A Study On The Construction Supply Chain Based On Quantity Flexibility Contract

With the rapid growth of economic globalization, competitions among enterprisesbecome increasingly fierce. As one of the competitive industries, construction industryalso faces enormous challenges inevitably. In order to reverse the present situation oflow productivity and profitability, new managements are in great need for constructionindustry to improve its overall efficiency. Since the beginning of the1990s, foreignscholars began to introduce supply chain management into construction industry, andthe engineering procurement management between upstream contractors and suppliersplays an important role in the supply chain management of construction industry.However, due to the complexity and uncertainty of construction projects, uncertaintyand risk also exist in its procurement activities. In order to solve the problems oftraditional engineering procurement, such as low level of cooperation, low efficiencyof procurement, and poor resilience towards uncertainties, this paper carried outtargeted researches.This paper compares the procurements under both construction supply chainmanagement and traditional engineering management, builds the quantity flexibilityprocurement contract model between contractors and suppliers based on the contracttheory of supply chain, and takes the unreliability of supply into consideration.Consequently, three main conclusions are drew through the above research.First, the quantity flexibility procurement contract model under constructionsupply chain management can increase the flexibility for contractors to perform specificprocurement activities, coordinate the interests between upstream and downstream ofthe supply chain effectively, improve the accuracy of demand forecast, and enhance theability of dealing with demand and supply uncertainties for both contractors andsuppliers, thereby coordinating the upstream and downstream enterprises ofconstruction supply chain effectively.Second, the largest shipments of supplier is an increasing function of the reliabilityof supply in the case of insufficient supply. The contractors’ optimal order quantity willincrease as a result of the unreliability of supply, but the relationship between such twofactors is not monotonous. Instead, the contractor’s optimal expected profit is an increasing function of the unreliability of supply.Third, the contractors’ optimal order quantity will not be affected by supplyinterruption risks, such as unsmooth roads, production equipment failures, and strikes.What’s more, such risks cannot be reduced by changing the order. Its optimal expectedprofit is an inverse function of the probability of supply disruptions.