costs.