When managing construction, it is crucial to have good relationships with your stakeholders – clients, subcontractors, consultants, suppliers, and other trade partners. Construction projects are made up of a million moving parts, and your materials and supplies are critical to their completion. As a result, it is essential to have good relationships with suppliers. You can be surer that your suppliers can deliver your requirements on time if you manage them, understand how they work, and measure their performance. Most project managers tend to overlook supplier management. However, managing and building strong relationships with them can ensure a smooth and seamless project delivery.
If you want economic growth or to procure the best materials for your projects, you must work with high-quality and professional suppliers. Because of this, construction companies need to find suppliers that fit well with their business goals and help them build good relationships. However, this is easier said than done, as finding suitable suppliers for your construction business might be more complicated than it sounds. It involves a comprehensive process that takes time, patience, and checking references. Still, the results are worth it. A good relationship with a supplier can make or break a project’s ability to finish on time and within budget.
In this article, let us dive into why it is essential to have good relationships with your suppliers. Then, let us talk about a few simple tips on how you can improve your strategies in managing contractor-supplier relationships.
What Makes a Contractor Different from A Supplier?
First, let us talk about what differentiates a contractor from a supplier.
Who are Contractors?
Contractors are a group of people working as independent businesses at a job site. They offer specialized services, such as general contracting or construction management. They usually have several subcontractors and suppliers to help them build the works they have been hired for.
Some examples of contractors are:
- General Contractors
- Concreting Contractors
- Mechanical, Electrical, Plumbing, and Fire Protection (MEPF) Contractors
- Equipment Installers
- Service Agencies
Who are Suppliers?
Suppliers, however, sell goods and materials rather than services. They give goods, materials, equipment, and other physical supplies to the client, the contractor, or subcontractors. The quality of your suppliers can affect the quality of your project. As a result, it is essential to thoroughly evaluate your suppliers based on the risks they might bring to your supply chain, sustainability, and reputation.
In construction, suppliers may include the following:
- Concrete, Gravel, and Sand Suppliers
- Reinforcing Steel Companies
- Paint, Tiles, or Wood Shops
- IT and Software Companies
What is a Contractor-Supplier Relationship?
A contractor and supplier relationship should be based on mutual trust and understanding, and it is about finding a balance between what the supplier wants and your business needs. Yes, you can get lower prices if you have partnerships with suppliers; however, this is more than just getting discounts.
One example of managing supplier relationships includes negotiating with your supplier on a flexible payment plan that considers how the company makes money. Or you can agree on delivery times and the quality of the products to keep the output the same. A supplier with whom you work closely can also inform you about upcoming material shortages, changes to rules, or price spikes that could affect your business. Early warnings give you enough time to prepare for any possible roadblocks.
Benefits of a Good Contractor-Supplier Relationship
General contractors work with many suppliers today, and the supply chains are getting more complicated. Luckily, with today’s digital advancements, many construction management software add-ons focus on managing supply chains, inventory, and resources. When utilized properly, you can create smoother transactions, foster smooth communication, and close collaboration with your suppliers.
In this section, let us look at several benefits associated with supplier relationship management.
Long-Term Cost Savings
Suppliers are a vital part of making sure projects stay on budget. Contractors can save money on materials by buying them bulk from suppliers they know and trust. Having a good relationship with your suppliers is a great way to save money in the long run, but you will need to ensure you have enough projects to handle the influx of stock and inventory. This is why supplier management and inventory management go hand-in-hand. An inventory management software can help you streamline and optimize your processes efficiently and effectively.
Timely Completion of Project Milestones
If you have suitable suppliers, your projects can stay on track. Your activities and tasks will progress as planned since you have all the resources required. Buying in bulk helps ensure you have all the building materials you need.
Suppliers are more likely to fill orders when they have a relationship with the buyer, and this is because they want the builder to hire them again. Trust is one of the main things that sets a long-term relationship with a supplier apart from a new or untested one. When a relationship between a builder and a supplier is taken care of, both sides are more likely to trust each other. As a result, plans and timelines are more accurate, and there are fewer delays.
Better Predictions and Forecasts
Some contractors are hesitant to talk about what they think their business needs will be in the future. You can make better procurement and inventory plans if you plan for demand early on and share those plans with suppliers.
It can be risky to base your supplier strategy on more than one source, and you might be spread too thin and will need to be able to keep track of all your deliveries and orders. If the supply chain is broken, it is more likely that deliveries will not happen at all.
On the other hand, putting all your eggs in one basket might seem like the easiest way to build a strong relationship with a supplier, but it can make you dependent on that one supplier. If they deliver on time, you will have a choice but to wait.
The best way is to build a small network of suppliers instead. You can build strong relationships by keeping the number of suppliers you work with small. You still have the freedom to choose between different rebate programs, prices, and inventory and get the best deals. If something goes wrong, you already have suppliers who have been checked out and can help you stay on track.
Improved Communication and Collaboration
If you have a smaller group of suppliers you trust, your team will have less work. Luckily, there can be many ways to get in touch with a single supplier. Each has a different sales representative, ordering system, billing process, and people to contact for help after the sale. With few carefully chosen suppliers, you have more freedom to build genuine relationships with fewer people.
Better Customer Relationships
Suppliers can directly affect client satisfaction and project delivery. Suppliers can help contractors create an accurate schedule to manage buyer expectations. Construction scheduling software can help you bridge the gap between the contractor and supplier and get a clear overview of how the project is expected to progress. If a supplier wants to work with your business, they will work with you to fix these problems as they come up. That way, it has less of an effect on how the customer feels.
Five Ways to Improve the Way You Manage Supplier Relationships
Over time, relationships should grow and get stronger. A strong relationship with your supplier will help you deal with disagreements and other problems, creating smooth transactions and seamless project delivery. It will also make it easier to negotiate and create a better deal.
In this section, let us look at ways you can improve your relationships with suppliers.
Fostering Trust Between the Contractor and Supplier
Depending on their needs, suppliers can help contractors find the best materials and deals. These dependencies or services help the business reach its goals and build trust simultaneously. Since trust helps your business do well and grow when things are going well, contractors should focus on building trust with all their trade partners.
Provide Honest Feedback
Keeping good relationships with your vendors takes honest, consistent work where you can share feedback, own up to mistakes, and work toward long-term goals that will help both of you. Construction project management software can provide an excellent channel for everyone to keep updated with the same information and any changes in the plans. You can also avoid mistakes if you always ask your vendors or suppliers for their thoughts on the material requests.
Partner With People Who Share Your Values
Contractors in the building industry need to form partnerships based on strong ethics and values. This helps both sides deal with each other more responsibly and builds relationships that can be helpful when things are not going well.
Clear Communication and Close Collaboration
As with any business relationship, you keep the lines of communication open with your suppliers, and honesty is essential. This will also maintain communication from breaking down with your suppliers. Regular contact will also help you learn how your supplier works and how they talk to each other and do business.
Leverage Construction Technology
Using technology for supplier relationship management helps with many parts of good supplier management. Whether a construction management software add-on or a cloud-based software, this technology can help you clarify your supplier relationships and create a record of what’s been done to help avoid any misunderstandings. It will also save you a lot of time and money on paperwork, making the process go much more quickly and accurately.