Understanding current and future requirements on logistics service offerings in the Danish construction industry

Abstract

Purpose - The purpose of this research is to create a better understanding of what the current and future customer requirements are on logistics service offerings in the Danish construction industry and how the studied case company can better match these.

Methodology - The research was conducted as a case study. A supplier (referred to as the case company) of tools, consumables and installation materials in the construction industry was studied. Empirical data was collected from three sources: interviews with personnel and customers of the case company, sales and delivery data from the case company, and grey literature on the Danish construction industry and its actors. By combining qualitative and quantitative data, an understanding of the requirements on logistics service offerings was established. Following this, an analysis on how the case company could focus its efforts to improve the match with the requirements was performed.

Findings - The study identifies and analyzes the relative importance of seven dimensions of logistics service offerings and fourteen services. Based on the empirical findings and analyzes, offering early and fast deliveries was indicated to be of the highest importance on the studied market. Requirements do however vary depending on customer segment. Installation firms are currently more demanding but requirements from contractors are indicated to increase faster the coming years. And as it is a competitive market, customers are indicated to become increasingly cost-sensitive. Requirements and willingness to pay in specific situations do, however, seem to be dependent on several contextual factors, such as industry characteristics, project characteristics and product characteristics. This study identifies customer segments, service dimensions and services that the case company could focus on to improve current and future match with customer requirements.

Originality - Previous studies on logistics in the construction industry have often investigated how improved logistics could improve productivity in construction projects. They usually have the perspective of constructions firms or end-clients. Furthermore, requirements on logistics service offerings have often been analyzed in B2C and e-commerce contexts. This study is original in that it analyzes the requirements on logistics services from a supplier perspective in the (Danish) construction industry. It complements previous studies by analyzing the requirements in a B2B context and by investigating the actual requirements, not would-be requirements to improve productivity.

Popular Abstract

TITLE: The conservative construction industry - a frontrunner in logistics?

Express delivery within 30 minutes? Order at 6 pm and have the goods delivered to your job site the same night? The construction industry is traditionally known for its low productivity and lack of standardization of processes. However, in terms of logistics, suppliers in the industry have stepped up their game, and thus also the expectations of the customers. This thesis explores the competitive environment of a supplier in the Danish construction industry and elaborates on what impacts the customer requirements.

Logistics has become a hot topic in recent years. It is a key component in the business models of e-commerce giants like Amazon. Free deliveries and free returns within a couple of days have become commonplace in the retail industries. In Denmark, a geographically small country, demands are even higher. For instance, having goods delivered the day after ordering is considered a standard delivery.

In business to business contexts, requirements are generally more formal compared to those in business to consumer industries. Service levels and response times are agreed upon beforehand, and a certain level of continuity across longer periods of time is common. Due to the nature of the construction industry, this does however often not apply. Each project is unique or on a new location and each job or installation can have case-specific requirements. It is thus not necessarily possible to plan ahead on what specific products and quantities will be needed.

In the thesis, requirements from two customer segments were studied, contractors and installation firms. The above-described lack of planning was found to be especially present in the installation business. One could believe that it would be in their own interest to plan better. However, interestingly enough, they expressed low incentive for doing so.

Five large retailers, serving both customer segments in the Danish construction industry, were studied and found to differentiate on logistics service offerings. In recent years, they have expanded their offerings and now offer a broad spectrum of logistics services for their customers. These services were described to spoil the industry. It is thus not necessarily the customer side that demands these services but rather the retailers trying to differentiate.
In the current market, it is mainly the installation firms that utilize the full range of these services, especially fast and early deliveries. They have thus become used to them. Looking forward, contractors are however likely to follow. And as forefront services, such as express deliveries within one hour and night deliveries, become more commonplace, competition on price of the services will likely increase.

Given the broad spectrum of services offered by the large retailers, it is not realistic, nor necessarily expected, that smaller suppliers compete on logistics services to gain any sort of competitive advantage on the Danish market. However, as many customers buy large shares of their products from these retailers, they become used to their services. Arguably, it will thus be important for smaller suppliers on the market to monitor how customer demands develop and be ready to adapt to meet them.

For companies supplying the Danish construction industry, the most important services to offer were identified to be next-day delivery pre 7am and express delivery within 3 hours. An arguably tough challenge, especially if logistics is not in the core of your business model. Maybe, the business to consumer retail industry should glance at the construction industry to see how customer demands could come to change?

• author: Dufberg, Erik and Forsström, Anton
• supervisor: Joakim Kembro
• organization: Engineering Logistics
• course: MTTM05 20191
• year: 2019
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: Logistics service offerings, logistics service dimensions, Danish construction industry, customer requirements.
• report number: 5895
• language: English
• id: 8986410
• date added to LUP: 2019-06-20 14:31:21
• date last changed: 2019-06-20 14:31:21