How Can Facility Managers Lower Their Multifamily Purchasing Costs?
Author: Tim Moegen
May 19, 2023 - 4 MIN. READ
High inflation is pushing up multifamily purchasing costs. As of November 2022, overall inflation as measured by the U.S. Department of Labor reached 7.1%. Rising prices for supplies, parts, materials, and labor are exerting strong pressure on multifamily property owners to contain costs and maximize NOI. Reducing costs increases net operating income (NOI) dollar-for-dollar, and still relatively low capitalization rates means each additional NOI dollar is more valuable.
Meanwhile, rent inflation has been driving up the value of multifamily properties. Therefore, from a multifamily asset management perspective, it is crucial to preserve the value that comes from escalating rents by maintaining or adding tenant desired amenities.
As facilities managers are responsible for maintenance, repair, rehab and operation activities, they must manage capital expenditures effectively.
Optimizing multifamily purchasing is essential to success in cost control. Doing so is a powerful way to combat inflation on capital and other expenditures for multifamily properties. The keys to success in improving multifamily purchasing lie in executing the activities shown below.
You cannot manage purchasing effectively if it is scattered and run by different groups. Putting it all in one place enables control and improvement.
Use technology tools to centralize, standardize, and automate purchasing processes and documents. It is impossible to evaluate the performance of separate and conflicting processes.
Manual processes or the use of multiple vendor portfolios are just too slow and are un-trackable.
Understand your spending using a technology platform. Gather and centrally store accurate, complete, and timely data. Without it, you are lost.
The days of paper records and Excel spreadsheets in multiple places are long gone.
Aggregate your spending volume by categories
Concentrating spend volume drives leverage with suppliers. Categorizing allows you to apply the appropriate expertise, experience, and technique to each category. In addition, you cannot properly analyze bits and pieces over widespread geographies.
Apply strategic sourcing techniques to high-spend categories
Centralization and solid spend categorization are crucial to strategic sourcing. Otherwise, it is unmanageable.
You need to meet your suppliers head-on with clear, accurate information. You can assume that they will be well prepared.
Track the performance of suppliers
If you cannot quantify performance, you cannot track it. And if you cannot track it, you cannot improve it. Manual tracking processes are not effective. They are too cumbersome and inconsistent.
Once again, automation and tracking tools are important because they make performance tracking possible.
Enforce compliance with contracted deals
Rogue spending is an invisible leak in your saving programs. It can swamp purchasing efforts and cost you credibility with suppliers and stakeholders. You must track rogue spending to control it.
Automation of compliance tracking using a purchasing platform is essential. Such purchasing platforms are easier to use and more effective than manual methods.
And you must enact policies to discourage rogue spending and publish performance reports to bring non-compliance to light. Buying units that comply should be recognized, as should those that do not.
Leverage group purchasing through Group Purchasing Organizations (GPOs).
You may not have enough purchasing power to get the deep discounts you seek. In that case, consider a GPO. GPOs' core business is aggregating the business of their member customers to negotiate better price deals than they can get on their own. They are compensated through membership dues and sometimes other fees from members.
In return, GPOs provide all the sourcing, technology, and administrative services needed. Simplified billing is another major benefit to customers.
And all of this is provided as one-stop shopping. If you need lighting fixtures, paint, carpeting, and electrical panels, simply go on your GPO platform to get deep discounts.
By going with a GPO, you can forego all the time, effort, and resources you would need to initiate and manage purchasing initiatives. You can hit the ground running much sooner than going it alone.
Ravien has the solutions.
With Raiven Marketplace, multifamily property managers can optimize their purchasing processes with its easy-to-implement, easy-to-use purchasing platform. Raiven provides support from start to finish.
Everything from purchasing to spending analysis to compliance is on one platform with Raiven Marketplace. All of your spending is aggregated in one place to maximize your purchasing leverage and enable effective strategic sourcing.
Key benefits include:
- Pre-negotiated discounts that are generating average client savings of 7-25%+ from big name suppliers like Ferguson, HD Supply, Grainger, Graybar, Office Depot, and more.
- Supply chain alerts for price and product availability changes on the items that matter to you most.
- Private marketplace houses all your preferred suppliers in one location for easy access to your discounts. No more bouncing around websites comparing prices.
- AI-powered purchasing tools that find the lowest prices even when employees shop outside your network.
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