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Material Suppliers Are a Major Cost;

I guess our business has been pretty successful; actually I know
it has. But I say that because my boss hired one of those consultants
to come in and give us a checkup, and he only does this
when the profits are high.

When I say “consultant,” I am sure you know the type. He has
never been in construction. He had no idea what it is like to
actually give a bid on something and then be responsible for
that bid since he is only works on a time and material basis.
Needless to say, I expected the worst. And to a great extent, I
got what I expected. The major purpose he was hired for was
to improve our teamwork. I was happy that he didn’t find much
to improve or even comment on in my estimating department.
But I did get one thing that is interesting and it might even
turn out to be a good idea from him.

I had to explain our business to this guy, how it worked, etc.
One of the key points he picked up on was our labor-versus-material
ratio and how many of our income dollars went to our
material suppliers. Are they part of your team?” he asked. “And
if not, why not?” Since we spent so much money with them,
why would we not have them as an important team member?

I have always thought that I worked well with our suppliers, but
quite frankly I never really thought of them as a key member
of “our team.” In a way I did, but not really. But now, looking
at the fact that a very sizeable percent of our dollars are spent
with them, it made sense. If our material supplier is a major
cost, then why isn’t he also a major contributor to our business.
I have to tell you, that makes sense.

This consultant gave me an assignment (as if I needed more
work to do). I had to write down ways I can include my supplier
as a team member; specifically, I needed to include ways I
can include them in our business. I went to my staff and we
brainstormed. There were a lot of ideas, but we limited them
to only ideas of how the supplier could help us with our estimating and sales. The following are a few examples of the things
we came up with.

Now, we had a good brainstorming session, and we came up
with more ideas than we could publish on one page, so the first
few ideas are included here, and the remaining will be published
in next month’s issue.

New Materials

Naturally, our supplier is someone who can keep us informed
about any new material that comes out. Typically, when we hear
about a material, we contact our supplier to find out the cost of
the material, whether or not it has been used in our area, and anything
else we can learn about it. That is not new. Part of our business
plan is to grow with the technology. What if our supplier was
to look out for opportunities that fit our plan? Wouldn’t things
be better for our company if our supplier actually sought out new
materials! What if he asked manufactures what new products are
coming out and searched for new ideas that might fit what our
company does? Couldn’t we have an advantage on our competition
if we found out about new materials before they did?

Business Development

What if, after knowing the type of projects we are searching
for that would complement our workload, our supplier helped
us by giving us leads for new work? Through their contacts with
manufacturers, architects and others within the industry, they
have to run into projects that would be good for us, especially
if it was their “job” to find some for us. What if we had it as a
requirement that our supplier bring us a project or two each
year? I don’t mean a lead, I mean an actual project that we only
had to negotiate—not bid.

Comments? Send your e-mails to [email protected], or fax
to (703) 534-8307.

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