How Suppliers Can Lose $500k of Your Revenue

Posted by Michael Leonard on Dec 6, 2018 9:56:04 AM

Years ago I was working for a general contractor. We specialized in public construction. Municipalities, Housing Authorities and other State-owned properties. Roofing, siding, windows and carpentry were our focus. Before the beginning of a new project I had been approached by a rep from a lumber yard I had never worked with before. He took me out to lunch, did the whole schmooze deal. His pricing was good, and I thought we were on our way to building a solid business relationship.

The new project was for a Housing Authority in central Massachusetts. It consisted of removing the flat roof decks off at 30 units, replacing the rotted plywood, and putting a membrane and sealant over the plywood deck. We had a crew of 12 carpenters on site. Deliveries were scheduled and double checked to make sure that everything flowed smoothly. Demo began and deliveries arrived. I had ordered a lift (approx. 50 sheets) of CDX plywood (amongst other materials), and everything should have gone to plan. Instead, I received a call from my foreman that the lumber yard had delivered OSB, not CDX.

This is a problem for a few reasons. First, OSB is particle board and should not be used in that application. Secondly, I had submitted my product data to the architect for each building material we would be using on the project. As soon as they discover the wrong product was used, it would have to be removed and replaced. Third, and most important to me at the time as the project manager, I now had 12 guys standing around, each making $67.38 an hour with no plywood to install. Every hour those guys weren’t working, it was costing the company $808.56. That will eat into profits just as fast as you think it would.

I called the sales rep regarding the delivery of OSB instead of the CDX plywood that was ordered. His response was, “The yard must not have had a full lift of CDX, so they  sent OSB instead”. I was stunned. How could he be so dismissive about this? But then I started to look at the situation from a salesman’s point of view. He just wanted the sale. He didn’t care about my job, and apparently neither did the yard crew. He wasn’t interested in a long-term relationship. This said a lot about him as a salesman (and a person), as well as the company. I never bought from him again. I estimate they lost out on roughly $500,000 in sales in the 10 years I was with that GC.

Over that time, I had built solid relationships with dozens of suppliers and subcontractors. Always taking careful note of who knew what they were talking about, who had decent pricing, and who I could trust. Sometimes, the suppliers I bought from did not in fact have the lowest pricing. But maybe I knew they had the inventory, were dependable to fill my order properly, and I wouldn’t have to worry about them coming through for me.

I would be willing to pay $1.38 more per sheet of CDX plywood if I can rest easy that you will in fact deliver…CDX plywood.

Topics: exterior remodeling, project management, supplier relations

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