Build Wise

Build Trust and Get Better Vendor Pricing

Build Trust and Get Better Vendor Pricing

Trust is important. This is especially so in the construction industry where collaboration with external parties is critical to project execution.

According to a 2014 study “The Information Economy: A Study of Five Industries,” the construction industry—more so than other industries—relies upon collaborating with a large, distributed group of vendors to deliver complex projects.

With such a high reliance on collaboration among external parties, one may imagine that owners excel at building strong, trusting relationships with these vendors. That’s not the case.

Erosion of Trust

According to KPMG’s “Global Construction Survey 2015”, only 32% of owners report a high level of trust in their contractors.

Owners contribute to this erosion of trust. Enstoa’s research finds that many organizations struggle with processing invoices and paying vendors within the terms set out in their contracts. How would you feel about an organization that commits to paying you in 45 days, but consistently doesn’t do so until 5 or 6 months later?

EPPM Reinforces Trust

There’s hope, though. Enterprise project management systems, such as Oracle Primavera Unifier, include workflow engines to enforce and automate standardized processes for the review and approval of project-related records, including invoices. More importantly, such systems enable the project teams—those closest to the work being performed—to own the process and monitor compliance.

EPPM systems track the receipt and status of invoices and alert project managers to invoices that are nearing their due dates to ensure invoices are reviewed and approved in a timely manner. Further, these systems make it easy to record trends of contractual compliance across the portfolio, enabling management teams to track the performance of the organization.

Organizations can dramatically improve contractual compliance in a short period of time with EPPM systems. The data from the organization shown above illustrates consistent improvements across 17 months. Over 70% of invoices were paid within contractual terms in the last six of seven months.

The Promise of Favorable Pricing

Finding millions of dollars of unused capital and improving the productivity of project teams are among the benefits when organizations deploy EPPM systems. Another unexpected benefit reported by Enstoa’s clients has been better vendor pricing.

Providing certainty to vendors that they’ll be paid in a timely fashion ensures they won’t need to float large sums of capital to pay their employees and subcontractors.

With certainty, comes trust. With trust, comes savings.