5 ways construction companies can strengthen supplier relationships

In the construction industry, the strength of supplier relationships can make or break a project. With tight deadlines, fluctuating material costs, and complex procurement processes, maintaining strong ties with suppliers ensures that projects run smoothly and remain on budget. As competition grows and supply chain issues fluctuate, construction companies should take proactive steps to build and maintain these relationships.

Here are five effective ways construction companies can strengthen their supplier relationships and create long-term, mutually beneficial partnerships.

1. Streamline payments with virtual cards

One of the most important factors in supplier relationships is timely payment. Suppliers rely on steady cash flow to purchase materials, pay their own employees, and keep their businesses running smoothly. However, payment delays are a common issue in the construction industry, often due to outdated payment methods, manual invoicing, and complex approval processes.

Virtual cards offer a modern solution to this problem. By implementing virtual card payments, construction companies can ensure that suppliers are paid faster and more securely. Virtual card numbers are generated dynamically for each transaction and/or for specific merchants. They are not tied to the physical card numbers themselves but are linked to the original card account. Additionally, virtual cards offer enhanced security, as each card number is unique to the transaction, reducing the risk of fraud or unauthorized access to funds.

For suppliers, receiving payment quicker builds trust and may encourage them to prioritize that construction company for future projects. By using virtual cards, construction companies demonstrate their commitment to efficient, reliable, and secure transactions – a key factor in maintaining strong supplier relationships.

2. Create clear communication channels

Clear, consistent communication is essential for maintaining strong supplier relationships. Construction projects are complex, often involving numerous suppliers delivering materials and services at different stages of the build. Any miscommunication – whether it’s regarding delivery schedules, material specifications, or payment terms – can lead to costly delays and disputes.

To avoid these pitfalls, construction companies should invest in digital communication tools that allow for real-time updates and transparent information sharing with suppliers. Supplier portals, project management software, or even simple communication tools like email or text can keep both parties on the same page. These tools can be used to share important information such as:

• Delivery schedules and project timelines
• Material specifications and quality standards
• Payment schedules and terms
• Updates on potential delays or changes in the project scope

In fact, according to a 2022 survey by Cornerstone Projects, 34% of respondents said improved monitoring and regular updates were the best way to mitigate delays. This was closely followed by better access to information like site drawings and plans before work begins (29%), improved scheduling and project management (28%), and greater adoption of tools such as 3D modeling software like BIM (14%).

By having an open line of communication, construction companies show their suppliers that they are valued partners. This also allows suppliers to voice concerns or propose alternative solutions early in the process, reducing the likelihood of costly misunderstandings later on.

3. Agree on flexible payment terms

Construction companies often face fluctuating demand and cash flow issues, but so do their suppliers. Offering flexible payment terms can alleviate some of the financial strain on suppliers, particularly during periods of high demand or economic uncertainty. Some flexible payment terms include:

• Early payment discounts: Offering suppliers early payment in exchange for a small discount benefits both parties. The supplier gains faster access to cash, while the construction company may receive a discount on materials or services.
• Extended payment terms: Conversely, during slower periods, construction companies may negotiate extended payment terms with their suppliers. This flexibility helps suppliers maintain steady business even when the construction company is experiencing a downturn.
• Customized payment plans: Tailoring payment plans to the needs of individual suppliers can strengthen the relationship by showing their willingness to collaborate for mutual benefit. This could include installment payments, milestone-based payments, or other arrangements that align with both parties’ cash flow requirements.

Offering flexible payment terms not only strengthens trust but also encourages suppliers to prioritize your construction company’s projects over competitors who may be less accommodating.

4. Collaborate on cost-saving initiatives

Yahoo Finance ranked construction as the eighth most competitive industry globally in 2023. This competitiveness stems from the industry’s consistently high demand, coupled with intense competition and limited opportunities for differentiation.

In a highly competitive industry like construction, companies are always looking for ways to reduce costs without sacrificing quality. Suppliers, with their deep knowledge of materials and the supply chain, can be valuable partners in identifying cost-saving opportunities.

Construction companies should actively engage suppliers in discussions about how to optimize material usage, reduce waste, or find more cost-effective alternatives. For example:

• Bulk purchasing: By purchasing materials in bulk, construction companies can often secure lower prices from suppliers. In return, suppliers benefit from the larger order size and the certainty of future business.

• Just-in-time delivery: Collaborating with suppliers to implement just-in-time delivery practices can reduce the need for large on-site material inventories, saving both storage space and money. Suppliers, in turn, may benefit from more predictable delivery schedules.

• Cost-effective materials: Suppliers may be able to provide insights into alternative materials or construction methods that achieve the same outcome at a lower cost. By involving suppliers in the value engineering process, construction companies can reduce costs while maintaining quality.

By working together to find cost-saving solutions, construction companies and suppliers build a sense of partnership, making both parties more invested in each other’s success.

5. Leverage technology for procurement efficiency

To maximize efficiency, construction companies should use technology to streamline procurement operations. Tools like supplier portals, procurement software, or enterprise resource planning (ERP) systems help:

• Automate order placement and tracking to prevent missed or delayed orders
• Monitor supplier performance with key performance indicators (KPIs) like on-time delivery and quality
• Ensure compliance with agreed terms and conditions
• Reduce administrative work by automating accounts payable, invoice processing, and payment approvals

Virtual cards can easily be implemented into these systems, simplifying payments and ensuring faster, more secure transactions. By adopting digital payments like virtual cards, companies show suppliers they are organized and committed to efficient, long-term partnerships.

For more insights and updates on corporate payments, check out:

• Your guide to virtual card rebates
• 2025 payment trends
• Is the secret to better cash flow management AI?

Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.

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The information in this blog post is for educational purposes only. It is not legal, tax or investment advice. For legal, tax or investment advice, you should consult your own legal counsel, tax, and investment advisers.

Resources:
Cornerstone Projects
Yahoo Finance