Leveraging and Maximizing Supplier Relationships

By Shawn Casemore
Casemore & Co.

Top contracting firms typically reached their level of dominance largely as a result of the breadth of their relationships with external suppliers and supporting contractors. As these organizations have grown, so too have their capabilities and service offerings as a result of a desire to continuously expand upon existing relationships. Even smaller contractors who achieve high levels of success employ a similar model – focusing on identifying and utilizing external talent to expand capabilities, and ultimately revenue.

No surprise here.

Many companies focus predominantly on building relationships with sub-trades and subcontractors more so than on material and equipment suppliers. This limited focus derives from historical practices in which sub-trades and subcontractors are recognized as the talent, whereas suppliers are often seen as simply commodities. 

Think about it this way. You might feel comfortable changing your source for steel or lumber, but you are likely limited on the number of sub-trades you would be willing to engage on a particular project. More commonly, if your customer requests a reduction in the price of a project, who is the first group you are likely to approach, your suppliers or sub-trades? Research has shown it is the former in over 75 percent of the cases studied.

Now here is something interesting to consider: the suppliers in many instances can offer more substantial value than a sub-trade or subcontractor. That’s right, if you are looking to expand capabilities, complete projects faster, or increase competitiveness in a tight market, a strong supplier relationship is often as important as relationships with sub-trades and subcontractors. 

Here’s why:

A supplier of door hardware, for example, supplies dozens if not hundreds of companies, many of whom may be your competition. They are in touch with the latest in technology, new techniques, and most importantly, what your competitor is doing. If you want to stay atop your market, and if you want to create a competitive advantage, then it behooves you to identify your key suppliers and start building relationships with them. You need to stay connected to be connected to your marketplace.

You can probably think of times during which you needed materials to ensure a project remained on track, and as a result of a strong relationship you had with a supplier, you were able to successfully attain what you needed in less than the usual lead-time. This special treatment is no mistake; it is the direct result of a strong positive relationship with an individual or group of individuals. So, who are your key suppliers and when was the last time you met with them to strengthen your relationship? 

Everything, absolutely everything, is negotiable. It just takes the right message, well positioned with the right person. Now, if price is predominately your concern, don't abuse your relationship with a supplier by continuously hammering them on price. If you have a solid relationship, however, your suppliers will help you with improving their pricing if you are able to build a case to do so (i.e., a new potential customer). As they say, negotiations are part art, part science, more so the former. So be clear on your objectives, position them appropriately and you will see better outcomes from your relationships. If you are seeking to develop a competitive advantage, this is the way to do it.

It takes more than just strong relationships with subcontractors to be competitive in today’s marketplace. 

If you can't identify in 30 seconds who your top five suppliers are and who the owners or presidents of those companies are, when the last time you met with them was, and how they are helping you to develop a competitive advantage, then you are missing a significant opportunity. If you want growth and profitability, start leveraging your supplier relationships.  There’s no better time than right now.

Associated General Contractors of America
2300 Wilson Blvd, Suite 300
Arlington, VA, USA
Ph: 703-548-3118 Fax: 703-837-5402