Enhancing Supplier Collaboration Through Integrated Project Delivery (IPD)
Every construction team is only as strong as the weakest links in its supply chain. Forging healthy supplier relationships is the key to reinforcing them, which can be challenging when competition reigns instead of collaboration. Fortunately, integrated project delivery (IPD) is gaining momentum. This new delivery method promises to nurture vendor relationships at every turn, showing other sectors like manufacturing the way forward on supply chain disruption mitigation and long-term business partnerships. In this article we will explore the benefits of enhancing supplier collaboration through integrated project delivery.
Pressing Buyer-Supplier Relationship Management Challenges
IPD exists because conventional project delivery methods fail to inspire sustainable cooperation between customers and vendors. Traditional models that force all parties involved to look out for themselves and behave selfishly to the detriment of others produce undesirable outcomes, including supply chain bottlenecks, project delays, productivity loss, cost overruns and mistrust. Putting a premium on collaboration can address these common challenges permeating supply chains.
Budget-Focused Procurement
Cost efficiency is front and centre in procurement decisions. However, hiring the lowest bidders may translate into higher profit margins on paper — but not necessarily more value in practice. Concentrating too much on discounts while overlooking the intangible aspects of a business relationship can be a costly misjudgement.
Unnecessary Contractual Disputes
Contact-related conflict between buyers and suppliers generally stems from various sources. Miscommunication, unclear expectations and cultural differences are the usual suspects. Disagreement can destroy budding relationships and sour established ones.
Unsatisfied Delivery Commitments
Lengthy lead times have been a thorn in the side of construction stakeholders for years. Although demand surges and supply shortages can be unpredictable due to some uncontrollable factors, shipment delays can be self-inflicted. The customer may overestimate the counterparty’s capacity to scale and make good on its promise. The vendor may miscalculate the inherent geographical problems of the other party’s location.
Widening Technological Gaps
Working with technology laggards renders supply chain management more burdensome than it should be in the 21st century. Partnering with less innovative suppliers can lead to communication breakdowns, material traceability issues and delayed visibility.
Disrupted Trade Routes
Geopolitical, black swan and climate change-related events have paralysed global supply chains. Take the Russo-Ukraine War as an example.
Importers in the United Kingdom relying on hundreds of millions of pounds worth of iron and steel shipments from Ukrainian material suppliers had to scramble and find alternative sources quickly to minimise the armed conflict’s impact on their businesses. While these disruptions are bigger than any organisation, they become larger headaches when customers and vendors are less in tune with one another.
How IPD Fosters Healthy Buyer-Supplier Relationships Through Collaboration
IPD is about evenly spreading risks, responsibilities and rewards among all stakeholders. This ambitious goal is attainable by involving everyone in a single contract inked before the design phase begins.This method requires a high degree of planning and cooperation from all sides early on. However, it’s a feature, not a bug. Even sceptics agree the early involvement of key stakeholders is a desirable characteristic of collaborative procurement models.
Critics say IPD limits the stakeholders’ ability to adapt to changes and adjust accordingly as the project progresses. Although the method’s advocates acknowledge this potential drawback, they highlight that robust supplier relationships can prevent most problems and quickly neutralise unexpected issues when they manifest themselves.
How does IPD foster healthy customer-vendor relationships? This method can spur engagement between relevant parties, optimising supply chains in these ways.
Maximising Cost Efficiency
Contractually splitting the risks and rewards between buyers and suppliers compels all stakeholders to work together. Although the suppliers willing to commit more time to project deliberations and after-hour correspondence may charge more, they’re worth the expense. Working with them helps reduce curveballs that cause project holdups, such as subpar product quality, prolonged lead times and pending regulatory hurdles.
Promoting Transparency
IPD encourages customers and vendors to view one another as equal partners that benefit from each other’s successes instead of competitors that gain from the other’s losses. This project delivery incentivises honesty, allowing both camps to understand one another’s objectives, requirements, expectations, concerns and apprehensions.
Mutually agreeing on key performance indicators and metrics ensures all sides are on the same page, creating a win-win situation. Managing supply chain uncertainty is less demanding when all parties trust one another.
Aligning Mutual Goals
Buyers and suppliers are more likely to work together in mutually beneficial ways when neither side thinks they’re getting the short end of the stick. Reconciling distinct business goals requires lengthy negotiations.
Both must reflect on the risks they wish to mitigate and the rewards they aim to obtain. Healthy risk-reward trade-offs are powerful motivators. For example, extrinsic motivation like bonuses and referrals can increase profit by 21%, driving teams to overdeliver.
The talks can be gruelling. Still, both parties can have fruitful discussions to craft a just, flexible contract and ultimately see eye to eye when everyone acts in good faith.
Encouraging Knowledge Sharing
Embracing IPD helps create a culture of knowledge sharing within the team and external partners. The rosier the outlook of future deals is, the greater the incentive to compare notes and streamline their processes.
Cloud-based solutions have rendered remote collaboration painless. Communication tools and web conferencing apps support real-time exchanges of critical information, decreasing confusion, misunderstandings and conflicts.
Adopting IPD for Stronger Buyer-Supplier Relationships
Collaboration is a sustainable path to mutually beneficial business partnerships in construction, manufacturing and other sectors. Customer-vendor relationships endure when founded on transparency, fairness, trust and goodwill. While IPD is novel relative to other project delivery methods, it ticks all the right boxes.
Author Bio
Jack Shaw, senior editor of Modded, is a respected authority on industry and business strategies. With a deep understanding of supply chains and a talent for breaking down complex concepts into easily digestible insights, Jack’s articles offer a fresh perspective on current trends and processes.
IoSCM procurement courses are available at a range of levels to support every stage of your career and further the duties and responsibilities of your purchasing department. From procurement training for beginners (covered in Levels 2-3) and advanced purchasing training courses (Levels 5-7); there’s online training for purchasing managers of all skill levels.