Innovation in Facilities Management Supply Chain Management - Essay Example

? "Contracts are normally written by the legal team, they are by nature one sided (or try to be) - procurement is also a little one sided too, which leaves the facilities manager to pick up all the pieces and do the balancing act. The first step is developing a good relationship at the start with a good procurement process that produces a workable financial/compensation model, balances risk between the parties, defines expectations, establishes a strong communication method, sets up a beneficial performance management process (not just KPI's) and work together for success, not as a traditional master/slave relationship. " a. Discuss the above statement by critically examine the role of innovation in FM supply chain management. b. Explore and critically analyse innovative procurement routes in delivering effective FM services Table of Contents 1. Introduction 3 2. Innovation in facilities management supply chain management 4 2.1 Supply chain management during the innovation design 4 2.2 Innovation and FM supply chain management in terms of geography 5 2.3 The role of knowledge management in the development of the relationship between innovation and FM supply chain management 6 2.4 The development of innovation in FM supply chain management as part of a general trend 7 3. Procurement, innovation and FM services 9 3.1 Innovative procurement routes based on contingency approach 9 3.2 Innovative procurement routes through e-procurement 10 3.3 Innovative procurement routes based on real options 11 3.4 Innovative procurement routes – needs and challenges 11 4. Conclusion 12 References 13 1. Introduction The increase of competition in all industries worldwide has been a phenomenon of the modern market. Under these conditions, firms that are interesting in keeping their competitive advantage need to emphasize on innovation. Traditionally, innovation has been regarded as an element of the organizational strategy; indeed, most of organizational plans include rules that promote innovation. Current paper focuses on the examination of innovation in relation to FM but also in relation to the procurement process. In order to understand the context of innovation in FM, it would be necessary to refer primarily to the definition of the above concept, as given by Dogson et al. (2008); the above definition can be described as follows: ‘Innovation depends upon a firm’s ability to create new products and services and make and deliver them’ (Dogson et al 2008, p.235). Apart from innovation – especially in regard to Facilities Management, current study focuses on the identification of the forms of procurement – as it can being transformed, aiming to become more innovative; the requirements of procurement, especially regarding its alignment with the innovation process are critically discussed aiming to identify the terms under which innovative procurement routes can be related to improved FM services. The two key issues presented above are discussed in the sections that follow. It should be noted that the main body of the paper has been divided into two major parts – divided into sub-sections – so that the answers to each of the questions of the case study to be clear. It is concluded that innovation can be indispensable part of Facilities management supply chain management but their relationship is likely to change continuously, such as in the case of procurement and innovation. 2. Innovation in facilities management supply chain management 2.1 Supply chain management during the innovation design In the context of innovation, FM supply chain management can be highly differentiated, aiming to support the increase of organizational competitiveness within its market. It should be noted here that the potential update of FM supply chain management using the rules of innovation would be a complex process; an indicative form of this process is presented in the study of Chan et al. (2005). In the above study reference is made to innovation as a condition for the improvement of FM supply chain management; however, it is made clear that the promotion of innovation would require a series of extensive changes in the traditional supply chain management process. Emphasis is given indicatively on the following requirement: the change of the mission of supply chain management during the innovation design – supply chain management responds to different organizational needs during the various phases of innovation. For example, during the immature phase of innovation, the supply chain management needs to focus on the product development’ (Chan et al. 2005, p.72). On the other hand, during the mature phase of innovation, the supply chain management serves a different organizational need, the ‘reduction of the cost’ (Chan et al. 2005, p.72). It is assumed that the level at which the supply chain management is affected by the innovation process is not standardized; rather, it can be differentiated in accordance with the following criteria: a) the role of supply chain management in the daily operations of the particular organization, b) the organizational culture – which allows for more or less independency, c) the market culture – which supports more or less innovation and d) the conditions in the internal and external organizational environment (which can be more or less favourable for the development of important organizational initiatives -including the changes in the mission of supply chain management during the innovation process. 2.2 Innovation and FM supply chain management in terms of geography Another aspect of the relationship between innovation and FM supply chain management is given in the study of Wisner et al. (2008); in accordance with the above study, the relationship between innovation and FM supply chain management can be explained using a different approach. At a first level, it is noted that facilities management is highly related to the location where the organization is established; it is explained that if the facilities of the organization are appropriately cited, then the organization involved is considered to have a ‘competitive advantage’ (Wisner et al. 2008, p.398). On the other hand, it is explained that the location of the business units is also important in terms of the supply chain management; for this reason, it is explained that ‘business clusters are offered for growth and improved supply chain management’ (Wisner et al. 2008, p.398). In accordance with Wisner et al. (2008), it is at this point that supply chain management is related to innovation; in areas where ‘successful business clusters are established innovation and competition are concentrated geographically’ (Wisner et al. 2008, p.398). Using a different point of view, Maxwell (2009) explains that the supply chain management system used within a particular organization is directly depended on the location of the organization – or of its branch – in the following context: the location of organizational activities has been found to be critical regarding the costs of supply chain management; more specifically, by making the appropriate choice in terms of their location, firms can manage to reduce their costs at extremely low levels – reference is made specifically to the manufacturing units of organizations. At the next level, the minimization of costs for the organizational activities will result to the increase of organizational performance, i.e. the increase of organizational profits. However, if the necessary funds are available, innovation can be also promoted across the organization. Through the above sequence of thoughts, innovation is considered as being related to FM supply chain management. Examples of the above case are the following ones: the relocation of many European firms and their establishment in China has led to the minimization of their expenses and the increase of innovation in most of their processes – by saving funds regarding their operational costs, these firms have been able to emphasize on other organizational sectors and aims, especially on the promotion of innovation across their units. 2.3 The role of knowledge management in the development of the relationship between innovation and FM supply chain management In order for innovation to be promoted across a particular organization it is necessary for certain requirements to be met; primarily, the organizational culture would support innovation, then the organization’s stakeholders need to agree on the importance of innovation for the particular organization. In order to examine the potential relationship between innovation and the Facilities Management – supply chain management, issue under examination in this study, it would be necessary to understand the forms and the role of Facilities Manager. In this context, Nutt et al. (2000) support that Facilities Management in modern organizations faces a series of challenges, which are highly related to the following problem: in most organizations the management of knowledge presents delay and failure; in organizations where this problem is extensive, the expansion of innovation is likely to be delayed from a series of barriers, including the ‘lack of facilities management expertise’ (Nutt et al. 2000, p.10-11). The potential effects of knowledge on the performance of innovation systems are also highlighted in the study of Fischer et al. (2001); through the above study, the following issues are made clear: facilities management projects related to the management of equipment for a long time, are heavily based on effective knowledge management techniques; in case that such plans are not available, then the performance of facilities management projects is expected to be kept at low levels, being restricted using various variables and methodologies. 2.4 The development of innovation in FM supply chain management as part of a general trend Apart from the common need for the promotion of innovation across organizations – referring especially to the innovation related to the FM supply chain management – there are certain cases where innovation plans are promoted across a specific organization, not because of the organizational needs, for instance due to the location of the organization, but mostly because of a relevant trend. An indicative example of such trend is provided in the study of Booty (2009); in the above study reference is made to the promotion of innovation across firms operating in the construction industry. It is explained by the above researchers that in the case of these firms the promotion of innovation is related to certain facts and trends; indeed, in the particular industry innovation has been considered as a necessary prerequisite for offering buildings of high quality. People who wish to build such houses have to follow the trends for innovation that characterize this sector; in the particular industry innovation refers to a wide range of issues, including the material used for construction, ‘the energy efficiency and the increased comfort’ (Booty 2009, p.287). The material required for promoting innovation across the particular industry need to be allocated by suppliers who are aware of the needs of such projects; it is at this point where innovation and supply chain management are met – in the case of the construction industry. However, the study of Booty (2009) does not emphasize – at least not adequately – on the relationship between innovation and Facilities management, even if, indirectly such relationship is indicated. In accordance with Best et al. (2003), the sustainable construction is the sector where the value of Facilities management is mostly appreciated; this view is explained by the fact that Facilities management provides the material for the realization of sustainable construction projects; through these projects, a series of significant benefits for the environment are expected to result. Moreover, innovation is continuously promoted across this sector ensuring that these benefits are continuously increased. Through the above view, the relationship between innovation and FM supply chain management is highly emphasized; in fact, this relationship leads to a series of important benefits for the environment; for this reason, the above relationship – referring to the case of sustainable construction – is expected to be further improved. 3. Procurement, innovation and FM services 3.1 Innovative procurement routes based on contingency approach The development of an innovative procurement of FM process it is required that certain requirements are met: primarily, the conditions of the organizational environment need to be taken into consideration – referring to the potentials of the facilities manager to act independently in regard to all phases of FM, including the procurement process. Then, the resources available for the promotion of innovation in the procurement FM process need to be evaluated; in organizations where innovation is not adequately promoted, the chances for innovative procurement HR routes to appear are limited. Finally, there is the following problem that needs to be resolved: Facilities managers are not always able to understand the needs of their organization and the potential value of innovation in procurement; alternative mechanisms should exist in place ensuring that innovation in procurement of FM is promoted and adequately supported. Such solution is proposed through the study of Ancarani et al (2005); in the above study reference is made to the potential use of ‘the contingency approach for selecting sources strategies’ (Ancarani et al. 2005, p.232). Of course, the feasibility of the above approach within each organization cannot be guaranteed; however, the suggested approach is an indication of the potentials for the promotion of innovation in the procurement of FM within modern organizations – under the terms that the relevant plans will be adequately supported by the employees involved in the particular processes. 3.2 Innovative procurement routes through e-procurement Another form of innovative procurement of FM is analysed in the study of Liu et al. (2011); the form of procurement suggested is the e-procurement which offers a series of competitive advantages – towards the rivals, like ‘the automatic definition of product requirements, search and selection for suppliers, negotiation and contracting with suppliers’ (Liu et al. 2011, p.49). However, despite their values, e-procurement schemes are not appropriate for organizations with extremely unstable internal or external organizational environment – referring for instance to organizations where severe conflicts are likely to appear every time that change initiatives are developed. On the other hand, the development of such schemes requires appropriate and adequate support – referring to the IT systems available for supporting such scheme – if its implementation in a particular organization is initiated. Moreover, in accordance with Liu et al. (2011) the use of ‘a novel agent-based architecture for an e-procurement system’ (Liu et al. 2011, p.49) would control uncertainties in the internal and the external organizational environment, a fact that could decrease the risk for failures of the e-procurement system involved. In any case, the e-procurement of FM would significantly increase the potentials of FM leading to the subsequent increase of organizational performance. However, because its performance is not standardized, in the context described above, it cannot be guaranteed that the investment made will be paid back – even in the long term. For this reason, the e-procurement of FM would be promoted rather in large firms where there are less chances of severe losses in case of the establishment of e-procurement of FM. Another risk of the improvement of existing procurement system for FM is presented in the study of Willoughby (2001); in accordance with the above study, the cost of the update of procurement for FM is not standardized; in fact, this cost is likely to change periodically under the influence of the market pressures and uncertainties. 3.3 Innovative procurement routes based on real options Moreover, Marquez et al. (2004) suggest that the criteria used by procurement managers in order to evaluate the effectiveness of procurement schemes may be differentiated. Schemes that respond to specific needs of the organizations involved can be developed – aiming to ensure the viability of these plans in the long term. An indicative example is the case of real options, which can be used in order ‘to secure price and availability’ (Marquez et al 2004, p.29). At this point, the following issue has to be mentioned: the development of procurement schemes based on real options is advantageous – compared other forms of procurement which are also considered as innovative but, additionally, they can lead to severe organizational failures – for example, the contingency model as it is developed above. However, the demands of a procurement system based on real options can be high; reference is made, for example, in the study of Marquez et al. (2004) to ‘in-transit and warehoused inventories’ (Marquez et al. 2004, p.29) which would allow the exchange and the process of complex information regarding the management of the particular procurement system. 3.4 Innovative procurement routes – needs and challenges The use of traditional forms of procurement for FM seems to be preferred when the risk involved in the transition to an advanced procurement system is high; such case exists particularly in small enterprises where the potentials for updating the firm’s IT systems are limited – mostly because the cost and the demands – in terms of technology and support – of these system are usually high. The above issue is highlighted in the study of Bharadwaj (2004) where emphasis is given on the need for regular check of the performance of a firm’s supply chain. Moreover, it is noted that the use of the specific practice, can support, without further initiative, the improvement of the supply chain. In accordance with the above view, innovation in procurement can have many forms; it does not necessarily involve in costly IT systems or hiring of highly qualified individuals; rather it can be achieved simply by improving a firm’s existing procurement routes – at the level that such change is required for the improvement of the quality and the performance of procurement for FM. The level at which the development of innovative procurement routes can affect the business performance can be depended on another factor; in accordance with Gallouj (2010) innovation is not expected to influence the procurement routes, at least not up to a point, in the following case: if there is ‘a case of service innovation which is not based on technology or knowledge’ (Gallouj 2010, p.54). As noted previously, in the development of a product, changes can be made on services but not on products. 4. Conclusion The level at which innovation is involved in the strategies and the activities of modern organizations is not standardized; under the influence of different market conditions and different priorities, organizations can choose to adopt more or less innovative procurement routes. In any case, the advances of technology and the improvement of operational practices of firms worldwide – despite the strong crisis- have supported the expansion of innovative procurement routes; innovation as part of the Facilities management supply chain management has been also increased. However, different explanations have been given for the above changes in organizational practices and performance; there are authors who emphasize on the decisive effect of geography or other similar external characteristics on the progress of innovation across the organization (Wisner et al. 2008). However, the actual performance of innovation in modern organizations cannot be considered as related to a unique organizational characteristic; rather it is primarily an issue of organizational culture and ethics. A similar assumption can be developed in regard to the relationship between innovation and procurement, as an element of the FM supply chain management. In other words, the increase of innovation across the organization – both regarding the FM supply chain management and the procurement, requires a robust and stable organizational framework; it is only within such organization that effective innovative routes – both in regard to supply chain management and procurement - can be developed. References Ancarani, A., Capaldo, G. (2005) Supporting decision-making process in facilities management services procurement: A methodological approach. Journal of Purchasing and Supply Management, Volume 11, Issues 5-6, pp. 232-241 Best, R., Langston, C., De Valence, G. (2003) Workplace strategies and facilities management. Oxford: Butterworth-Heinemann Betts, M. (1999) Strategic management of IT in construction. Oxford: Wiley-Blackwell Bharadwaj, N. (2004) Investigating the decision criteria used in electronic components procurement. Industrial Marketing Management, Volume 33, Issue 4, pp. 317-323 Booty, F. (2009) Facilities Management Handbook. Oxford: Butterworth-Heinemann Chan, C., Lee, H. (2005) Successful strategies in supply chain management. Hershey, PA: Idea Group Inc Dodgson, M.,Gann, D., Salter, A. (2008) The management of technological innovation: strategy and practice. Oxford: Oxford University Press Fischer, M., Frohlich, J. (2001) Knowledge, complexity, and innovation systems. New York: Springer Howells, J. (2005) The management of innovation and technology: the shaping of technology and institutions of the market economy. London: SAGE Gallouj, F. (2010) The Handbook of Innovation and Services: A Multi-Disciplinary Perspective. 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