Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.
In spite of the past few rough economic years, many businesses have continued to grow building new locations, warehouses and divisions while be able to upgrade, remodel and rebrand their businesses to match pace with the 21st century. As part of this growth, companies have contracted with General Contractors all over North America to help with these remodels and new builds without giving much thought to a big expense that results from these activities; fixtures and supplies.
General contractors have established relationships and pricing for these materials which they then pass along to their customers with a markup. In small projects this can be worth the extra money paid because the General Contractor has taken the time to leverage their spend for better pricing and they remain responsible for following up on warranty issues should they arise. When the projects are much larger and especially if they are more frequent, this model begins to benefit the customer less and less. Today’s blog will look at some of the reasons companies in this latter situation should look a sourcing the materials and fixtures on their own.
No visibility to price – As is often the case with construction projects, visibility into every aspect of a job is uncommon. In fact, receiving a $50,000 invoice with only a few line items is more normal than not. The problem with this approach is that a customer has no idea how they are truly paying for the fixtures, material and equipment being used. Without this detail the customer cannot base, historically, whether they are getting the best value for their dollar from their contractor. Customers with a large amount of spend have the capability to make their own deals with the manufacturers and then pass that pricing back to the general contractor along with an agreed upon markup for handling the inventory as needed. Another option is to work with your contractor on a combined sourcing project to get overall lower prices that the general contractor can pass to you and leverage in their own way with their other customers.
Changes in quality – Another issue when the general contractor is in charge of procuring the materials and fixtures for a project is that quality can be compromised at time in order to improve margins. When the customer makes their own deals according to their own specifications, they can use online sourcing tools like catalogs for contractors to use that will ensure the correct items are being ordered at the price they have already negotiated. This ensures that both price and quality will remain locked in place.
Central Management of Warranties – Many customers use multiple general contractors for their projects especially of those projects are spread out geographically. Because the general contractors manage the warranty issues for the fixtures and materials they purchase, it can be difficult to know exactly who to contact when certain issues arise covered by warranty. When customers bring the procurement and management of those manufacturer relationships in-house they can have a central point of management when issues arise that can be integrated into company Intranets for remote locations to use whenever issues arise. Employing the services of Repair and Maintenance managed service companies can also help manage this process.
Exploring the procurement of construction materials may not be something everyone company wants to do, but if the spend is large it should be one that is at least investigated. For more information on how SafeSourcing can assist your team with this process or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.