We’ve all been there. Instructions were clearly spelled out, reminders were sent several times, yet the vendor is still late in delivering their goods. Whether it’s rebar, windows, electrical transformers, or simply paper, not having the material delivered to a project on time can cause serious delays and, in some cases, bring the project to a complete standstill.
This is why managing vendors is such an important part of a contractor's operations. When managing a variety of different vendors, it’s essential to collect and track the right information so that your organization can determine if things are working effectively or if you need to consider a replacement.
Having a project stall because of a vendor is usually avoidable and can be a sign of poor vendor management. By following the tips below you can increase your chances and start making smarter decisions, especially when it comes to who you decide to write the purchase orders to.
Need help managing project delays? We wrote a series of articles to help, check them out here!
1. Deploy a Vendor Onboarding Process
Every time a new vendor begins working with your company, it is crucial that you let them know what your expectations are. Simply thinking they should know already, or that it is common knowledge, won’t get you anywhere and is often the leading cause of you slipping down their priority list.
The best way to get this accomplished is through an onboarding process which includes the following:
Access to your system: If you currently use a project management system, or some other type of platform, it is key to get them setup on there with the correct permissions so that communications are streamlined.
Contacts: Ensure that the vendor has a complete list of your primary contacts for specific business operations such as where invoices need to be sent, who to talk to for price negotiations, and perhaps site contact information.
Communications: If there are any specific instructions or communications methods required for your business or project, it is critical that you provide these details to your vendor (email is preferred because it is traceable). Let them know who is the site contact, who is the purchaser, who is the PM, etc.
Spell out expectations for everything: If you’re accustomed to a specific method of invoicing, or a specific way of receiving shop drawings or material, it is important to let the vendor know ahead of time so that they can ensure they are covered and able to provide the services you requested. It is best to do this before even giving a PO because it allows everyone to price in extra overhead if required, giving them no excuse not to provide the service you had requested.
Security access: If your project or site requires a list of people who will need access, it’s important to let your vendor know so that they can provide a list of their employees who will be visiting your site. This will ensure that there is no hiccup when it comes to delivering goods to your project.
2. Use a Scorecard to Evaluate Vendor Performance
Projects can last for years and your vendor relationships can last even longer. If you can take the time to evaluate your project periodically, it is equally as important to do the same with your vendors. A vendor scorecard is a tool used to identify problems early and ensure that you are consistently monitoring critical components of your relationships.
Some of the most important qualities to evaluate are as follows:
Operations: Evaluating a vendor's operational performance involves rating them based on their timeliness, quality of materials, and ability to follow specific instructions.
Customer service: Asking your staff to rate vendors is really powerful as they can let you know of critical information you would otherwise never see. For example, if they often find themselves waiting around excessively for materials that should be ready for pickup, this would be costing you at the rate of your workers hourly salary.
Safety: Safety is always the #1 priority, so if your vendor isn’t following your safety policies, or is found placing people in danger when delivering goods, this shouldn’t be taken lightly. Always grade vendors on safety and ask your site crews if they see any issues with delivery personnel.
Flexibility and value added services: Projects never go as planned and plans can change very quickly. This is why evaluating vendors based on their flexibility and ability to help you solve problems is so important. If you find that your vendor is constantly looking to put in a change request for an order, instead of working with you to find a cost effective solution, it’s time to look elsewhere.
3. Take Advantage of Vendor Data and Your Accounting Software
If you’re not tracking this already, you’ll be surprised to see what you actually pay a vendor in a given year. It’s important to track this information because you can then use it to negotiate for better pricing in the future. Vendors have special discounts that they can offer based on the volume you purchase from them, so it’s important to know this information for future negotiations.
4. Keep a Record of Vendor Failures and Successes
Vendor failures unfortunately happen all the time in construction. The impact may be massive, or there may be none at all. Regardless, each and every moment of failure, or even success, should be recorded as part of a standard process throughout your organization.
Combining this with the scorecard system will allow you to not only rank vendors by performance, but also by their unique value added services or flaws.
For a deep dive into the role of suppliers in construction innovation, check out our past article here.
In summary, vendor management is all about managing and mitigating risks. Most contractors know firsthand that a vendor can be critical in being able to deliver a project on time and within budget. Therefore, it is important that you start making this a part of your normal practice if you haven’t done so already.
We all have those projects where you want to put your best foot forward, and try to do anything possible to impress a client. Knowing your vendors and ensuring you have the right one for the job can be a make or break factor, so once again don’t take this lightly. A helpful tool that can be used for this is CRM-type software. There are a ton of them out there, and some are even construction-specific like Onraccr.