Framework of Manufacturer and Supplier Relationship in the Manufactured Housing Industry Jae G. Jeong 1 ; Makarand Hastak, M.ASCE 2 ; Matt Syal, M.ASCE 3 ; and Taehoon Hong, A.M.ASCE 4 Abstract: In an increasingly competitive marketplace, purchasing and supplier relationships are becoming a strategic function and a key factor for supply chain management in the manufactured housing (MH) industry. However, little research has been conducted in the field of supply chain management focusing on the manufactured housing industry. In this paper, key supply chain relationships and the critical issues in terms of supplier relationship have been identified, and a new framework of a supplier relationship management (SRM) called the manufacturer-supplier relationship optimization model (MSROM) has been developed. Specifically, the MSROM framework identified a variable supplier lead time, an inconsistent safety stock level, and a poor supplier evaluation process as the key constraints of the efficient supply chain performance. As a result, taking into account the supplier’ s performance, a theoretical optimal level of safety stock was in- vestigated and a new algorithm that adjusts lead time forecast with consideration of related risk factors and new supplier performance evalu- ation method has been developed. The proposed strategic MSROM frameworks and the specific optimization models together contribute to achieve a significant improvement in supply chain performance for the MH industry. DOI: 10.1061/(ASCE)ME.1943-5479.0000164. © 2013 American Society of Civil Engineers. CE Database subject headings: Manufactured homes; Optimization; Models; Planning; Housing; Supply chain management. Author keywords: Manufactured home; Optimization; Models; Planning; Linear function; Housing. Introduction Because material availability in the factory is directly related to the production service level, the material management; the planning, storing, moving, and accounting for inventory, is the one of most important aspects of supply chain management. The goal of material management is to increase the financial return on invested material inventory while simultaneously increasing production ser- vice levels. Frazelle (2002) found five initiatives that lead to in- creased return on inventory and at the same time, increased inventory availability as follows: (1) improved forecast accuracy, (2) reduced lead times in each supply chain link, (3) lower purchase order/setup costs, (4) improved inventory visibility, and (5) lower inventory carrying costs. These five initiatives are the foundation of any progress in supply chain management and also indicate the im- portant role of the supplier relationship management. In other words, effective material management not only includes the flow of materials within the factory, but also should focus on the supplier relationship for supporting the streamlined material requirements within the factory. However, from the point of view of supply chain management, little research has been conducted in the field of supply chain man- agement focusing on the manufactured housing industry. Barriga (2003) analyzed the material flow and management in the MH facilities and proposed new MRP support system and Jeong (2003) analyzed the characteristics of the current supply chain in the manufactured housing industry at the macro level and identified several significant process bottlenecks with regard to process time from order to installation of a manufactured home. It was deter- mined that streamlining the information flow plays an important role in the overall performance of the supply chain parties, and broad adoption of advanced information technologies by the manu- factured housing industry was recommended (Jeong 2003). In particular, supplier relationships also need to be developed as aggressively and strategically as inventory management within the factory at the same time. The reliability, predictability, and value added in the links with suppliers serve as the foundation for the ability to manage the inventories, which contribute to cost reduc- tion in the production of a manufactured housing. Therefore, the most effective material management is seamlessly integrated both internally within the organization and externally with the suppliers. Therefore, this paper describes the framework of an industry- specific supplier relationship management solution for the MH industry and suggests a new paradigm for the MH material management planning. Specially, the main objectives of this paper are to (1) identify key supply chain relationships and critical issues in terms of supplier relationship in the MH industry and (2) develop an MH industry-specific framework of supplier relationship man- agement which includes a material requirement planning (MRP) supporting system with optimal lead-time forecast and supplier performance evaluation. The proposed manufacturer-supplier rela- tionship optimization model (MSROM) was developed to harmo- nize supplier relationship management (SRM) activities with internal material management in the MH facility. This harmony was achieved by streaming sourcing and procurement process 1 Executive Director, Shinsung Engineering Co. Ltd., Seoul, Korea. E-mail: jgjeong@sseng.co.kr 2 Professor and Head, Division of Construction Engineering and Management, Purdue Univ., West Lafayette, IN 47907-2051. E-mail: hastak@ecn.purdue.edu 3 Professor and Graduate Director of Construction Management Program, School of Planning, Design and Construction, Michigan State Univ., East Lansing, MI 48824. E-mail: syalm@egr.msu.edu 4 Associate Professor, Dept. of Architectural Engineering, Yonsei Univ., Seoul, Korea (corresponding author). E-mail: hong7@yonsei.ac.kr Note. This manuscript was submitted on April 12, 2011; approved on December 6, 2012; published online on December 10, 2012. Discussion period open until March 1, 2014; separate discussions must be submitted for individual papers. This paper is part of the Journal of Management in Engineering, Vol. 29, No. 4, October 1, 2013. © ASCE, ISSN 0742-597X/ 2013/4-369-381/$25.00. JOURNAL OF MANAGEMENT IN ENGINEERING © ASCE / OCTOBER 2013 / 369 J. Manage. Eng. 2013.29:369-381. 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