The real estate industry all over the globe has been witnessing a significant incursion of investment capital, thus, expanding at a much larger scale than it ever could. Consequently, the ever-challenging landscape has become more evident. Comprising a substantial share of the overall cost in a real estate business, procurement is emerging as the most cost-efficient activity in construction planning and management provided that it is done strategically. Imbibing technology to the core, a lot of real estate developers and contractors are strengthening their procurement process by investing in integrated technologies as well as smart procurement strategies. These strategies include goal-based sourcing, performance based contracting, online inventory management and electronic data exchange thereby, focusing on reducing costs, timely deliveries and streamlined material management.
How strategic sourcing and cost-efficiency go hand in hand?
As the real estate industry has started to expand enormously, the role of strategic sourcing has become relentless in the procurement process. The approach focuses on aligning the purchasing strategy with the business goal and consolidating the purchasing power to get the best market pricing. By aligning the business goals and requirements to the right suppliers with the right capabilities, organizations can maximize their performance and gain a competitive edge over their peers. From the assessment of the supply market, classification of the appropriate suppliers to total cost analysis, the modern strategic sourcing strategies have gone far beyond the traditional methods of procurement and rightfully so. This holistic approach where there is evaluation and re-evaluation of the activities pertaining to procurement has significantly brought transformation to the entire real estate business schema.
Paving a path for more sustainable approach to business spends, strategic sourcing encourages activities like analysing market data and implementing crucial insights so that the total cost of ownership is measured. The outlook is substantial to the real estate organisations that go through endless fluctuations, day in and day out.
Integrated Systems and Strategic Sourcing
From material category identification to spend pattern analysis, vendor prequalification to automated bid comparison, expression of interests (EOI) to online vendor management, integrated systems have managed to gain advantages for the real estate companies in terms of cost-efficiency and otherwise. Generally, these areas focus on offsetting cost and risk. However, the problem arises when there is a lack of clarity. This is where property technology like real estate ERP, online procurement platforms, inventory management softwares etc come into play.
Strategic sourcing can help in building strong supplier relationships by integrating the supplier and buyer network making it easier for the real estate companies to initiate dialogues for a cost efficient business.
A Step Further
An integral part of strategic sourcing is being clear in your head about your buying decisions. Once the requirements are finalised, begins the process of purchasing all that is required. This process has been streamlined and made a lot more convenient by online procurement platforms such as BuildSupply that allow you to purchase building material online. These platforms have convinced a number of real estate and construction companies to invest in a cost effective business model. The procurement processes on these platforms include price discovery, order management, raising ‘Request for Quotations’, approval management, instant purchase, dashboards and analytics and streamlined delivery that has proven to be competent in terms of the time and money.
Material purchase credits for around 70% of the total cost of any construction project. With traditional sourcing methodologies, weak points like high lead time and inept prices go unaddressed, significantly adding to the total cost. Thus, by implementing strategic sourcing models to construction projects, you can accelerate your enterprise growth by addressing the most dangerous pitfalls real estate companies face while sourcing.
A Final Word
From buying construction materials online to process redesigning and implementation, flexibility of strategic sourcing has outshone the traditional procurement methods tremendously. The result is evident through the profit made in terms of cost-efficiency, higher return on investment and efficient vendor management. This has led to a powerful way of defying the challenges and unforeseen economic circumstances in the real estate environment.