An area that is often overlooked is the way in which a building business sources and purchases materials, labour and services for the business. Most large residential building businesses have a dedicated procurement manager as the potential savings and compliance opportunities become obvious with such large numbers involved.
Creating a procurement plan for a residential building company involves outlining the process and strategies for acquiring the necessary materials, supplies, and services to successfully complete construction projects. Here's a step-by-step guide to help you create a procurement plan:
Identify Construction Requirements:
Start by identifying the specific requirements of the construction projects. Consider the scope, timeline, budget, and quality standards. Determine the types and quantities of materials, equipment, and services needed. A helpful way to pull all this together is to develop a 'technical specification' that covers every component of the construction process. This is an opportunity to consider the most suitable materials and products required for the construction and to determine the range of suppliers for the products and materials.
Conduct Market Research:
Research and identify potential suppliers and vendors who can provide the required materials and services. Evaluate their reliability, quality of products/services, pricing, and reputation in the industry.
Develop a Supplier Evaluation Criteria:
Establish a set of criteria to evaluate potential suppliers. This may include factors such as experience, financial stability, capacity to meet project demands, track record, and compliance with legal and ethical standards, as well as price.
Establish Procurement Methods:
Determine the procurement methods that align with your project or business requirements. Common methods include competitive bidding, request for proposals (RFPs), or negotiated contracts. Consider which method is most suitable for each category of procurement.
Set Procurement Goals:
Define specific procurement goals, such as cost savings, quality improvement, or supplier diversity, as in back-up suppliers as well as any rebates available. These goals will guide your decision-making throughout the procurement process.
Create a Procurement Schedule:
Develop a timeline that outlines the key procurement activities and milestones. This includes supplier selection, contracting, ordering, delivery, and payment schedules. Align the procurement schedule with the overall project timeline or potential launch dates for display homes or product ranges.
Determine Risk Mitigation Strategies:
Identify potential risks associated with procurement, such as supply chain disruptions, delays, or quality issues. Develop strategies to mitigate these risks, such as maintaining backup suppliers, setting quality control standards, or negotiating penalty clauses in contracts. This has been highlighted by the covid years and the supply issues faced by the industry.
Establish Supplier Relationships:
Build strong relationships with selected suppliers and vendors. Clearly communicate your requirements, expectations, and timelines. Foster open and transparent communication channels to ensure smooth collaboration throughout the project. Involve your major suppliers in any changes to the specification and be part of any new product launches to keep up with new innovations and products.
Monitor and Evaluate Performance:
Regularly monitor supplier performance to ensure compliance with contractual agreements, quality standards, and delivery timelines. Establish a feedback loop to address any issues promptly and assess supplier performance for future projects.
Continuously Improve:
Evaluate the effectiveness of your procurement plan after each major project or at least annually. Identify areas for improvement, lessons learned, and feedback from project stakeholders. Incorporate these insights into future procurement plans to optimize efficiency and effectiveness.
Remember that each residential building business has unique requirements, so it's important to tailor your procurement plan accordingly. Regularly review and update the plan as necessary to adapt to changing project needs and market conditions.
The 3C Mentor can help your business develop a procurement plan to suit your business.
The whole purpose of The 3C Mentor is to help create really great businesses in the residential building industry and delivered by our unique ‘Three Pillars to Your Success’ – Business Coaching, Business Consulting, Business Resources.
For an overview of these three pillars go here. To find out more about our Business Coaching go to The 3C Mentor here, for further information about the services The 3C Mentor can provide go directly here and to access the many documents and resources you need as a residential builder, go to our Builder’s Business Resource Centre here.
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