Industrial Construction Purchasing

Negotiating in Cancun

Travis Tilton — Mon, 25 Jan 2010 16:57:00 GMT

I would have to say a great benefit to working in the purchasing industry is being comfortable negotiating. My wife and I took a trip to Cancun and as anyone knows who has been to Mexico is that items sold on the street are subject to haggling. Our list of purchases...

Sandals- Asking $45- Purchased for $15
Dice Cup- Asking $55- Purchased for $20
Coin Purse- Asking $30- Purchased for $10
Jacket- Asking $30- Purchased for $18
Hat- Asking $10- Purchased for $8

There was also an excursion to Xel Ha which is an all-inclusive resort with plenty of activities. Our vacation planning service offered the trip for $119pp. The local agencies advertised the same trip for $95pp. My wife and I preferred to book with our vacation service because they offered a warranty on the trip. After discussing the local pricing they took off 10% and we booked the trip for $107 each.

More evidence that just about all pricing is negotiable!

Chapter 1 excerpt

Travis Tilton — Mon, 04 Jan 2010 16:53:00 GMT

Everyone wants to be thought of as good at what they do. In the world of Construction Purchasing the keys to being an important part of your company’s future are excellent decision making, honesty, organization, and having a bit of skill at psychology. If you can show talent in all four of these areas your chances of success are great. Other welcome traits are some basic jobsite construction skills, understanding the “slang” used around projects, and the capability of handling the stress that comes with helping a project that is either behind schedule or over budget.

So how do you measure success? How do you know for certain that you are performing at a high level and earning what you are being paid? Success is found in each PO you write. If you can justify each order you place to both the requisitioner and the home office as being the best combination of value, quality, and risk you will find success.

Making things better

Travis Tilton — Mon, 26 Oct 2009 19:52:00 GMT

As I am having troubles getting more Contractors to use the website regularly I am reminded of something I read. In Walden, Henry David Thoreau developed a better method to measure and weigh the grain and produce brought to market by farmers. The buyers of the food did not at all like the new scale. For them the current scales were already "too accurate". Thoreau eventually gave up on trying to sell or implement the idea and it died.

This is just me starting to worry for the first time that there could be problems ahead that have nothing to do with whether the site is good or not.

Letting your feedback tell a story

Travis Tilton — Tue, 06 Oct 2009 18:07:00 GMT

I was reviewing the feedback that Critical Sourcing has been leaving for several of our suppliers at JobsiteBuying.com and was pleasantly surprised at the level of communication. By just jotting down a sentence or two about many of the quotes received we were able to let the Suppliers know what is important when evaluating bids and what needs to happen to earn more business.

Assuming the trouble was taken to call the many suppliers on a bid by bid basis there would almost certainly be no record of the conversations. As human beings we hear and retain different bits of information that becomes skewed in our memories as time goes by. By putting down in type what is happening we are letting the suppliers review what is working and where they fall short.

The feedback tool is something I may want to push to our users as a great tool they could be overlooking.

The 4th way to source pricing requests

Travis Tilton — Sun, 04 Oct 2009 02:33:00 GMT

Having spent the day reading various tech blogs and looking at the latest gadgets coming down the development pipe I started to wonder just how far, if at all, JobsiteBuying.com could move the technology ball forward in the construction industry.

The first method purchasing agents used to communicate with suppliers was the phone and file cabinet. This method is still widely in use today at projects with little main office support. The major pro was knowing the suppliers were actively working on issues, the major con was absolutely no documentation is possible concerning miscommunication.

The second was the fax machine. It allowed for immediate documentation of requirements for the first time. This is used rarely today as a scanner and email account works better. The major pro was it became possible to send drawings, RFx, or BOM to suppliers in real time. The major con is not knowing if your fax was just sitting on a machine not being attended to. The print quality was usually poor as well.

The third was email. It solved many problems by allowing contractors and suppliers to communicate quickly (similar to the phone) and allowed for the sending of files. A distribution list of suppliers allowed for multiple quotes of the Contractor requisitions. This is by far the better way to communicate with Suppliers with no major cons.

However, email is used for more than just finding the best pricing and availability for tooling, material, and equipment. Each requisition sent out will get responses out of order that do not easily relate back to the original request. JobsiteBuying.com is a web-based sourcing application that easilly manages each requisition along with all corresponding pricing. You can leave notes, feedback, and manage your suppliers through the service.

So have I come up with the 4th way to find pricing and availability? Time will tell, and I have finally hired an area rep for St. Louis so I can develop the next territory!

It's been a while since posting anything

Travis Tilton — Mon, 14 Sep 2009 13:14:00 GMT

The economy has just been brutal in the St. Louis area for the Construction industry. There are very few projects underway and every week it seems like something is cancelled/postponed. I am very thankful that my industrial clients are still busy!

I have been interviewing to hire a salesperson to work in the St. Louis region and market/sell JobsiteBuying.com. Plenty of candidates have applied and there were 3 particular applicants I liked with one being my likely choice for the job. After someone is hired and trained I will be looking to open a Chicago territory. One nice result of interviewing is getting feedback about the JSB business concept. It was very favorable.

I wish there was something to say other than keep your head down and this too shall pass. Better days ahead!

The role of the purchasing agent

Travis Tilton — Tue, 28 Jul 2009 12:58:00 GMT

1. Spend/Procure as if the money were your own. Be aware of where the better value is.
2. Manage the suppliers proactively. Reach out to them and let them know what is important to your buying decisions.
3. Improve how your job functions. Find ways to save money and report those savings.
4. Avoid friendships with suppliers. Be friendly, but professional.
5. Do the daily things right. From sending PO's to suppliers to following up questions don't let the little things go undone.
6. Communicate with your internal customers. What are you doing right? Be open to what you are doing wrong.
7. Resolve issues. Once a problem has been identified decide how important it is and send the reolution to all parties involved.
8. Education. Times change! Be aware of new strategies and keep up with your duties to be aware of them.
9. Network with other purchasing agents. It's a great place to hear of changes and meet people who could advance your career.
10. Use JobsiteBuying.com for the sourcing of your tooling, safety supplies, equipment rental, and material for your Industrial or Commercial construction project.

Burdensome approval processes

Travis Tilton — Sat, 30 May 2009 15:41:00 GMT

I was working with a Contractor who has the following process...

1. Requisition
2. Sourcing
3. Determine quote award
4. An approval is now required (REGARDLESS OF $ AMOUNT OR IMPORTANCE) by the

Project Manager (who has about 100 more important things to do)
Cost Manager (who already would be getting this cost information through accounting software)
Requisition Originator (what, he's not going to approve the purchase of something HE HAS ASKED FOR?!)

5. After 3 copies of the PO's are distributed and then signed off they are returned to the Purchasing department then the supplier is notified and the PO is sent to actually place the order.

This is a perfect example of a Contractor just doing things because they think they should. There is zero value added to the time and expense associated with 3 people approving a $30 order for dill bits or drinking cups. This particular Contractor is also a very large company with offices throughout the world. I don't know if this process goes on at all their projects or if it is just the way the person in charge wants on this particular project.

Now, I'm all for an approval process that is staggered by expense or strategic importance. Some type of sign off on a $1,000 order is fine. A more complex approval could also be put in place for a $25,000 order. My point is don't put self imposed barriers in place that take away resources. There are also a number of better ways to get approval than by just handing off copies of PO's. You can post to a internal server for digital signing or email the PO's and quotes as a package that can be forwarded back as an approval... you don't have to unnecessarilly print so much!

New purchase order database

Travis Tilton — Sat, 23 May 2009 17:14:00 GMT

Next week we will be installing a new PO database for a large contractor doing an environmental project in the Midwest. They turned to Critical Sourcing to help find a way to process PO's that use less paper, are searchable, provide cost data, and provide other benefits. I'll be working this weekend to get the database customized to their needs.

The database allows for the importing of data from a requisition form (in Excel) so double entry is reduced. It also work with our sourcing website (JobsiteBuying.com) so you can import the data directly from the web without needing to save the file first.

Jenni will go down for a couple of days and train the 2 users. She will also introduce our inventory and equipment tracking systems.

On a related note I had a meeting with a contractor last week that still uses a 4-part form and a file cabinet when they issue PO's. They are ripe pickings for a change and this DB could help them as well.

Intractibility

Travis Tilton — Fri, 15 May 2009 01:22:00 GMT

I have been reading The Google Story to see if there are any ideas I could apply to JobsiteBuying.com. I read a particular paragraph that I can relate to. During the first year the Google guys were trying to build and monetize their search engine they said the following...

"During the first year we collectively had concern that the market we were pursuing was more difficult and intractible than we originally imagined."

Exactly. They had already proven their search engine was the quickest and most accurate in the world but they found businesses unwilling to adopt their better mousetrap. The key word was "intractibility".

The answer to intractibility is time and persistance. Eventually people will catch up with new ideas, the trick is to last long enough to see it through.

Our first week of sales for JobsiteBuying sourcing service

Travis Tilton — Sun, 10 May 2009 19:41:00 GMT

The first week of sales is behind us and I think we locked up 9 suppliers to pay for the site. We even got our first sale on Tuesday and had the check in hand by Friday! Nice (and thank you Mid-States Supply).

My time is taken up training the customer service / technical support person so I can only spend so many hours a day making phone calls or doing demonstrations. More time will clear up after this week when the training ends and I can be out doing this 100% of the time.

I have to really focus on the Contractors. There are many approaches to take but they all revolve around helping them find qualified suppliers for whatever their project needs at the right price. This lets them keep their eyes on the project and out of the trailer. We can help with sourcing as well as keeping their contacts in an easy to manage format.

This week we should close about 3-5 more suppliers. I'm only working on the lowest hanging fruit right now until my time frees up. Oh, yeah... business cards have been ordered as well as the sign on the window for the front door of the office! HAHAHA!!! Really critical stuff!

New supplier database

Travis Tilton — Mon, 04 May 2009 01:24:00 GMT

There is a lot coming to a head at work. JobsiteBuying.com is finished with testing and goes live tomorrow, our JobsiteBuyingLIVE service starts pretty soon, and we are turning our supplier database upside down by moving it to a custom built application in MS Access.

There actually are 2 databases. One is for our sourcing business that is only for JobsiteBuying suppliers and the other is for our procurement side and is open to just about any supplier and commodity. The JobsiteBuying database will be kept in just that department but the procurement database will be available to everyone.

The 2 big improvements are

1. You can select the zip code of a project location as well as the commodity type being sourced. Without needing to click anything a result pops up that shows only those suppliers that are relavent. The previous database would only show suppliers by commodity but you had to visually scan for the suppliers that serviced particular areas.

2. We also put all the sales contacts on the Suppliers main page that is accessible by double clicking the Supplier name in the search result. It's very handy to see everyone's phone, email, and title in one easy to read spot.

Most of next week will involve moving our contacts to the new databases. We can't import very much becuase there was no uniform way of data entry in the old database. There was no accurate way to map the transfer. Oh well, lesson learned about that.

New CRM application

Travis Tilton — Tue, 28 Apr 2009 21:24:00 GMT

    I have needed to buy a CRM solution for some time. With jobsitebuying.com going live next week it will be necessary to keep track of which Contractors and Suppliers I've spoken with and how everything is progressing. It will be very handy when the other territories such as Kansas City and Chicago start up to see how the salespeople are spending their time.

     I looked at Act! and SalesForce. SalesForce seemed to have better user reviews so I signed up for a free 7 day demo. To make the story short, it seems like a good fit and I signed up for 1 year of access (there is no software, it's an online app) for $99. I can add up to 5 other users at the same price each.

     The system also came with a "call center" for logging problems and issues, something I've had on the JSB.com bug tracker for a long time to help with Critical Sourcing's problem resolution process. Bonus!

     I can add accounts, contacts, leads, opportunities, calls, tasks, events, notes, documents... and everything ties to the right account or contact in an easy to track way.

     So, 2 thumbs up for SalesForce. If it becomes 2 thumbs down I'll post something about it later.

Website goes LIVE May 4

Travis Tilton — Wed, 22 Apr 2009 00:17:00 GMT

Our web based e-sourcing application specifically for the industrial and commercial construction industry will finish testing May 1 and go live May 4. Whew!

The site is up and running at www.jobsitebuying.com and you can read a little more about the application at www.criticalsourcing.com

We will be opening sales/service territories in St. Lous, Kansas City, Denver, Chicago, Indianapolis, Cincinnati, and Memphis. If you know someone who has strong sales or procurement skills and knows area contractors then I may have a great job for you!

Supplier consolidation at Anheuser-Busch

Travis Tilton — Tue, 21 Apr 2009 19:45:00 GMT

The link below deals with a beachwood supplier for the brewing process at Anheuser-Busch, makers of Budweiser and other beers. http://www.stltoday.com/blogzone/the-platform/editorial-writers-notebooks/2009/04/the-new-a-binbev-chipping-away-at-traditions/

This is a great example of an owner looking to reduce costs by bidding out the bulk of materials required to a single supplier. I live in St. Louis and nerves are still raw about AB being sold to a foreign company, so anytime it looks like the "little guy" is being screwed it makes the news.

On one hand there is an American company that has been producing beachwood to AB for over 60 years. On the other is a foreign company that has been supplying AB for a much shorter period of time. Well, the bids went out and the foreign company had the best pricing and met the specifications. American company is closing its doors...

Did AB make a bad decision? Not from a cost point of view. But faced with a similar decision, keeping the economy of the US in mind and the bad press over the last year about no longer being an "American" beer... I may have made a different award.

A baseball analogy

Travis Tilton — Thu, 16 Apr 2009 13:57:00 GMT

Our largest client has been in a nasty outage/turnaround at a power plant in Illinois. Many requests have been last-minute notifications with deliveries required ASAP. Generally this is nothing new and is very much what makes purchasing for industrial contractors different from manufacturing where more planning is generally the norm.

But we haven't done a good job at all on this project. Deliveries have had terrible backorders, unqualified suppliers have been given orders, and nothing has been easy. I'm sure there will be a meeting at the end of the job where we will have to explain just why our performance was not up to the usual level.

As I was thinking about this it occurred to me that it could be a slump. Just like some of the best hitters in baseball can go several games without seeing first base it seems like we were missing some routine swings at pitches. Those hitters see the same 88 mph fastball thousands of times a season. Some days those pitches end up in the upper deck. Some days they whiff.

The way to get out of a slump is to get back to basics and practice. As there is no chance I would explain our mistakes as "being in a slump" to our client it would be simple to say we forgot the basics. We didn't qualify our suppliers (our stance was open), we didn't follow up critical orders with delivery updates (we didn't swing through the pitch), and we failed to recognize a systemic problem with how this job was being run (we took our eyes off the ball).

So, it's time for myself and the purchasing agents involved to go back to reading some basic process reminders and work a little harder at getting our game back to where it was. All-Star level!

Handling internal customer issues/problems

Travis Tilton — Tue, 14 Apr 2009 19:27:00 GMT

You can't make all of the people happy all of the time. Knowing that, there will be times the performance of either you, your office, or your staff will fall short of expectations. How should you handle it?

If the complaint is even slightly valid, fall on your sword. Take the blame for the issue fully and on behalf of everyone who may have led to the letdown. There is a difference between fault and responsibility... the responsibility is always yours, if not the fault.

There are varying degrees of error. If the mistake or instance was of little consequence assure the internal customer a lesson has been learned and won't be forgotten. If the problem is bigger move on to your problem resolution processes. In all cases assure the person bringing up the complaint that it is being reviewed and thought of. Follow up with some type of resolution or explaination in the future.

If you are faced with a constant low-level back chatter that "purchasing always makes mistakes" but nobody can ever seem to give specific issues or instances please let it be known to everyone involved that you have an open-door policy and welcome any/all constructive criticism. Never argue, just listen.

Nobody is perfect. Avoid being defensive and always look to be as helpful as possible. When you are faced with criticisms that are unfair or inaccurate just remember that there is a reason the blame is heading your way. Find out what that reason is and improve or change it. Your reputation will go a long way!

New Supplier scorecard in the works

Travis Tilton — Mon, 13 Apr 2009 14:31:00 GMT

It's time for me to revisit the scorecard used to measure the suppliers I do a regular and significant business with. The form I currently use has worked in the past, but it has been several years since I've looked around to see if I can find some ideas to incorporate into the process.

I'll start with the internet then call some Contractors I know who are using scorecards to see if we can exchange some ideas.

When I'm done I'll include a link to our new scorecard. The one we currently use is at http://www.criticalsourcing.com/News/SupplierEvaluation.xls.

One idea that jumps out at me is to find a way to tie actual circumstances of non-conformance or errors to the scorecard. I have been thinking about adding an issue tracker to our website, there may be a way to get both the scorecard and the issue tracker working together.

Another idea is finding a way to review the scorecard with the suppliers I measure. It could be a way to align objectives and let them know what is important in determining how spend is allocated and PO's awarded.

Anyway, I'll write more about this later as I get into it. Have a great week!

A Good Friday emergency

Travis Tilton — Fri, 10 Apr 2009 23:09:00 GMT

3:00- A truckload of tools and supplies needed immediately for a jobsite 4 hours away on GOOD FRIDAY?

8:00- Unloading should be done.

Nice! (Jenni and Doug get the credit)

Planning ahead

Travis Tilton — Tue, 07 Apr 2009 13:58:00 GMT

I had a meeting with a pipe mechanical company yesterday near St. Louis and spent most of the time discussing how their purchasing process works. It soon became clear that they were a typical "reactionay" company where requisitions were usually an emergency and there was rarely time for the competative bidding process to take shape.

Yes, there are going to be circumstances where you dig a hole expecting to find pipe A but instead find pipe B. You had expected to work on pipe A, had the materials for pipe A, and now find yourself stuck until you get the proper pipe B items can arrive to the jobsite. This happens, and nothing will ever change.

However, all too often a contractor waits until the morning of opening that hole before he orders the excavator, shovels, safety supplies, trenching equipment, and radios. Why? It was pretty clear yesterday that digging a hole was required. Wouldn't a little bit of planning be prudent?

Sometimes I think Critical Sourcing is victim to its own success. Because we successfuly manage our suppliers and have a grasp of what can be acquired with short notice we have managed to get the excavator, shovels, etc quickly and the superintendent never realized he was on the brink of not working that day.

Also, it greatly limits the pool of suppliers a purchasing agent can use if things are always an emergency. A supplier may keep a warehouse of tooling and supplies that can ship to a jobsite, but there is no chance of getting items same day or first thing next morning. Many of those suppliers have competative prices that you are locked out from taking advantage of. You are stuck with only the local suppliers when you are dealing with last minute orders.

So, Supervisors... let us save you some money and ensure you get what you really need. Please don't wait until the last minute before letting us know what you need to keep working. Thanks!