Research on Partner Selection of Real Estate Development Enterprise in China Based on Supply

Chain Management Thoughts

Fuzhou Luo School of Management

Xi’an University of Architecture &Technology, XAUAT XI’AN, 710055, P.R.China

Yanhu Han School of Management

Xi’an University of Architecture &Technology, XAUAT XI’AN, 710055,P.R.China iamhanyanhu@163.com

Abstract: Along with the development of the real estate market in

China and the increasingly fierce competition of the real estate

industry, in this situation, this paper has analyzed the necessity of

supply chain management introduced into the real estate enterprise

management in China and has presented the constructing mode of

supply chain of real estate development under the direction of the

supply chain management theory, combined with the actual situation

of China's real estate enterprises. Meanwhile, supply chain partner

selection principle, comprehensive evaluation index system and

methods have been put forward when supply chain partners need to

be selected, with the real estate development enterprise regarded as

the core enterprise on the supply chain.

Keywords: real estate development enterprise； supply chain

management；partnership

I. THE NECESSITY OF INTRODUCING SUPPLY CHAIN

MANAGEMENT THOUGHT INTO REAL ESTATE ENTERPRISE

MANAGEMENT IN CHINA

The supply chain management is pregnant and produced in the process of the development of the traditional manufacturing industry. Before 1960s, for the sake of the relative stability of the surroundings manufacturing enterprises faced in western countries, the enterprise investment holding or the "vertical integration" mode of merger was mainly adopted in the development of enterprises and led to success in the market environment and conditions at that time. However, with the quick development of science and technology, customers'

changing needs and the increasingly fierce market competition, the "vertical integration" strategy showed inadaptability compared with the new market environment, and the enterprises’ " large and all-inclusive " increased the costs and risks of enterprises and could not response to customers’ personalized needs fast. As a result, the "horizontal integration" strategy management mode emerged at the right moment. In order to reduce costs, to obtain complementary resources and abilities and to enhance the competitive advantage of enterprises, all the node enterprises and users eventually constitute a network structure, which transfers logistics and information through organizing node enterprises together, such as suppliers, manufacturers, distribution center, channel distributor etc, and adjacent node enterprises are in a relationship of supply and demand. The entire supply chain operation and management must be emphasized to make every enterprise on the supply chain enhance its power and to improve competitiveness.

Together with the development of the real estate market in China and the increasingly fierce competition of the real estate industry, a batch of large real estate enterprise groups have come up, such as Vanke Co. Ltd., POLY REAL ESTATE GROUP Co. Ltd and so on. Some of them, which come into large expansion at the same time, still use the "vertical integration" strategy, which leads to enterprises’ bloated organizational structures, increased management cost, impeded information communication and

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reduced organizational flexibility etc. In addition, the competition between enterprises has transformed into the competition between entire supply chains in the current real estate market, so that customers should be regarded as the centre and the ability of fast response to customers’ requirements should be improved. Obviously the strategy and management pattern of some large real estate enterprises cannot adapt to the current requirements of the development of the real estate market in China. The supply chain management being a kind of typical "crosswise integration" strategy, the supply chain management thought must be blended in the management of real estate development enterprises, which is highly needed by enterprises' own long-term development and is urgently demanded by the development of the current real estate market in China.

II. SUPPLY CHAIN CONSTRUCTION MODE OF REAL ESTATE

There is great difference in the supply chain construction between the real estate industry and the manufacturing industry. A real estate development project generally includes four stages: investment decision, preparatory work, construction, marketing service. At the very beginning of the development, it is necessary to

consider fully the concept and positioning of the project, building, marketing and property management etc, all of which are closely related with the project success. What’s more, the consideration for these factors happens almost at the same time, and the information about design, construction, marketing, property management and so on, must be mutually exchanged. Therefore, the information flow and value flow on the real estate supply chain should be transferred through internal and external two-way exchange. Furthermore, because of the transition from seller's market to buyer's market in the real estate market, the real estate supply chain structure must make customers oriented, and the real estate enterprises should keep good docking with customers. The supply chain construction of real estate mainly depends on the smooth communication between enterprise’s internal departments and enterprise’s external partner business, and the information flow should be kept unblocked. At the same time, the real estate development enterprise should coordinate among partners and maintain mutual cooperation. Combined with the SCM thought and the characteristics of the Chinese real estate enterprise, the supply chain construction model of real estate is shown in figure 1.

Figure 1. supply chain construction model of real estate

Administration Department

Financial Department

Personnel Department

Development Department

Design Department

Engineering Department

Sales Department

Property Department

……

Property Developer

Financial Institution

Design Business

Contractor Marketing Agent

Property Management Contractor

Customer

Thus it can be seen that the real estate enterprise has integrated all the resources in the whole process of the real estate development. The cash flow, logistics and information on the supply chain are integrated in the interior of the real estate enterprise through establishing contacts between the internal related departments of the real estate development enterprise and the external supply chain enterprises and then common goals are shared so as to serve collaboratively for clients and to enhance customers’ satisfaction. Of course this model demands high ability to integrate for the real estate development enterprise. Not only does it need to integrate well internal departments and ensure each department in close cooperation and smooth information flow, but also to integrate external resources well and ensure that internal departments and the corresponding node enterprises cooperate successfully and coordinate each node enterprise. The strategic cooperative partnership between the real estate development enterprise and the node enterprises is reflected, and every member enterprise's core competitiveness and management level directly affects the common interests all enterprises shares on the supply chain. Hence a selection of strategic partners is very important.

III. REAL ESTATE SUPPLY CHAIN PARTNER SELECTION

A. Concept of Supply Chain Partnership of Real Estate

From the angle of strategy management , the supply chain partnership of real estate is to form a three-dimensional and multi-layer partnership model based on supply chain contracts, which regards the development enterprise as the core enterprise and land development unit, planning and designing unit, material and equipment supplier, contractor, retailer and all kinds of consulting services participate in, through the integration of resource advantages and competitiveness of supply chain enterprises of real estate.

The management of the supply chain partnership of real estate manifests the transformation from malignant competition to cooperative competition as to enterprises’ management strategy, namely the "win-win" concept, and aims to explain that only do the unity and cooperation and creating common value in the competition between enterprises render enterprises achieve unprecedented profitability and competitiveness in modern economic

conditions.

B. Comprehensive Evaluation Index of Supply Chain Partner Selection of Real Estate

The comprehensive evaluation index system of the selection of supply chain partners is the basis and standard to select supply chain partners of real estate. According to the characteristics of supply chain member enterprises of real estate and the elements of the core competitiveness, the comprehensive evaluation index is divided into four categories: Enterprise Management Ability(Q1), Business Capability(Q2), each kind of index is divided into several point indices, and finally a relatively complete index system is formed, which is shown in table Ι.

TABLE I. EVALUATION INDEX SYSTEM OF SUPPLY

CHAIN PARTNER SELECTION OF REAL ESTATE

Target

Layer

Criterion

Layer Index Layer

Supply

Chain

Partner

Selection

of

Real

Estate

Management

ability

Strategy and planning

Credit

Qualification level

Organizational structure

Excitation and

coordination mechanism

Business

capability

Scientific research level

Innovation ability

Level of keeping an

appointment

Quality assurance

Employee

competence

Training and

development

opportunities

Technical ability

Academic degree

Moral standard

Financial

cost

Operational cost

Profit level

Assets operation ability

Because the business of the supply chain partner of real estate is mostly different, and the comprehensive evaluation index system is different as well, corresponding adjustments must be made into the comprehensive evaluation index according to different characteristics of enterprises.

C. Methods of Selecting Supply Chain Partnes of Real Estate

In the evaluation of the competitiveness of supply chain partners of real estate, qualitative and quantitative indices, both of which influence the market competition ability, should be considered comprehensively. So quantitative and qualitative methods combined should be adopted to analyze and evaluate partner enterprises.

Screen preliminarily and narrow the choice scope. On the basis of requirements of the core competence of a real estate project and market conditions of the day and basic requirements of partner enterprises, several candidate partner enterprises should be preliminarily selected from numerous enterprises in the market. This can greatly reduce the follow-up quantitative evaluation work.

Evaluate one of partner enterprises’ abilities. For quantitative indices, real and standardized data should be adopted as far as possible to reduce errors; for qualitative indices that cannot be calculated precisely, establish an expert team for assessment, collect index information of candidate partner enterprises, score for the candidate partner enterprises according to evaluation standards and draw quantitative evaluation.

Evaluate candidate partner enterprises synthetically and rank them. Respectively distribute various indices with corresponding weights in line with their influence degree, then select proper mathematical model to carry on the comprehensive evaluation for candidate partner enterprises so as to determine the optimal partner combination.

IV. CONCLUDING REMARKS

As China's real estate market is developing continuously and laws and regulations are being improved and perfected constantly, whether to adopt this management mode also depends on a number of other factors while the supply chain management idea of real estate is widely used in foreign

countries. For instance, the real estate development enterprise's own ability of integrating all kinds of resources, the strategies of partner enterprises, market competition level, the development of information technology, certainly including the supporting measures to serve for this kind of mode and so on .

The selection of partner enterprises is one of the decision rings of the supply chain management, and is the primary issue to build the supply chain and to make it in good operation. Need to formulate different index systems for comprehensive evaluation separately and choose one of them properly, according to the distinctive nature of characteristics of the partner enterprises. Additionally, still need a thorough study on its applicability and operability as to the choice of comprehensive evaluation methods.

REFERENCES [1] Mathew J, Tyler A, and Thorpe, “Preconstruction project

partnering:Engineering Construction and Architechtural Management,” New York: Academic,1996, pp. 117–131.

[2] Jiming Cao and Xiang Gao, “Fuzzy Syntheses Evaluation of Supply Chain Partners of Real Estate,” in Journal of TONGJI University, vol. 33 No.6, Shanghai: Academic, June 2005.

[3] Jian Yu and Qiming Li, “Research on Cooperation of Real Eatate Enterprise Based on SCM,”in Construction Management Modernization,term 73,Harbin: Academic,2003.