Supply chain distribution is one of the biggest challenges companies face, especially in light of the COVID-19 pandemic. Procurement in construction can be difficult. Procurement managers deal with complex supply chains, high-quality standards with a limited budget, and regulatory guideline compliance. Without effective construction procurement best practices, your procurement processes can be affected by delays, customer dissatisfaction, and issues in quality assurance. There are many steps to the procurement process to consider:
- Identifying internal needs
- Researching and selecting suppliers
- Creating and approving a purchase order
- Negotiating and sending a purchase order to the supplier
- Receiving goods
- Paying the invoice
- Reviewing lessons learned
- Maintaining records
We’ve laid out the top five construction procurement best practices to keep your workflow running smoothly.
1. Invest in Automated and Cloud-Based Tools
Digital solutions reduce the tedious operational components of procurement, freeing up team members to focus on strategy. As technology becomes more and more integrated into our daily lives, having automated and cloud-based tools is essential. In fact, over 50 percent of chief procurement officers agree that underutilizing automation technologies is a huge project management risk.
Digital procurement solutions can help with things like supplier management, purchase requests, invoice approval, spend analytics, and more. Automated software removes the need for manual processing of things like data entry, record updates, and document hand-offs. Not only does this speed up processing, but it eliminates human error and boosts cost savings.
2. Select an Appropriate Strategy
Use compliance sheets to compare the project’s specifications, requirements, and acceptance criteria to the technical specifications. Pay special attention to the components, standards, system interactions, and quality measurements. Identify and consider the features or benefits that are not needed to reduce the total cost.
Once you understand the technical specifications, it’s time to select the appropriate procurement strategy that falls within the project’s constraints. There’s no perfect procurement structure—each has different benefits and pitfalls—just select what works best for your team!
When choosing a plan, consider critical factors like time restraints, risks, budget, and quality. Here are some types of construction procurement to consider:
- Traditional Contract: The contractor works under a lump sum contract and is responsible for carrying out the project requirements.
- Management Contract: Under the main contractor, different contractors undertake procurement work with a fixed fee in the form of a percentage.
- Construction Management: A contract that is similar to a management contract, however, the client appoints a management team to oversee the procurement process.
3. Predict the Cost Breakdown
A solid cost breakdown structure (CBS) of the materials, products, and services will help you in the negotiation phase. You can identify the CBS using historical data, expert judgment, and other forms of research. With a cost breakdown, you will be set up to have spend transparency throughout the entire project.
4. Ensure Spend Transparency
Spend transparency is key to ensuring accountability and staying under the budget and can be achieved in a few easy steps:
- Define procurement policies
- Monitor and document the procurement process
- Identify and manage a list of approved suppliers
- Conduct frequent audits
5. Find the Right Partners
Like with any relationship, finding the right suppliers for your project is essential. Not only do you have to select someone who can get the job done, but you have to consider quality control and compliance with mandatory certifications. With the right supplier information management system, you can input all the information about your standards and constraints so suppliers can self-select.
After you find the perfect partners, it’s important to build a strong relationship with your suppliers. Almost fifty percent of organizations believe that strengthening supplier relationships is the best way to reduce supply chain disruptions. This is because with a strong relationship typically comes clear communication and transparency. The supplier will let you know of issues and change requests ahead of time to reduce bottleneck issues.
If you’re looking for a great partner, Trekker Group sells, rents, and services construction equipment, parts and tools, building materials, and formwork and shoring systems. Learn more about our services at www.trekkergroup.com.