Even with the known concerns, contractors might have little or no process or management system for material procurement. This can be problematic. As a result, these firms incur additional but avoidable costs. Some of these costs are due to:
- Paying a premium price for materials
- Excess ordering of material
- Significant delivery times for materials
- Lack of tracking cost fluctuations for materials
Let's review common process aspects
- Consider procurement at the design stage
- Looking beyond the purchase price
- Project-specific pricing
- Staffing the procurement function
- Choosing the right software
Enjoy these tips for helping contractors improve material procurement which can save time and money on every project.
1. Consider procurement at the design stage
Having great working relationships with suppliers is an essential requirement of any contractor, no matter your industry segment. Trust, fairness, mutual benefit, and honesty are integral for building solid partnerships when selecting suppliers at the design stage. Reliability is another characteristic to consider; however, how do you track the performance of each supplier performance on every project? It would be best if you had the right tools to track each supplier's history, pricing, and reliability.
Based on the situation and type of project, it might be beneficial to change the specification to mitigate potential risks with unknown suppliers, thus reducing costs in the process.
2. Look beyond the purchase price for materials
Successful material procurement is not just about securing the lowest price, but in fact, by getting the correct material spec at the right rate from the right supplier. Focusing on total cost shifts the unit cost to the entire cost of acquired materials or services. What this means is it's better to understand and consider all costs including, but not limited to reliability, availability, transportation, storage, and disposable expenses. Looking beyond the price for materials and make decisions on total costs is an exercise worth researching. Read these Construction materials industry statistics & facts.
3. Get agreement early with suppliers
Construction contractors (especially SMBs) relying on day-to-day ordering processes sometimes miss opportunities for procuring better rates on materials. At project starts, rates can be specific by required volumes and vary by amount, grouping, and supplier. Applying an agreed rate on agreed volumes doesn't necessarily mean all the materials are delivered at once but can retain costs. In this case and all cases, incoming and outgoing invoices need to be monitored to ensure the correct rates are applied throughout the project.
4. Plan your procurement staffing responsibilities
The range of possible solutions for a successful procurement process are many, but most current processes are antiquated, relying on emails, text messages, and using tracking spreadsheets. In addition, Procurement managers often visit jobsites to confirm materials delivered. Depending on the contractor's size, some will choose to employ for this role, and others will spread the responsibility—either way, the proper structure needs to be in place at the company level and be followed by each.
An example of rules at the company level could involve:
- Establishing project-specific material volume-discounts
- Management approving all orders
- For purchases over $1,000, 3 supplier quotes are required
Strategic thinking and a value-based approach to material procurement empower purchasing managers to unlock the potential savings on every project; however, due to the current manual and archaic workflows, construction firms of all sizes need the right technology - easy to set up, very little training, and no IT resources to get the software up and running.
5. Select the right technology for you
Contractors cannot afford to maintain traditional ways while the construction industry makes dramatic efforts to improve productivity with purpose-built technology.
The right technology connects the field, office, and suppliers to digitize material procurement workflows replacing manual activities to improve the way contractors order, price, manage, and track materials in one platform accessed through desktop and apps in the field.
The introduction of digital purchasing and material management software and mobile apps offers easy-to-use tech that helps contractors improve materials management and increases profits without requiring IT resources or a task force to move forward. The software is available today, and you can get started today.
