When was the last time you thought about your vendor management process?

Construction firms work with a myriad of vendors from technology companies and material suppliers. When a materials vendor fails to deliver on time, a project comes to a halt. When companies have a “wait and see” approach to technology, gaps or overlap will arise, and efficiency will be lost. Both scenarios cost construction firms money, and potentially, goodwill with clients.

Tracking your vendors will help your firm make better choices, receive better value, and achieve long-term savings. Vendor management doesn’t need to be complex or add more work to your already-busy schedule. These five steps will help you develop a smooth process for maintaining a profitable vendor workflow.

Create and Follow a Vendor Onboarding Process

Communication is key to every relationship. An onboarding process will help you avoid potential communication issues by clearly defining the who, when, and how between the two companies. Be sure to document the following when onboarding or updating vendors:

• Contacts – Identify a primary and secondary business contact at the vendor.
• Tax Reporting – Obtain all necessary tax documents for year end tax reporting, such as form W-9
• Reporting – If the contracts require reporting, identify when and how to deliver those reports.
• Status updates – Let vendors know your communication preferences – emails or phone calls, weekly status updates, or as progress or setbacks arise.
• Site access – Obtain a list of who will need access to construction sites and when.

Evaluate Vendor Data

Evaluating core competencies will help you make informed decisions instead of convenient ones regarding supplier selection. In addition to quality, cost, and delivery (QCD), document the vendor’s financial stability, potential discount opportunities, warranties and guarantees, inventory risk mitigation, and technology. If a vendor offers multiple products or services, limit the exercise to the main product they provide to your firm.

Develop Vendor Scorecards

Collecting data on new and existing vendors will give you all the information you need to develop supplier scorecards. This scorecard should include standard operational performance criteria, like timeliness, quality of deliverables, and the ability to follow the project specifications, as well as staff ratings for customer service with examples and commentary to back it up. Finally, be sure to identify if they pose a safety risk to the company and their flexibility in case of a change order.

Review Project Failures

Create a record of vendor failures to understand why they happened and how your firm can prevent them from occurring again. Ask these questions:

• What vendor was associated with the problem?
• What consequences from the impact? Negative press? Financial? Negative goodwill with the client?
• What does the vendor say happened?
• What did the company do to contribute to this failure?
• What can you do to prevent this from happening in the future?

Keep Your Tech Up to Date

Companies often select their technology vendors and put them on cruise control. Make a habit of reviewing your technology vendors to identify any overlaps or gaps and if a current vendor solution or one of their competitors can solve that problem. Recent articles showcase the economic impact of innovation doubles nearly every year and a half. This means previous systems that worked together last year may now overlap, causing financial inefficiency.

Effectively managing vendors can help you maintain profitability and avoid costly mistakes. For assistance auditing vendor selection criteria and setting up a financial analysis, contact our team of professionals.