Managing vendors is an important part of operations for construction companies. But what happens when someone drops the ball? If a vendor is late in delivering bricks, concrete or electrical supplies, what happens to your productivity and project timeline? The project may face delays or grind to a complete halt.
When managing a variety of different vendors, it’s critical to collect and track the right data to understand if things are working as they should or if you need to find a replacement.
Don’t let a project get stalled because you’re using the wrong vendor. Try these tips to proactively manage your vendors.
1. New Vendor Onboarding Process
When a new vendor starts working with your construction company, how do they learn your expectations? If you answer “through trial and error,” think again. There is a better way to guide your new vendors.
Use an onboarding process that includes providing the following information:
- Contacts: We recommend identifying your primary business contact and an alternate contact in case the primary person is on vacation.
- System Access: If you ask vendors to use your project management platform, gather any required information here to get them set up on your platform.
- Vendor Reports: If your contract requires the vendor to submit reports, explain how the vendor will deliver them.
- Communications: Provide an overview of your preferred communication process for vendors (e.g., weekly status calls and other points)
- Security Access: Ask the vendor to provide a list of the individuals who will need access to your construction sites so you can arrange access for them.
2. Use Vendor Scorecards to Evaluate Performance
With long-term vendor relationships, taking the time to periodically measure a vendor’s performance makes sense. This is a process to identify problems early and ensure you are consistently managing all of your vendors.
Gather the following information about your critical vendors on a quarterly basis using a scorecard:
- Customer Service: Ask your staff to rate the vendor regarding customer service performance. In addition to a rating, gather comments and examples as well.
- Operations: Evaluate your vendor based on their operational performance, such as timeliness, quality of materials and following your specific requirements.
- Safety: If a vendor fails to follow your safety requirements, including completing any safety reports, everyone is in danger. Make sure you evaluate vendor performance on safety to avoid an accident or tragedy.
- Change Requests: Sometimes, life does not go according to plan. Evaluating vendors on their flexibility and ability to deliver on change requests matters.
If multiple people work with the vendor, send the vendor scorecard to several people on your team and analyze the results.
3. Gather Vendor Data for Financial Planning
Vendor-related costs tend to be a large line item in construction budgets. Gathering data about vendor costs as part of an annual or semi-annual benchmarking exercise will help you to determine if the value and pricing you have is acceptable.
- Choose the Most Significant Item the Vendor Provides: Your vendors probably supply multiple items. To simplify the analysis, focus on one item at a time (e.g., crane rental or concrete).
- Collect the Pricing Structure: Ask the vendor to provide their pricing structure.
- Identify Any Discount Opportunities: Some vendors provide a percentage discount for large volume orders. If that situation applies, take note of it.
- Gather Information on Service Standards and Guarantees: While it is tough to analyze this information in a spreadsheet, it is smart to have a record of it.
4. Create Records for Vendor Failures
Nobody looks forward to a vendor failure in construction. If you can learn a lesson from experience, your company can improve in the future. When a vendor fails to deliver and causes a significant problem, you need to understand why it happened. Develop a process to gather the following data:
- Identify the Vendor: Start by clearly identifying the vendor associated with the problem.
- Describe the Impact: What was the consequence of the failure financially and otherwise? For example, negative press coverage over missed deadlines would qualify as an impact.
- Vendor’s Explanation: Note down the vendor’s explanation of the cause of the problem.
- Your Company’s Oversight: What was your company doing or failing to do that contributed to this vendor failure? You may have given poor direction to the vendor.
- Action Plan: Finally, what steps can you take to prevent this type of vendor problem from occurring in the future?
Follow these steps to improve both vendor management and performance, and set your construction company up for successful long-term supplier relationships.