Procurement might not turn heads the way marketing or customer service does in the world of property management, but learning to purchase strategically can increase the asset value of a property, according to the “Strategic Procurement! Mastering the Art of Purchasing Intelligently” panel discussion at this year’s National Apartment Association Conference and Exposition in San Francisco, California.
An effective strategy for procurement and spending begins by standardizing the company’s purchasing policies, which must be tracked and enforced across the portfolio to gain traction and remain successful.
Here are three factors in building a more strategic procurement process:
Before rolling out a new procurement system, property managers should solicit onsite maintenance staff and encourage them to be a part of the process, said Jeffrey Weissman, a former multifamily operations executive who has worked for Morgan Properties as well as The Lynd Company. That is, make sure to secure buy-in from all stakeholders, because maintenance will be using the system as—or even more—frequently as the property manager.
Regardless of the particular system selected, property managers must also train maintenance personnel and have them report on a regular basis to ensure they continue ordering from authorized suppliers, said Krystin Reuter, director of procurement for Avesta.
Avesta implemented procurement software and cut costs (plus time) just by driving vendors to online invoices and catalogs, Reuter said. The expense to process invoices offline previously ran the company between $6 and $7 apiece, and Avesta can pay its suppliers in about half the time now, she added.
Dean Holmes, COO of Madison Apartment Group, said his company operated by a loose purchasing system and permitted ordering to be done from the field, but he would receive an avalanche of expenses at the end of the year (after bonuses were determined), and the surprises became increasingly cumbersome.
The company transitioned to an online procurement system, which allowed Holmes and his colleagues to clamp down on the runaway purchasing process and boost visibility into operations. The new approach also enabled the company to leverage partnerships with national suppliers such as Moen, and it barred onsite personnel from engaging in “rogue spending.”
Limiting orders further by their Stock Keeping Unit (SKU) gives property managers the ability to identify overpriced and impractical purchases made by onsite staff in the field, Weissman said.
Instituting a new procurement system can be difficult, and there will be hiccups, but as long as property managers stay collaborative and actively discuss the process with their onsite teams, the investment will be worth the time, Weissman said. Starting small can aid the transition, he added.
It can also be a big change for vendors, who will be required to operate within the new system, Holmes said. Property managers must be patient, but at a certain point they have to draw a line in the sand and resolve to work only with suppliers who are willing to improve the way they do business.
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