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Material Suppliers Are a Major Cost

As a result of a consultant’s health-check on our company, I sat
down with my staff to brainstorm ways we could include my
supplier as a member of our team. The major topic of discussion
was, If our material supplier is a major cost, then why isn’t
he also a major contributor to our business?

Last month I told you about new materials and how our supplier
could provide us with a “heads up” when something new
is available, and also about how our supplier can be used to provide
us with leads for new work. This month we look at my
team’s other ideas for including our supplier on our team.


Suppliers know most of the people in our industry, What if our
team member helped us find potential personnel for our company?
We ask them for information anyway, but if they really
were part of our team, couldn’t they help us more?

Entertainment and Promotions

Right now, our suppliers do entertain us, but we currently do not
use them at all for entertaining our clients. Isn’t it a possibility that
we could do a better, more effective job of using our entertainment
budget by working with a supplier team member?

Knowing Our Competition

We do try to learn as much as we can about our competition—
I’ve mentioned this before in a previous column. But we are
always learning about things through the gossip mill. We get a
variety of types of information from suppliers. For example, we
learn that this estimator changed companies, and that this company
does things this way or that way, or that this company
needs work. What if it was the responsibility of our team member
to keep us current on our competition? Couldn’t we learn
more about which competitor got which project and who is
doing work for whom? Wouldn’t we be able to keep our information
on our competition more current and accurate?

Tracking and Planning Workload

In the past, I have gotten information from our supplier that our
volume is “down this month,” or the opposite. This comment
came long before our internal accounting system told me. Our
rep knows how much money we spend with him on a monthly
basis—he has to, he works on commissions. Why isn’t that information
good for me to know as well? What if I told him the projections
for next month and asked him to keep me current on the
actual volume? Wouldn’t that information be beneficial to me
and to my efforts to keep our volume at the level that is planned?
Wouldn’t that data be beneficial to hi also, and for his planning?
If he becomes better at his job, couldn’t he help me more in mine?

There are many other ideas that we had as a result of this exercise.
And I am not yet sure how many of them I am going to
try. As a standard rule, we use three suppliers regularly. We have
one who gets the majority of our work, about 70 percent, and
the other two split the rest. We currently bid out our projects,
so our suppliers are always in a competitive situation. In order
to try any of these ideas, I have to re-think our standard method
of purchasing materials. But that is what ideas are supposed to
do, right? They are supposed to force us to think about things
differently and as a result, change for the better.

My plan is to take this article and sit down with our main supplier,
make him read this, and see what we can work out. It will
be different, and I have to admit that the consultant who didn’t
know anything about construction did stumble onto something
that forced me to re-think our business paradigm. Maybe
the money wasn’t totally wasted after all.

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

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