The construction industry is project heavy. By being managed project-by-project, the spend is often both disjointed and very convoluted. More often than not, when it comes to the cost of individual projects, managers can’t or won’t factor in indirect expenses (such as transport costs), even though these costs are critical for project-based activities.
Instead, project managers often focus solely on the direct construction costs such as material and manufacturing costs. Thus, neglecting a significant part of the total spend.
The reason why this happens varies from person to person, company to company, project to project. But based on our experience, this can often be traced back to the lack of easily accessed, reliable and concrete cost data.
Developing your procurement strategies in construction
A robust, well-documented procurement strategy, based on facts, data, and analysis, is an important part of planning a successful delivery of a project. It is developed during the planning phase of the procurement life cycle where two of the key objectives are to assess a range of delivery options and negotiate with vendors.
The importance of concrete cost data
Knowledge is power, and data is knowledge.
Having access to vast amounts of cost data is necessary for you to get the most out of your suppliers. It gives you important insights into both direct and indirect costs concerning the procurement process for construction projects and the industry as a whole. This cost data and information will give you an edge when negotiating with your suppliers, or at least level out the playing field.
Using procurement software in construction
The difficult part of it all is accessing the cost data. While you can scour the net and contact manufacturers for the cost data yourself, it’s a fairly convoluted process requiring both time and effort. Instead, you can use so-called construction procurement software. It’s a specific type of procurement system in construction to access indices on all relevant cost drivers such as raw materials, manufacturing costs, tax & transport costs, labor costs and currencies.
Using construction procurement software is on the rise of becoming one of the most prevalent procurement strategies in construction for two reasons:
- It saves a lot of time allowing you to focus your efforts on your core business and preparing for the negotiations with suppliers.
- Gives you access to reliable and continuously updated indices to be utilized in a fact-based negotiation strategy.
Using Prognos as your procurement software in construction
Using Prognos as your procurement system in construction gives you access to all the cost data you need in order to get the most out of your suppliers, with data tailored for your specific situation. The Prognos system gathers data from multiple sources to give you up to date data in one place for raw materials, manufacturing costs, tax & transport, labor costs and currencies.
Prognos is available as two different platforms:
- From our platform Prognos Tailored you can access interactive, continuously updated, reports where you can drill down in your materials, compare the prices to your own cost development, export the graphs, or export the underlying data for further analysis. The reports are customized for you by Prognos, leaving you to focus on the negotiation strategy and not on finding the data. You also get access to several different features including: should cost trackers, selected indices and country focus.
- With Prognos Online you get access to over 8 000 indices on raw materials, components, wages and currencies in an interactive online tool capable of transforming the data to fit your needs.
Get in touch with us to try out the Prognos platform today and experience all the benefits it means to use them.
Frequently Asked Questions
What systems are used in procurement?
There are numerous systems that can be used in the procurement process, and may be necessary to carry out certain procurement strategies in construction. These vary from total purchasing tools supporting you throughout the complete procurement process and project management tools to track the resources and status of each project, to tools such as Prognos where you can dive into the global cost data of your services and products to gain an edge in the negotiation with your suppliers.
What software is used in building construction?
There are numerous software solutions used in building construction including project management software, construction accounting and payroll processing software, as well as construction procurement software. Depending on the nature and complexity of the project, as well as your situation, you may need one or all of them to ensure a smooth construction process while keeping the costs to a minimum.
What are the benefits of a procurement management tool in the construction industry?
An efficient procurement system in construction requires a high level of micro-management to ensure protection from potential risks and losses to the company. However, micro-managing, in most cases, is unfeasible for the parties involved. This is where construction procurement software tools shine through.
- Efficient cost management
- Minimized (shared) risk in long-term contracts
- Effective administration
- Complete transparency
- Reliable global indices data
- Helps you identify the best vendors and prices
What is procurement management?
Procurement management is the process of selecting the right products and services for a project. The process involves in-depth research and brainstorming about the product to project relevance, quality, long-term return on investment, payment, service delivery, and most importantly, risk mitigation.
Using a procurement strategy in the construction industry helps you select the most cost-efficient choices that provide long-term returns for your business.
What is procurement in the construction industry?
Procurement in the construction industry refers to all purchasing activities to obtain the necessary products and services to complete the project. The construction procurement process may differ from company to company, project to project, but should encompass all direct and indirect purchases, as well as the procurement of services.
What are some Ccommon problems in construction procurement?
- inability to find the best supplier
- cost management issues
- inaccurate data
- poor planning
- energy and time mismanagement during resource sourcing
- no standardized procedure
- better cost control in longer projects
Adopting construction procurement software can help tackle common problems faced in the procurement process.
How can Prognos' construction procurement software support supplier negotiations?
- The Prognos’ construction procurement software provides you with cost data customized specifically for your needs. No matter which vertical your organization lies in, the Prognos purchasing software for construction provides extensive information for you to conduct fact-based negotiations and receive the best deals within the market.
- The Prognos software provides you with automated reports consisting of should cost trackers, selected indices and country-specific focus allowing you to conduct fact-based negotiations efficiently and effortlessly with suppliers. This ensures you receive the best market rates and achieve cost efficiency in the procurement process for construction projects.