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How to Reduce Procurement Risks During Supply Chain Disruptions

In today’s challenging and disruptive business environment, forward-thinking contractors and developers are assessing and updating their procurement practices to help meet and address supply chain issues.

In fact, in some surveys, 72% of companies reported that even though they have experienced other supply chain disruptions in the past decade, the COVID disruptions were the most significant.

No wonder. The kinds of supply chain challenges COVID presents create inefficiencies and cause real delays. When there are also problems with the procurement workflow, customer satisfaction drops, and key supplier relationships are jeopardized.

Without updated best practices in place, almost any company’s procurement department could fall victim to delays, shortages, and missed opportunities for profits. Happily, some well-documented best practices and improvements can minimize risk and exposure in this turbulent environment. We share a few of our favorites below.

Practice Process Transparency

Transparency is one way companies and suppliers work together to identify and remedy issues early on. It’s one of the most effective ways to prevent disruptions and delays. Transparency in procurement means that stakeholders have easy access to relevant documentation and information.

In the current environment, transparency is a vital part of managing supply chain issues. That’s why 42% of organizations are expanding access for suppliers to mitigate supply chain risks that may cause bottlenecks. Plus, 56% of companies say they’re improving communication with suppliers in order to increase their ability to spot potential issues early.

Get Strategic with Suppliers

Yes, building a solid relationship with suppliers is vital to your organization’s success. But also ensuring that those vendors deliver reliable, high-quality goods and services on time (and at the best fill rate) is needed to maintain healthy margins. Balancing relationships and deliverables require a strategic approach to supplier relationships.

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Strategic relationships track performance and evaluate supplier value. However, it must be done in a way that allows your vendors the opportunity to understand and meet (or exceed) those expectations. By gathering and sharing data on your vendors’ performance, you have the information you need to ensure your business needs are being met and your vendors have a clear picture of expectations, and ongoing feedback on performance.

Here are some ways to develop and evaluate strategic supplier relationships.

Maintain clear, open communication: Clearly communicate purchase orders and requirements to your supplier. Have a system in place to ensure the delivery of invoices.

Establish expectations early: Leverage your knowledge of the market so you can hold your vendors to that standard. Communicate those expectations explicitly.

Evaluate vendor performance regularly: By evaluating the quality of goods and services delivered, you ensure your company receives the best value for its investment.

Pay vendors on time: Leverage your company’s ability and desire to pay quickly. Your vendors will prioritize your company if you prioritize theirs.

Stay aware of the competition: Knowing your vendors’ product lines and how your supplier compares to the competition also ensures that your company gets the best.

Invest in self-service portals: With a self-service portal, your vendors can submit invoices, proposals, and contracts. Plus, you can easily communicate with them directly on the platform, sending or receiving critical notifications/alerts.  Note-Although this is an excellent suggestion, I’m not sure it “fits” with Metro’s typical customers.

Use vendor dashboards: Track vendor performance against contracts and ensure your vendors provide consistent service. Keep a supplier deliver log for on-time delivery parameters. Compare and switch vendors only when necessary and justified.

Value Engineering Allows Procurement to Think Beyond “Cost Reduction”

Focusing on cost reduction is a viable strategy when supply well exceeds demand, but in an economy where materials are in short supply, bargain shopping places a business at a considerable disadvantage. Moreover, when supply chain disruptions happen, that creates a delay for the time it takes to search for lower prices and may cause contractors to miss their chance to secure much-needed materials.

But that doesn’t mean you always have to pay top dollar. Value engineering is a way for contractors or developers to work with distributors to identify alternate materials or systems that can be used to maintain value without sacrificing performance and aesthetics. Value engineering is often calculated as the ratio of functionality to cost. Sometimes it’s wise to replace high-cost processes and supplies with alternatives that meet or exceed existing criteria by using other materials while keeping the investment the same or less.

Work Closely with Suppliers and Distributors

By consistently working with your team of vendors and suppliers, it’s often possible to leverage vendor relationships for faster and better service.

In a recent survey, 47% of organizations reported that strengthening supplier relationships is the best way to reduce supply chain disruptions and bottlenecks. These firms know that their suppliers will inform them of issues and changes ahead of time and keep them up to date on process alterations or payment problems.

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With close relationships in place, contractors and developers are able to deal with potential supply issues early on before they become crisis points. Recent research noted that over half of companies surveyed planned to boost their supplier communication strategy. Strong communication also helps to mediate any issues that may arise before the relationship turns sour.

Contractors’ and developers’ procurement teams may also find that good working relationships with a distributor put them at the front of the queue. If a supplier struggles to fill the orders from all their customers, they’re more likely to first help loyal buyers with well-established histories. Make sure that’s you by building solid relationships.

Metro Has Earned New York’s Trust

Metro Interior Distributors has spent decades helping contractors and developers in Manhattan, Brooklyn, Queens, Long Island, Staten Island, the Bronx, New Jersey, Connecticut, and Upstate New York. For almost 40 years, Metro has been an efficient, effective, and flexible distributor. We value customers, earn their trust, keep our promises, and continually meet and exceed customer expectations.

Metro is committed to being a strategic partner that enhances procurement efficiencies, is agreeable to modify, helps customers manage inventories, provides expertise in value engineering, and delivers outstanding service for all your operational needs. If you need a building materials distributor who can help you thrive in tough times, contact Metro today.