Every contractor likes a good deal, and buying construction materials in bulk could be one of the best. From keeping more dollars in your pocket to wasting fewer man-hours, bulk purchases can help your company reap long-term financial benefits. According to a forecast by Anirban Basu, chief economist at Associated Builders and Contractors Inc. (ABC), construction material prices are predicted to increase by almost 3 percent in 2015. As a result, bulk purchases might make more financial sense for your business in the coming year. Here, we outline the advantages of buying in bulk, and reveal how to determine if larger purchases could be an effective tactic for your business.
Save more money in the long run
Among all the advantages of buying in bulk, the possibility of getting more for your money is the first that comes to most contractors’ minds. These types of purchases, when made correctly, have the potential to be an effective money-saving strategy, says Michael Bellaman, president-CEO of ABC in Washington, D.C. “If you can take advantage of a scale purchase, you can lower your cost of business,” he says. “That’s provided you can move that inventory at a low cost to the project.”
Reclaim more man-hours
When contractors make a bulk purchase, they also gain an opportunity for better time management, says Michael Hydeck, owner of Hydeck Design Build Inc. in Telford, Pennsylvania, and past president and national chairman of the National Association of the Remodeling Industry. Bulk purchases eliminate the need for traveling back and forth from a store to pick up materials and help avoid a situation in which workers are waiting around for materials to arrive at the jobsite. “I’ve talked to a couple of different remodelers about this, and some of them have found out that their workers have gone three or four times a week to pick up materials,” Hydeck says. “If you calculate that time out, it’s time wasted. But the guy who buys in bulk, who has everything on the jobsite ready to go, he’s not sacrificing that time.”
Guarantee job consistency
While buying in bulk can play a major role in saving your business time and money, the advantages extend beyond the financial. The visual aspect is key in most jobs — a builder wants to have the same look across a building asset, or a series of building assets — so it’s vital that the materials used throughout the job remain consistent. Bulk purchases guarantee this consistency. “For example, you can buy Carrara, a whitish marble with gray veining, out of the same quarry. But if it’s purchased at different times and comes from a couple of different blocks, that marble could look totally different.”
Always have materials on hand
When faced with late deliveries, long lead times or supply constraints, contractors who already have materials on-hand should have a leg up on the competition. Having materials ready can be especially helpful when it comes to finishing jobs on or even ahead of schedule, Hydeck says. “When I do a kitchen, for example, before I start doing the demolition, I have the new cabinets on site,” he says. “A lot of remodelers will start the demolition, then order the cabinets, but that could take weeks. Plus, if the demolition goes a lot faster than you anticipated, your cabinets aren’t here.” While contractors might not specifically purchase cabinets in bulk unless they take on a large-scale building project, Hydeck says the idea of having the materials on site for smooth-running jobs is the key.
Finishing work on or ahead of time not only increases current customer satisfaction, but can also secure future jobs for your business. With this in mind, it’s important to consider tactics that can help you complete jobs as soon as possible, such as buying in bulk in some situations. “If you tell a client this job is going to take 20 days and you finish it in 15 because your time management was better handled, your client’s really happy,” Hydeck says. “If you told the client you were going to be done in that time and now you’re not done by day 30, you’re now getting an aggravated client who’s not going to recommend you.”
Thinking about buying in bulk? First, consider your job pipeline
While buying more materials upfront has its advantages, it’s smart to first ensure that such a purchase is the right move for your business. Contractors who have an extensive backlog are in an ideal position to take advantage of buying materials in bulk, Bellaman says. When contractors are already committed to jobs and guaranteed compensation, the risk of buying more materials at one time decreases because those materials are less likely to go to waste. “If you’re going to buy bulk as a contractor, you need an assurance that you know you’re going to be able to utilize the material,” Bellaman says. “You want to make sure that what you’re buying in bulk is going to be required across multiple projects.”
Because bulk purchases pay off when the materials can apply to a variety of jobs, Bellaman warns against ordering large quantities of unique materials. “You won’t want to buy anything that’s custom because your demand won’t be there,” he says. “Instead, buy something that’s relatively consistent that you know you’re going to have a need for.”
For contractors to gain the greatest benefit from a bulk purchase, they must also have an opportunity to influence job design and specifications. For example, upon building a 200-unit apartment building in which the properties will be rented out, it makes sense to buy 200 ovens in bulk, Bellaman says. But if the properties are for ownership, a bulk purchase would not be advantageous because each buyer might have a different oven preference. “In this instance, you would need to have some level of control over the design choices so that you can make sure that bulk purchase will be utilized and that your inventory will be expended,” Bellaman says.
Be sure to join the Lowe’s ProServices LinkedIn Group to read additional content and interact with other Construction/Trade and MRO professionals.