It is no secret that big companies benefit from their buying power. Through the collective purchase of thousands of products on a national scale, such firms are able to negotiate better pricing and even better delivery in some cases. However, as one company has shown, regardless of your size, you can save money by partnering with the providers of your products and services. By taking the time to research costs and create a long-term partnership with your trusted vendors, you can save money and deliver value that benefits your entire operation.
Initial steps in a program
About seven years ago, Structural Group, a $210 million specialty contracting firm that delivers services, systems, and technologies to build, repair, protect, strengthen, and reinforce concrete, steel, masonry, timber, and soils, felt the same pressure to remain competitive as did many other construction firms. So the firm began looking for ways to cut costs in order to get the most from their equipment.
“We originally introduced the concept of a resource management team at the corporate level to look for the best ways to purchase equipment,” said Terry Daniel, training director at Structural Group. “With 20 operating centers across the country, we recognized that we needed to implement a resource management program in all of the branches.”
To begin the program, Structural Group identified a leader in each branch office who was interested in the program and could serve as a facilitator for other branch personnel. A key component to the success of the program was the creation of a tracking system for the resource management leader to enter new information. A simple system was created using Microsoft Excel spreadsheets to automatically track when service is needed for new equipment. This system ensures that key service appointments are not missed and helps to increase the usable life of the equipment through proper maintenance. Further, the system was used to gain a perspective of the historical usage of materials and products to aid replacement decisions.
“While this program may be simplistic, it tracks something that often gets lost in the day-to-day operations of running a construction firm,” said Daniel. “This is a cost-effective system that could return big dividends over the life of your equipment, no matter what the size of your firm.”
Construction is a capital-intensive business that requires the purchase or rental of not only large equipment, but also many miscellaneous supply items such as safety glasses, work gloves, earplugs, and a variety of other products. To determine how many of these items were needed, Structural Group monitored several jobsites to determine anticipated usage. While the initial cost for these items may seem low, it can add up over the course of a year.
“Before implementing our resource management program, we were buying these smaller items one job at a time,” said Daniel. “We quickly realized the benefit of purchasing these items in bulk. This became one of the first initiatives in our program and showed immediate cost savings during the year. Further, it helped with budgeting to anticipate our usage of these items.”
Partnering with vendors
Beyond looking for opportunities to purchase necessary supplies in bulk, it's important to look for ways to collaborate with equipment vendors. Most suppliers have a national accounts program, and they will work with companies to find a mutually beneficial solution. Daniel pointed out that regardless of size, a company should look for ways to better collaborate with suppliers.
“We first began our national accounts program with smaller purchases such as miscellaneous equipment,” said Daniel. “When we realized how successful this initiative was, we moved to larger purchases including vehicles, large tools, and equipment.”
Before meeting with a vendor, review your spending and buying habits for that product. By understanding your purchasing habits, you will have more power to negotiate with the vendor. Taking the time to research a vendor's national accounts program will also help you prepare for negotiations. At Structural Group, three cost estimates are required for purchases of more than $1000 when there is no pre-approved arrangement. “Understanding what the competition is charging is important knowledge when establishing a new relationship with a vendor,” said Daniel. “Further,” he added, “the biggest mistake that contractors make is not asking for what they want.”