Five Ways to Mitigate Construction Supplier Failure

By relying on high-quality supplier data, prioritizing relationship management, and considering small and diverse suppliers, contractors should build a base of trusted suppliers that can rise to the challenge.
By Stephany Lapierre
February 2, 2021

Due to the large-scale, complex nature of most construction projects, supplier failure is an inevitability. During the COVID-19 pandemic, we’ve seen new and more critical examples of supplier failure and, more than ever, we understand the need to be prepared for the inevitable situation of when a supplier is no longer able to deliver on its original commitments.

Supplier failure is unavoidable, but it is also possible to create a healthy supply chain that will provide contractors with a safety net. This way, when suppliers fail, contractors can quickly and strategically pivot so that projects continue in the most efficient way. To prepare for success in the face of a supplier failure, here are five things contractors should know.

1. Some project details can be compromised, but quality cannot

Quality is the most critical deliverable for construction projects, so when searching for new suppliers in the middle of a project, contractors must find someone who can do the job just as well as the current vendor, or even better.

However, searching for and onboarding suppliers can take a huge amount of time and resources, and adjustments to budget or other details will likely be needed. It is important to understand that these concessions are being made in the name of quality; however, contractors can decrease onboarding time and preserve their budget by assessing a catalogue of suppliers that is created using accurate, updated and trusted supplier data. Because contractors are working from a complete data picture, they can make decisions confidently and be assured that they have all the information needed to make the best possible choices.

2. Clean data will enable optimal decision-making

In addition to helping contractors navigate changing project details, clean and accurate supplier data can help them understand more about their current network of suppliers, so they can ensure that every supplier is being used appropriately.

For example, a contractors may have a long-standing relationship with a supplier who is contracted for one specific function. However, in the time since the contractor started working with the supplier, the supplier may have expanded its offering, and could very well be the perfect solution for an urgent need. However, if the contractor’s supplier data is stagnant and doesn’t reflect a supplier’s most updated offerings, the contractor may never know this, and could waste time and money searching for a new supplier.

Keeping supplier data updated is a full-time job, and doing it manually can be a hassle and leave room for human error. There are data solutions on the market that solve this problem, and constantly refresh and refine supplier data into a searchable database, so contractors can easily assess the capabilities of their current supplier base and quickly find new additions that fit their exact needs.

3. Leverage network relationships

The search for a new supplier should start with relationships. Because search engines and online listings are often pay-to-play spaces, the best way to evaluate the true quality of a supplier is to understand their reputation. Who is this supplier currently working with? How are they performing in RFIs?

However, when searching for endorsements, be mindful of bias or irrelevant information. Contractors should look for qualitative reviews that reflect the needs of their situation. Many current data solutions offer space in a supplier profile for reviews, and can provide actionable insights into how the supplier performs in different areas. Many of these reviews might be from members of the contractor’s network, and it’s best to look for recommendations from these trusted sources.

4. Supplier diversity means access to more opportunities

Diverse suppliers can often be an untapped resource, but the importance and substantial benefit of working with small and diverse suppliers is becoming increasingly apparent. A supplier failure is a good opportunity to introduce more diverse spend into a contractor’s procurement strategy, which may be a requirement of a government or public project.

By widening your search to include small and diverse suppliers, contractors will open the door to new opportunities and the ability to share that opportunity up and down the supply chain. Especially in the case of adding more diverse suppliers to the list, pivoting after a supplier failure can have effects on a contractor’s entire supplier ecosystem. The contractor’s new supplier network could introduce benefits that trickle down to all stakeholders.

Small and diverse suppliers are often more difficult to find, and may not have been given the opportunity to achieve the same level of visibility as large suppliers—even if their offerings are similar, or even more innovative. In fact, data solutions that offer the ability for a supplier to self-certify as small and diverse are helping to solve this visibility problem.

5. The best and the brightest are out there

Sometimes, when a supplier fails, it can feel like contractors will have to settle for second-best to complete a project. However, having to recover from a supplier failure does not mean contractors need to compromise or lower their standards. There are countless suppliers out there who can exceed contractors’ expectations, and by working with them, contractors build new relationships that will strengthen the health of their supply chain and safeguard them from future supplier failures.

Creating the process for tapping into that network will require flexibility and a willingness to employ new strategies, and, most importantly, it will need to be powered by accurate supplier data. But by leveraging relationships and having confidence in data, contractors can create a safety net of suppliers that are the best of the best, and work with them to their fullest potential.

By keeping these five things in mind, contractors will be able to pivot quickly and prevent operational inefficiencies in the face of a supplier failure. By relying on high-quality supplier data, prioritizing relationship management, and considering small and diverse suppliers, contractors will build a solid base of trusted suppliers that can rise to the challenge when contractors face an urgent need.

by Stephany Lapierre
Stephany Lapierre is the founder/CEO of Tealbook, a highly coveted supply chain thought leader, and one of the most influential minds in emerging data technologies. She has been recognized as one of the Top 100 Most Influential Women in Supply Chain, and her company, Tealbook, has both been named a Top 50 company to watch by Spend Matters and won the Cool Vendor Award by Gartner. Prior to Tealbook, Stephany spent 10 years building a successful strategic sourcing and procurement consulting firm focusing on large scale sourcing optimization projects. Given her experience and visibility into the data issues crippling procurement she has made it her mission is to deliver a ‘Trusted Source of Supplier Data’ to an ever-growing eProcurement space.

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