As Materials Prices Rise, Construction Companies Seek Smart Procurement Solutions as a Method to Cut Costs

By Steve De Franco | March 23, 2021

It’s been a tough year for our industry, as it has for most others, due in large part to the pandemic which has resulted in an unanticipated economic downturn. This is in addition to our normal challenges from regulatory, labor, safety, environmental, and trade issues. What this year has shown is we need to be able to quickly respond to unforeseen issues and that means, among other things, utilizing technology that moves us forward.

With so many companies having at least a portion of their workforce working remotely, digital transformation has become a necessity, not a luxury. Visibility into real-time data and workflows is essential in order for teams to work collaboratively. That includes access to analytical tools that provide insight, not just into the status of every project, but into the business itself. These digital tools will also enable companies to gain greater control over both cash flow and working capital, simply by optimizing procurement and payables practices.

Some of the challenges we face include:

  • A normal shortage of skilled workers exacerbated by quarantines, social distance requirements, and travel restrictions
  • A reduction in construction output, expected to be up to 7% in North America
  • A significant increase in the costs (up to 25%) for steel and lumber, among other materials needed for construction, as well as ocean freight
  • Shrinking margins due to all of the above

All of this comes on top of the fact that, according to KPMG, only 31 percent of construction projects come within 10 percent of their budget and too many companies go well beyond that 10 percent. This has created a burden on construction companies to control costs wherever they can. Although you may not have control over the commodities markets or how many change orders the project experiences, you do have control over how your company spends on parts, products, repairs, and regular maintenance needs.

Drive cost management solutions into your daily operations

Your core business should be your core concern…not spending valuable time negotiating with vendors that supply your essential equipment needs: tires, parts, lubricants, hydraulics, filters, telematics, etc. To put the focus where it belongs, many construction companies are beginning to recognize the benefits of outsourcing these procurement tasks to third parties.

The answer to these challenges may be a Group Purchasing Organization (GPO). But, like anything else in business, whom you work with matters.

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It matters that you work with a GPO that understands your business and has a history of proven success. It matters that the provider has a team of industry experts that have spent years building partnerships with top reputable industry suppliers. When it comes to Fleet GPO, Corcentric has decades of experience and thousands of customers, resulting in the buying power of more than 800,000 vehicles.

That experience has expanded to include the construction industry. We are highly aware that the very nature of the job sites for construction can be tough to navigate and increase wear and tear on equipment and parts. But the aggregated buying power of our 800,000+ vehicles results in a great deal of leverage, enabling our procurement professionals to use that leverage to negotiate pricing and terms with over 140 of the industry’s leading suppliers. To help our customers, our industry experts provide thought leadership and spend analysis guiding the best possible outcomes and decision-making.  Companies that have joined our Group Purchasing Organization have realized savings of 5% to 20% on those products most in demand by fleets everywhere.

Pay the same price no matter where you purchase

One of the most challenging issues that companies face, especially those that have sites that are regional or national rather than local, is ensuring that pricing is consistent. Working with our GPO, that concern is eliminated. No matter where you may purchase, your price and terms stay the same, substantially reducing the possibility and costs of off-contract and rogue spending.

Maintaining your current dealer relationships is also important. Those kinds of relationships come with degrees of trust that you do not want to lose. With our GPO, you just order as you always do, only knowing that the price you’re paying is the right price…every time.

Where Corcentric excels is in the reporting capabilities we offer. The data provided enables companies to make better, accurate, more informed decisions and thus offers greater control over working capital and cash flow. We know that challenges to the industry will continue, but our team will ensure that your company will be ready to meet those challenges.

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