The choice of the procurement process is critical to the success of a construction project. It is also a major deciding factor to the overall success of the company. Procurement in construction is never easy. Thus, it always requires a series of upgrades. And working with a complex supply chain, you have to source out high-quality products and items with a particular budget and concurrently comply with regulatory guidelines.
Read this blog to learn the most common procurement issues in construction and the routes to strategic procurement that can help you improve your overall procurement process.
What is Procurement in Construction?
In construction, procurement is the acquisition of construction equipment, materials, and services needed to successfully handle and operate a construction business and complete a particular project. This refers to the services and goods required to complete a building from start to finish successfully.
Procurement needs to be recognized and approached in a strategic way for you to maximize the efficiency of each project. Your construction firm has to take a carefully planned strategy to procurement by simply purchasing needed supplies most cost-effectively.
You also have to be aware that the construction field has undergone a widespread change in this era. Despite methods and materials have evolved and legal requirements are updated, age-old issues persist within the procurement system. Here are some of the most pressing challenges in the construction procurement that you may encounter:
- Miscommunication – Your client failed to communicate their expectations. On the other hand, you implement a decentralized approach when managing the supply chain. As a result, it leads to under-performing service, project delays, or wrong ordered materials. You have to ensure your firm has a comprehensive and centralized procurement solution to reduce consternation and confusion.
- Purchasing Predicaments – Knowing the industry you belong in, you and your team may have the occasional need for a one-time purchase at the nearest supplier. Without a well-developed supply chain for inventory management in the construction and purchasing process, your people can be overspending and double-buying, creating more and more expenses via replacement fees and lost time.
- Lack of Flexibility – To a certain tolerance for complexity, your construction firm needs a measure of adaptability. Client requirements evolved. Codes change. Weather events may create costly project delays, Labor strikes and shortages that cripple even your best-laid plans.
Good that there is a web-based inventory software that can help you roll with the punches the procurement gives. You can use the project data this software solution has stored to collaborate effectively with your clients and suppliers, making things easier for all parties involved.
Routes to Strategic Procurement
There are many different routes your construction company can take when it comes to strategic construction procurement. When choosing a route, the long-term objectives should be carefully considered. Speed, costs, risks and opportunities, quality, budget and financing, and project constraints are some of the key factors influencing your procurement process.
But the nine-point plan cited below is one effective way towards strategic procurement that can eventually improve your overall procurement process.
1. Address immediately your supply chain vulnerability
There is a significant disconnection between the supply chain and the business itself. And if the same thing happens within your firm, you have to acknowledge the issue and solve it immediately. Another issue is becoming prevalent today – the subcontractor structure used in construction projects often results in limited supply chain visibility.
If this is the case, more transparency and an in-depth review, rebalance of risks are required to implement. Hence, always do a proper mapping of your supply chain to understand every area of vulnerability fully. There must also be a shift for a self-delivery method where you can provide services without third parties so that there’s better visibility and a closer relationship with your subs.
2. Utilize Demand Planning
Without a more precise picture from across the sector, many suppliers can be unsure of how much demand they expect to see while moving forward. You and your team need to learn to collaborate with other third parties in a non-competitive way to understand the market fully. There should also be proper planning and a detailed construction inventory list to ensure the supply remains stable while supply allocation is minimized.
3. Use analytical and negotiation skills
As a professional who handles the procurement process, juggling between planning and executing construction projects, dealing with multiple suppliers, and negotiating the best transactions and deals, says that you should have some excellent analytical skills.
- Understanding quantitative data is critical – Knowing the quantitative data helps make the best financial decision for the company. The procurement process needs to walk on a stable and fine line as far as negotiation is concerned. An effective procurement process integrated with project management software can improve your organization’s bottom line and increase profitability and efficiency.
- Strategic acquisition skills– It will add significant value to your company as a whole. While making changes can seem daunting at first, yet in the long run, they prove to be advantageous in many ways.
4. Standardization allows cost reduction and flexibility
Suppliers and specifications cause inefficiencies throughout the supply chain and introduce more and more layers of risks. That is why it is highly recommended to focus more on flexibility when you’re sourcing from your suppliers. It brings total costs down and even drives up quality standards.
Standardization has to be balanced with driving innovation, specifically in terms of striving for more sustainable solutions.
5. Make the proposal and processes a two-way street
Unfortunately, too many decisions in the procurement processes are made with too little info on both ends. In most cases, it was your company’s lack of knowledge about the marketplace, specifically the consultants and suppliers’ technical capability. The operations are a two-way street. Take note of that while having a solid sense of the issues at the same time.
Request for information, approval, and clarification of commercial and technical changes to the procurement process can be made and evaluated if both sides know each other’s strengths, weaknesses, and challenges.
6. Procurement needs to evolve
Crises in the industry often expose weaknesses in the system. However, on the other side, it provides an ideal opportunity to review what areas need to improve. In this aspect, you have to emphasize the particular function that needs to develop and learn more about it. Doing so will have all your construction projects continue on time and within the budget.
7. Find the suitable suppliers
The quality of your suppliers is essential. However, the pool of suppliers you work with can be massive due to different project sizes and when you have multiple site locations. It only means that it can be challenging to deal with in terms of quality control.
But with the right software solution, like the best-of-breed inventory management software, you can put everyone into one place, allowing your suppliers to self-serve everything. Instead of spending time to manage both your team and suppliers, you can ensure that all of them can access critical data thru the software tool.
8. Strategic sourcing
You and your team should have the knowledge and experience to source the best and high-quality materials, products, etc. Due to the amount of material and labor involved in your projects, improving your construction procurement is necessary.
With a sourcing strategy, you can easily cut evaluation time and reduce cycle time by up to 85%, allowing you to align your strategic sourcing activities with your project schedule. And huge thanks to the transparent.
9. Resolve difficult procurement issues fast
Successful procurements, specifically the ones involving new technologies, often encounter underestimated or unexpected problems. Such issues have to be addressed fast and with minimal second-guessing by the management on both sides.
Accordingly, the representatives of both sides, whether you or your crew, should be designated to solve the occurring issues. In many cases, it was the project manager who was responsible for doing all of these things. They must have the ability to act on their company’s behalf immediately and obtain immediate access to those who.
Use Online Inventory Software to Strengthen Procurement Process
Technology creates wonders! Hence, why not make the most of it since it can help you save tons of time and become more and more efficient. One way of utilizing technology to improve your procurement process further is by integrating an inventory management system. Let’s admit it. You are working with different suppliers and overseeing the company’s stocks at the same time. When you deploy this specialized software tool, everyone is connected to a central platform where all information is accessible anytime and anywhere.
Pro Crew Schedule is the go-to inventory management tool and project management software for construction professionals like you. It includes a set of powerful features helpful in keeping tabs on your people, inventory, resources, etc.
Get started with a 30-day FREE trial and see how Pro Crew Schedule helps you improve the way you track your inventory, procurement and support your management capabilities.
Ensuring efficiency in your procurement process has a positive chain reaction to your company. It is crucial to optimize the whole process to make significant value to your business. Your company should have a high-class procurement process far beyond the usual traditional belief – that the primary role of the procurement process is to acquire services and goods in response to internal needs.