Tyre Purchasing by Civil Engineering Construction Companies – A Case Study of a Major Company in Africa

Abstract

Although tyre expenses can be a significant component of the operating costs in civil engineering construction (CEC) companies, there are few studies investigating how the CEC industry can benefit by implementing specific tyre purchasing policies. The research aimed to highlight the expenditure on tyres, the factors affecting these, and how specific purchasing policies can impact on the total costs of purchases. A case study was conducted at XYZ-Eng-Africa, a major tyre purchaser in Africa by collecting data on tyre expenditure and supplier information from three countries in Africa (Angola, Malawi and Mozambique) for the period 2010-2012. It was ascertained that the expenditure on tyres depends on the size of the wheeled fleet and the diversity of the civil engineering equipment, resulting in a broad tyre supplier base which is difficult to manage. In addition, the focus is only on the ratio of price to quality, thus dismissing other important aspects of the purchasing process. It is recommended that the tyre purchasing policy of CECs should focus on implementing Supplier Relationship Management (SRM) strategies, and rationalizing the segmentation of the supplier base, and applying supplier performance measures. However, the success of SRM strategies may be affected by the lack of an integrated database of suppliers, and incorrect perceptions about purchasing. Nevertheless, CEC companies that focus on SRM policies in tyre purchasing may benefit from the flexibility to adapt to the market conditions and decrease total purchasing costs. DOI: 10.5901/mjss.2014.v5n23p1797