Cost efficient materials procurement is essential for SME contractors in the UK to maintain profitability and competitiveness.
There are a number of ways to optimise this process, including thorough planning, supplier negotiation, and benchmarking.
Thorough Project Planning
Many of our blog posts begin by recommending thorough project planning, but it is too important to be overlooked.
Conducting a comprehensive project analysis to identify the exact materials needed minimises the risk of overordering or underordering which can save both time and money further down the line.
Technology Adoption
Embrace technology, including digital procurement platforms and software, to automate processes and streamline procurement. This reduces manual errors and saves time.
Digital solutions can enhance the work your skilled procurement teams carry out by increasing efficiency and improving accuracy of data. This makes it easier to spot any discrepancies or problems in the pricing you receive and frees up the time of your buyers to build relationships with suppliers which can lead to better deals.
Read more: The Benefits of Online Procurement Solutions for the Construction Industry
Explore Alternative Suppliers
Continuously explore new suppliers and consider alternative materials. Competition among suppliers can lead to more competitive pricing.
Relying on previously used suppliers or old contracts often means you are receiving pricing that is no longer in line with the rest of the market, costing you money. By widening your pool of suppliers, you maximise opportunities to get the best price.
Researching new suppliers can be time consuming, so it’s important to implement solutions that can help with this. Technology can be used to speed up the process of finding, negotiating with, and comparing new suppliers.
Supplier Negotiation
Negotiate prices, terms, and delivery schedules with suppliers. Building strong relationships allows for more favourable terms, including volume discounts and credit facilities.
Benchmarking
Regularly benchmark material prices against industry standards. This ensures that you are paying competitive rates and can identify opportunities for negotiation.
This is another area where new technology can be of assistance. Digital procurement platforms can be used to bring all quotes into a single dashboard, allowing for easy comparison.
Local Sourcing
Source materials locally to minimise transportation costs, support the local economy, and reduce the carbon emissions associated with long distance deliveries. Local suppliers may also offer more competitive prices.
Track Market Trends
Stay informed about market trends and fluctuations in material prices. Timing purchases during favourable market conditions can lead to significant cost savings.
Adopting digital procurement solutions will also generate accurate data that can be used to provide further insights into your procurement processes and help drive future decision making.
Centralised Procurement
Centralise procurement processes to consolidate purchasing power. Bulk orders often lead to better negotiation terms and lower prices. Bulk orders can also reduce the unit cost and ensure a steady supply for ongoing projects.
Leverage Group Purchasing
Collaborate with other SME contractors or join purchasing groups to take advantage of bulk-buying discounts and shared resources.
Inventory Optimisation
Optimise inventory levels to prevent overstocking or stockouts. Efficient inventory management reduces holding costs and minimises the risk of wastage.
Evaluate Total Cost of Ownership
Consider the total cost of ownership, not just the initial purchase price. This includes maintenance, storage, and transportation costs.
Value Engineering
Explore value engineering practices to identify cost-effective alternatives without compromising quality. This involves optimising design and specifications for cost savings.
Continuous Improvement
Establish a culture of continuous improvement in procurement processes. Regularly review and refine strategies based on lessons learned and changing market conditions.
By implementing these tips, SME contractors in the UK can enhance their materials procurement processes, reduce costs, and contribute to the overall success of their construction projects.
Increase Efficiency and Achieve Best Value with The Build Chain
At The Build Chain, we recognise the value provided by SME contractors to the UK construction industry.
We created our platform to help SME contractors connect with their new and existing supply chains, benchmark pricing and speed up the process of buying materials.
Rasico Construction reported “significant amounts of time saved” and “significant amounts of money saved.” THB had similar results, included a “streamlined supply chain” and “improved delivery of our projects.”
