SUPPLY CHAIN MANAGEMENT IN FACILITIES MANAGEMENT – USING THE

i2i MODEL

M.L. Nelson, M. Sarshar

School of Construction and Property Management,
University of Salford, Salford, M7 9NU
E-mail: M.M.Nelson@salford.ac.uk

ABSTRACT: The SPICE (Sarshar et al, 2000) project identified that supply chain
management issues were very important in the construction industry. Thus, the SPICE FM
project examined supply chain management issues using the Integrate to Innovate (i2i) model
developed by Barrett and Sexton (1998).

i2i is a five-level model and framework for evaluating supply chain relationships. It operates
on the premise that the capacity for innovation increases the higher you go up the levels.
Relationships can operate at different levels simultaneously and the aim is to achieve a
balanced portfolio of relationships with suppliers.

A case study was undertaken at an Acute NHS Hospital Trust in the Northwest of England.
This paper presents how the model was applied and the findings of the case study. It discusses
the strengths and weaknesses of the model in healthcare FM, and is of interest to facilities
managers in general and the healthcare sector in particular.

Keywords - Facilities Management, Supply Chain Management, Innovation

1. INTRODUCTION

The Structured Process Improvement for Construction Environments – Facilities

Management (SPICE FM) project is a follow-on to the SPICE (Construction) project, which
developed a tool for assessing process capability and a framework to distinguish levels of
increasing process capability. SPICE FM took a process view of facilities management.
Davenport’s (1993) definition that “a process is simply a structured, measured set of
activities designed to produce a specified output for a particular customer or market” is most
commonly cited. Process management is important because processes are the backbone of
any organisation and “the inability of a process to deliver quantifiable, managed and
measured performance can have far reaching effect” (Sanders, 2000).
The SPICE model, (Sarshar et al, 2000) which is based on the Capability Maturity Model
(CMM) (Caputo, 1998) used in the IT industry, assumes that process improvement is
achieved through small systematic evolutionary steps. Although the SPICE project
acknowledged that supply chain management issues were very important in the construction
industry, the SPICE model did not address this issue. The Integrate to Innovate (i2i) model
was identified as a staged supply chain management model which had been developed for the
construction industry by the Salford team of Barrett and Sexton (1998). This was tested in a
pilot case study in the healthcare FM market to determine its suitability and applicability.
Alexander (1996) stated that “Facilities are an organisation’s second largest expense and
can account for as much as 15% of turnover” and “they are also the largest item on the
balance sheet, typically over 25% of all fixed assets”. Research however has shown that very
few organisations effectively manage their facilities assets or consider it as part of their
overall business strategy. Construction is usually undertaken to meet a business need, whilst
facilities Management (FM) is often seen as an overhead. Its contribution to business
productivity is often overlooked. In a 1999 BIFM survey of its members (figure 1), just over

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20% believed that their board of directors (or similar) perceived FM to be of high strategic
importance, 36% of respondents voted for medium strategic importance, whilst 34% voted
modest strategic / operational importance. 7% voted for little or no importance, and 1%
actually voted that their board of directors perceived FM to be an ‘unavoidable evil’ (BIFM,
1999).

Level of importance

High strategic importance

Series1
Medium strategic importance

Modest strategic / operational importance

Little or no importance

Unavoidable evil

0% 5% 10%15% 20%25%30%35% 40%

Fig. 1 Perceived level of importance of FM by Boards of Directors (BIFM, 1999)

There has also been very little alignment or integration between construction, facilities
management and / or the business needs of organisations. Traditionally, FM has been seen
very simply as the management of buildings and building services. However, the growing
trend is to view FM as the management of non-core company assets and activities to support
and increase the efficiency of the main (core) business of the organisation. This includes the
management of buildings and building services as well as management of other support
services such as porterage, cleaning, management and maintenance of equipment and
furniture, communications systems etc in order to create a working environment that supports
the primary objectives of the organisation.

1.1 Supply Chain Management in FM

Supply chain has been defined as a “system through which organisations deliver their
products and services to their customers” (Poirier & Reiter, 1996), whilst supply chain
management is “the explicit creation and systematic management of vital knowledge through
the supply chain” (Barrett and Sexton, 1998).
The historical background to supply chain management (SCM) lies in manufacturing, in
particular, logistics management. Supply chain management was seen as the “logical
customer-focused progression of physical distribution and logistics management” (Metz,
1998); and “every effort involved in producing and delivering a final product, from the
supplier’s supplier to the customer’s customer” (Supply Chain Council, 2000)
comprising four basic processes – Plan, Source, Make and Deliver. This view could be
applied to the holistic provision of services, from conception, through procurement,
construction to delivery.
Successful supply chain management initiatives have adopted a holistic approach
combining both strategic and tactical change, and orchestrate effort so the whole
improvement achieved (revenue, costs, and asset utilisation) was greater than the sum of its

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parts, thereby contributing to profitable growth, whilst unsuccessful efforts tended to be
‘functionally defined and narrowly focused’ and lacked ‘sustaining infrastructure’ (Anderson
et al, 2000). Supply chain integration is achieved ‘through aligning strategies, structures and
which innovation is ‘severely limited’ (Barrett & Sexton, 1998). This
highlights the need for the integration of both the construction and FM supply chains to be
managed as one seamless process.

2. INTEGRATE TO INNOVATE (i2i)

The i2i model is a five-level model (fig. 2) and framework (fig. 3) (Barrett & Sexton, 1998)
for evaluating supply chain partners. It operates on the premise that the higher up you go, the
levels of the model, the more strategic the relationship, and the higher the capacity for
innovation. Relationships can operate at different levels simultaneously and the aim is to
achieve a balanced portfolio of relationships.
At level ‘a’ of the model, there is a one-way flow of information, and the level of
innovation is minimal. This level consists of the most basic activities such as materials
requisition. Level ‘b’ knowledge exchange involves a two-way flow of information, but this
remains at ‘enquiry’ level. At level ‘c’ the two-way exchange becomes knowledge
collaboration and involves problem solving. Level ‘d’ innovation chain involves the supply
chain partners working together to innovate their processes, services or products. At level ‘e’
innovation network, innovation is on an industry wide basis, with members of the industry
benefiting from the generic innovation and tailoring it to their needs.

Level of innovation
Level e: through the
Innovation network supply chain

Level d:
Innovation chain

Level c:
Knowledge collaboration

Level b:
Knowledge exchange

Level a:
Information transfer

Fig. 2. i2i model (Barrett & Sexton, 1998)

There are very few examples of this level of integration. The pharmaceutical industry
does collaborate on this level in some ways in the development of new drugs. Closer to home,
the steel construction industry have also collaborated at this level, whilst the Salford based
Centre for Facilities Management (CFM) is a network of organisations collaborating on
innovative FM projects at industry level.
Innovation is defined by Barrett & Sexton (1998) as “the effective generation and
implementation of a new idea which enhances overall organisational performance.” i2i views

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innovation in knowledge management terms across the supply chain(s), and uses a ‘portfolio’
approach, i.e. innovation can be located at different levels depending on the nature of the
relationship, and achieving the right balance should be the key objective in supply chain
relationships, rather than developing all supply chain links to the top level. An example is
that the development of a long-term, strategically important relationship would warrant the
resource investment to develop an innovation network, but a one off purchase would not
(Barrett & Sexton, 1998).
The framework (fig.3) comprises a series of questions flowing from left to right, each
question being dependent on the answer to the previous question. The questions investigate
the supply chain relationships in three areas: Could we work together? Should we work
together? How do we work together?

High strategic importance /

compatibility
Level 5:
Innovation network
• Objectives complimentary

• Culture match

• Information

• Level of Trust
Strategic importance of supply
chain partner Continuum
• Shared Measurement System

Low strategic importance /

compatibility
Level 1:
Information transfer

Q1 - Could we work together? Q2 - Should we work together? Q3 - How do we work together?

Fig. 3. i2i framework (Barrett & Sexton, 1998)

The logic behind this framework is simple. If organisations do not have complimentary
objectives, share trust and measurement systems, or their cultures clash, then could they or
should they work together? The criteria listed under the first question are essential ingredients
in the effective management of supply chain relationships.

3. CASE STUDY

The objectives for the case study were to

• Consider the appropriateness of the i2i Model
• Find appropriate tools for carrying out an i2i assessment
The pilot case study was undertaken at the FM department of a NHS hospital trust in the
North-West of England, which by NHS standards, is a large acute (accident and emergency
and surgical services) trust, and involved the management of new and old ‘facilities’. Its core
business is the provision of clinical services, and its facility management function is
classified under ‘support services’. The facilities function is further sub-divided into estate
services, hotel services and design and projects. The electronics & bio-medical engineering
(EBME) department within the estate services department was nominated for the assessment
exercise, and tis relationships with two units, hotel services (an internal ‘value chain’ partner)
and an external contractor (which provided outsourced porterage services to the hotel services

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department) were assessed. Only senior management staff were involved in the assessment,
as i2i dealt with strategic issues which could only be addressed by policy / decision makers.

3.1 Methodology

A combination of structured and semi-structured interviews and questionnaire were

utilised in carrying out the i2i assessment. The case study investigated the questions 2 and 3
of the i2i framework. Question 2 was analysed with the aid of the interaction type diagnostic
checklist (a questionnaire type document), whilst question 3 was analysed with the i2i
assessment test (through interviews). Question 1 was not analysed in this case study as it
would have involved a detailed study of the organisations and their relationships which was
outside the remit and time scale of the pilot study. However, some related issues such as
information and shared measurement systems were addressed with the parties in the course of
the interviews.
The steps involved in the case study were:
i) Obtaining senior management commitment
ii) Understanding the i2i model
iii) Interviews to identify supply chain parties
iv) Identification of current and desired levels of operation with supply chain parties on the
i2i model
v) Questionnaire survey using the interaction type diagnostic checklist
vi) Analysis of results
The supply chain parties were identified as follows:

Table 1. EBME supply chain

Customers Collaboration for Suppliers Manufacturers
Service Provision
Theatres / ICU Estate Services Company A Company C
Wards Hotel Services Company B Company D
Other departments Working with Gases Company E

Other trusts

The relationship with hotel services was broken down into two; working with and without
gases. This was essential as higher standards were required and stringent health & safety
measures were to be met where gases were employed or being moved. It is important to note
here that the external contractor was not one of the companies listed as a supplier. Only
providers of parts and components were listed under suppliers and it did not include those
that provided services.

4. RESEARCH FINDINGS

The case study focused on the two objectives earlier identified, appropriateness of the model
in FM, and identification of appropriate tools to carry out an assessment and analysis of
results. The findings are as follows:

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4.1 Appropriateness of the i2i model

The model was found to be generic and applicable in the FM industry in terms of identifying
the appropriate ‘ideal’ relationship with supply chain partners. However, it was deemed not
to have added value in the NHS market, as there were a number of barriers and constraints
beyond the control of the FM or Trust organisation, which influenced decision making in this
market.
FM supply chain issues in the NHS market were found to be more relevant in the PFI
sector. Further research is required into the added value of the model in both the ‘public’ PFI
and ‘Corporate PFI’ markets.

4.2 The Assessment Tools

The i2i assessment was developed by the SPICE FM research team in response to the need
for a tool(s) to carry out an i2i assessment and analyse the results. The two methods
employed were the use of interviews and questionnaire survey.

4.2.1 Interviews

This was a quick and graphic way of determining the current and the desired levels of the
supply chain relationships, and its strengths included:
• Highlighted the areas where there was disparity between the current and desired levels in
the relationships, and showed at a glance, areas where a gap analysis was required, and
areas for further improvements.
• Generated discussion on supply chain management issues. It raised a lot of issues, some
of which although previously known were not highlighted. It particularly generated
discussion on what the organisation was doing right and areas that required change or
improvements.
• Highlighted the differences in service delivery objectives between supply chain partners.
It also showed a clear picture of how strategic or important supply chain partners viewed
each other. Where there was disparity in views, it showed that there were no clear
standards or specifications in place for what needed to be done, nor for roles and
responsibilities to get the work done right.
• Prioritised areas for improvement by highlighting those areas where there was the most
disparity.
Its main weaknesses however were that it did not
• Prioritise improvements according to their importance to the organisation
• Show how to go about achieving improvements and moving from one level to the next,
and
• It was subjective and very difficult to quantify

4.2.2 The Interaction Type Diagnostic Checklist

The diagnostic checklist was used to determine the strategic importance of the supply chain
partners, and hence address the second question ‘Should we work together’. The original
checklist was found to be inappropriate with regard to the rating system and was modified by
the project team.

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 The main strength of the checklist was that it prioritised the supply chain by ranking the
organisations in order of strategic importance to the department. It also showed that all the
customer relationships, with the exception of other departments, were strategic. Company D
was shown to have the most strategic relationship with the department. Theatres/ICU and
Other Trusts were the most strategic customers to the department, and Company B was
shown to be more strategic to the department than Company A.
However, the following weaknesses were highlighted:
• Prioritising suppliers was time consuming and generated too much data to make it any
more than an academic exercise at this point in time. In its current state of development, it is
not an efficient procurement decision-making tool.
• Terminology was difficult to understand. On initially going through the interaction type
diagnostic checklist, it was felt that some questions were rather abstract and similar. The
major problem however was in the way the answers were rated. Despite the fact that this was
changed from the abstract to specific terms in the boxes, replies came back that the meaning
of the terms were not very clear. Also the wide variation in some replies, as well as some
obvious answers, which were not picked up, suggests that the terminology still needs to be
addressed.
• As there were only two senior members of staff involved in this study, the wide
differences in replies in certain cases made it difficult to adequately analyse the results of the
assessment.
• Difficulty in translating checklist – The checklist was devised to differentiate between
strategic and operational dimensions and thereby be in a better position to locate them at a
suitable knowledge management level. However although overall results show strategic
relationships, which are a fair reflection of the situation, the method of assessment needs to
be more clearly defined and precise.
• Difficulty in putting checklist in a format to compare with desired levels – The researcher
encountered some difficulty in translating the results from the interaction type diagnostic
checklist into a format to enable comparison with the current and desired levels. It was the
intention of the research team to use the results of the model assessment as the desired level
and the result of the checklist as the required level. More work still needs to be done in this
area.
• It did not assist in prioritising or positioning the organisation’s objectives, and
• Results are inconclusive.

5. CONCLUSIONS

There is a gap for a model to be adopted for use in addressing supply chain management
issues in facilities management. Integrate to Innovate (i2i) is a model for evaluating the
relationships between supply chain partners, and is essentially looking at the ‘soft’ issues
involved in managing a supply chain. These include cultural issues within the organisation,
shared objectives, trust and the strategic importance of relationships.
A Construction Industry Council backed initiative, i2i was initially tested by six industrial
project partners across the supply chain, but had not been extensively tested nor fully
developed for use in industry. i2i is primarily a theoretical model and not viable for
implementation in its present format. As such, it does not tell you what to do next, and who
should do it. There was no methodology for moving up or down levels, or achieving the right
balance of relationships, although the interaction type diagnostic checklist was referred to in
the project. An assessment tool was required to test the issues raised by the framework. The
accuracy of the results should therefore be viewed in that context.

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 The case study identified the supply chain relationships, and the current and desired i2i
levels. It also identified the priority areas for improvement (highest gaps in current versus
desired levels) and the strategic importance of partners. It prioritised areas for improvement
by highlighting those areas where there was the most disparity. It however did not prioritise
according to its importance to the organisation. This finding further highlighted the
requirement for a means of bridging the gap between FM processes and business strategy and
productivity.
The assessment test using the i2i model was a quick way of determining the current and
the desired levels of the supply chain relationships. The disparity between the current and
desired levels of the relationships could then be measured against how strategic the
relationship was, from the results of the diagnostic checklist in order to prioritise areas for
improvement. This however was not followed through to its conclusion, as this area was not
considered a priority with the trust.
The result of the checklist assessment was also slightly different from the result of the
supporting interview. The former identified Company A as the most strategic partner, whilst
the latter identified Company B. This difference could only be partly explained by the
constraints and barriers identified in the organisation.
One of the most important benefits perceived from the assessment was the generation of
discussion on supply chain management issues. It brought to the forefront issues that would
otherwise not be highlighted and a better understanding of how they collaborate with their
suppliers, and their suppliers’ impact on their service delivery standards. These issues are
some of the benefits to be derived from reengineering the supply chain (Hammer, 1998).
Facilities management is a service focused, predominantly customer demand-led industry. A
faster response time to changing customer demands is therefore a real issue, as is bringing the
service element into focus.
Suppliers’ impact on service delivery standards cannot be overemphasized. Oftentimes
delays and problems are caused not within the service organisation but within the suppliers’
organisations. For example, one of the issues highlighted in the case study was that of
medical equipment. In some cases there was only one or a handful of manufacturers in the
UK, and delays of up to nine months have been registered in parts delivery, where there have
been breakdowns. This ultimately affected both the trust’s facilities and medical services’
delivery standards as that piece of equipment was taken out of commission for almost a year
for repairs. This highlights a wider issue which supply chain management is seeking to
address, i.e. taking a holistic view to improvement initiatives, as suppliers’ performance
directly or indirectly affects the business performance and productivity of the client
organisation.
Other issues identified from the study were that the i2i model did not give guidelines on
implementation. This is an area for future research, and there is a need to address the issue of
how to move up or down levels to attain the right balance in a supply chain relationship. The
link between procurement strategies and business objectives is also obscure. It does not state
whether all or a number of criteria have to be met in the first question in the framework in
order to move on to the next question, neither does it give a comprehensive list of criteria.
Assessments were subjective and not a very good measure for benchmarking. There were
also a number of constraints, which made the assessment inappropriate in this case study.
Firstly, there were in-built government regulations and directives, which were a barrier to
change. Another was the organisational structure of the organisation, which meant that before
any major improvements could be carried out, some reengineering of the structure of the
organisation and its business processes was required. This was outside the remit of the study.
Lastly, political decisions and media hype tended to prioritise the business areas in the NHS.

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 i2i sees integration and knowledge management across the whole spectrum of the supply
chain as crucial to its effectiveness, and to increasing the capacity for innovation across the
supply chain. However, integration if not properly managed can inhibit the natural
development of innovation. The Honda / Rover alliance which ended in 1994 with the
acquisition of Rover by BMW, highlighted the fact that reluctance and nervousness to pass
on information from both sides, unless within the boundaries of the project, inhibited the
natural development of informal communication networks and the discovery of unplanned for
learning and knowledge acquisition (Perks, 2000). Empirical research in collaborative New
Product Development (NPD) also point to the danger of managerial effort being focused on
making the relationship work at the expense of market focus (Perks, 2000); (Littler &
Leverick, 1995); (Piercy & Cravens, 1995).
The case study highlighted this danger as the areas identified as priority areas for
improvement were not the business priority areas. The major issue with the use of the model
however was the business value of carrying out an i2i evaluation test. As it stands it requires
the commitment of a high level of resources, which is not practical. The value added has not
been quantified, and as such cannot be justified. Currently, therefore it fails to meet the gap
for an FM toolkit for supply chain management. It however has the potential to be further
developed as a supply chain process improvement tool, and also a tool for making supplier
procurement decisions, including rationalisation or consolidation of the supply chain.

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