How to reduce project costs by improving supplier relationships

For construction businesses, having good relationships with suppliers is crucial. Your subcontractors and suppliers bring valuable expertise to your projects.

With a shortage of skilled workers (83% of construction businesses face this), it’s important to build a reliable network of suppliers. Trust is key for strong supplier relationships, and the following points explain how to achieve it.

Build meaningful relationships

“Get to know your neighbours before your house is on fire.”

Think about how you can add value to your supplier relationships, especially the high performing ones. If they’ve been doing good work and offering great prices to you, it’s only a matter of time before they get approached by a bigger contractor with deeper pockets and a bigger order book.

Consider:

• Create a preferred supplier list and give them early access to tender opportunities.
• Invite suppliers to your office for events to meet your team and see your projects.
• Support subcontractors by using your network to assist with their challenges.

Upskill your supply chain

When winning new projects, you might need specialised skills or certifications your current suppliers lack. Instead of finding new subcontractors, consider offering a training budget to help your existing ones acquire the necessary certifications. Although there’s a concern they might work for other contractors after gaining new skills, it can enhance their capabilities and benefit your projects.

In reality, they’re likely to value the relationship more, making your projects a priority due to increased development opportunities. This approach not only saves the time and hassle of sourcing and onboarding a new subcontractor but also strengthens your existing partnership.

Pay Invoices Faster

Managing more than 30 suppliers on a project can be a challenge. With multiple invoices coming in, it’s crucial to double-check completed work, calculate deliveries, and keep accurate payment records to avoid overpayment.

This process often involves lengthy email exchanges between different teams. Simultaneously, you must factor in how pay runs impact your cash flow.

Invest in your accounts payable process by setting clear due dates for processing, approving, and making payments. Consider integrating accounts payable software with your accounting system for efficiency. Paying invoices promptly benefits your supply chain’s cash flow, making them more likely to choose you over other suppliers.