Managing costs effectively is a key part of ensuring the success of any construction project. One of the most powerful tools in a procurement manager’s arsenal is price benchmarking – comparing the prices of materials from different merchants to ensure you’re getting the best possible deal.
What does effective price benchmarking look like?
Effective price benchmarking involves gathering data on the prices of similar materials and products and analysing this data to determine the best value for money. In addition to price, it’s also good practice to compare things like delivery distance, timing and pricing to truly determine whether you’re getting an appropriate deal.
This process helps procurement managers make informed decisions, avoid overpaying, and negotiate better deals with suppliers.
The value of price benchmarking in construction materials procurement
Cost Savings: The main benefit of price benchmarking is cost reduction. By systematically comparing prices, construction companies can identify the most competitive rates and avoid overpaying for materials. This can lead to substantial savings, especially for large projects with significant materials requirements.
Informed Decision Making: Price benchmarking helps provide buyers with a clear picture of market rates. This in turn enables them to make informed decisions about merchants to use, ensuring they get the best value without compromising on quality.
Supplier Negotiation: Armed with benchmarking data, procurement managers can negotiate better terms with suppliers. Knowing the market rates gives leverage to secure discounts and more favourable payment terms, further reducing costs.
Transparency & Accountability: Implementing a benchmarking process brings transparency to the procurement function. It ensures that purchasing decisions are based on objective data rather than personal preferences or relationships, promoting accountability within the procurement team.
Market Insight: Regular benchmarking helps companies stay updated on market trends and price fluctuations. This insight is invaluable for strategic planning and budgeting, allowing companies to anticipate price changes and adjust their procurement strategies accordingly.
How The Build Chain facilitates price benchmarking
The Build Chain platform is designed to make price benchmarking easy and effective. Here’s how it works:
- Quick Quote Requests: Users can send out enquiries to multiple suppliers simultaneously, collecting a broad range of prices in a short time
- Centralised Comparison Tool: The platform provides tools to compare quotes side-by-side, highlighting the best deals based on price, delivery time, and merchant location
- Analytics and Reporting: Detailed analytics and reporting features allow users to track price trends, identify savings opportunities, and make data-driven procurement decisions.
We discuss this topic further in our post: How To Benchmark Pricing and Achieve Best Value for Construction Materials.
A real life example from a user of The Build Chain
North Yorkshire-based SME contractor Rasico Construction faced challenges with fluctuating material costs and time-consuming material sourcing processes. By leveraging The Build Chain for materials procurement, Rasico was able to compare quotes from multiple suppliers quickly and efficiently.
Rachel Jolley, Rasico Construction Managing Director, said:
“The Build Chain has been a fantastic introduction to our business, saving us substantial amounts of money on many items and equally as important, it’s saved us a substantial amount of time. With industry-wide price increases, every penny counts towards making projects commercially viable.”
Price benchmarking is an essential practice for any construction company looking to optimise procurement processes and control costs. By systematically comparing prices and leveraging data-driven insights, companies can achieve significant savings, make informed purchasing decisions, and negotiate better deals with suppliers.
At The Build Chain, we provide a powerful platform that simplifies and enhances the price benchmarking process, leading to better procurement outcomes and a stronger bottom line.
