Implementing new capital project software can be challenging, because large industrial plant projects may involve hundreds of suppliers and stakeholders globally. Additional challenges are presented by the fact that capital construction projects are temporary in nature – businesses also tend to manage their individual investment projects independently from one another, which means that the same digital tools and same suppliers won’t necessarily be used across capital projects. If business management makes a purchase decision and implements a new SAP or ERP- system, at the end of the day, the organization doesn’t really have a choice but to learn to use the system. Unfortunately, the same rule doesn’t apply when trying to get external suppliers to commit to using new digital tools.
For the past twenty years, we’ve been working on onboarding entire capital project networks to our Material Handling System- which is a materials tracking tool for investment projects. Here are our tested and tried best practices for getting external stakeholders and suppliers on board with using a new project-wide capital project software.
1) Get it in writing
Include the use of your chosen software as a supplier’s obligation in your contracts. While legal contracts are not the best grounds for genuine motivation to use new software, these clauses are key to resolving potential issues with suppliers. When projects have hundreds of suppliers, which each may have tens of people working for your project, you’re bound to come across some individuals, who don’t want to collaborate using new digital tools. When more efficient methods of motivating the supplier don’t work, disputes are easy to resolve by referring to the contract, that the supplier has signed.
We for example recommend that our customers add the following clause to their contracts: “Suppliers are obligated to report details of materials, packages, containers and deliveries in the Material Handling System (chosen by purchaser as the materials tracking tool)”.
2) Keep your suppliers in mind when selecting capital project software service providers
Ensure that the software you’ve selected is easy to use for suppliers- especially, if getting the suppliers to adapt to using the software is a critical success factor for you gaining your benefits of using the tool. If the software you’ve chosen creates an unnecessarily large burden on suppliers and their processes, you can be sure that you’ll have a lot of unhappy stakeholders. For example, asking material suppliers in capital projects to RFID-tag all individual components and feed details of the tag id’s and components into a tracking system will cause a lot of extra work for the suppliers warehouse.
Here are some of the things you should ask a potential capital project software vendor to evaluate, how easy their software would be to use from the suppliers perspective:
- Which languages are supported? If you’re working with global suppliers, you want to ensure that the software is at minimum available in English
- How is onboarding and training of suppliers to the system handled? What do you handle, and what will our team be responsible for?
- How does customer support work, what times is customer support available and what is the cost? If you have suppliers globally, you want to make sure that customer support is not limited to for example, only European business hours.
- How long have you been in business?
- What feedback have you received from suppliers in past similar projects?
- Do you have any references we can contact?
- What resources do you offer after implementation and for what cost?
- What’s the long-term strategy for your business and the product?
3) What’s in it for the supplier?
Highlight the features of the software, that help the supplier and their processes. Rather than telling the supplier all the amazing benefits you get from the suppliers using your software, focus on the benefits for the supplier. For example, which of the following statements would make you more likely to cycle to work instead of driving your car?
- You should cycle to work, because the city wants to reduce traffic during morning hours.
- You should cycle to work to decrease the likelihood of getting certain diseases, increase your cardiovascular fitness, muscle strength an flexibility all the while reducing stress and your carbon footprint.
I’m sure most of you picked the second option. Work with your software service provider to identify all the benefits for the supplier. They might be able to give you insights based on their previous customers, projects and feedback from supplier networks.
For example, we encourage our customers to highlight, that the Material Handling System (MHS) creates automatic packing lists that always meet the purchasers needs. That means, that the material suppliers don’t have to worry about creating new packing list templates. Another benefit of our software for the material suppliers is the transparency of information. Have any of your suppliers ever been in instances, where the purchaser claims that certain materials were missing from packages or certain deliveries never arrived at the project site? With a materials tracking system, everyone has access to same delivery information and images of delivered goods, packages and containers can be uploaded to resolve any potential disputes. Through using MHS, suppliers also get rid of a lot of manual Excel and email work and they have a real-time overview of their expensive cargo deliveries, giving suppliers some peace of mind.
4) Implement a no system use no pay -policy
A no PO, no pay policy is very common in many large companies. If use of the software by suppliers is business critical for you, consider implementing a similar policy in regards to use of your chosen capital project software.
For example, in some of our past projects, payment for materials has been released, once the goods have been marked as unloaded at the industrial plant projects construction site. If the suppliers are aware that they won’t get paid for products, which haven’t been input into the system, you’re bound to get detailed and correct lists of products and their delivery times.
Why is it important to get supplier buy-in on the capital project software?
The obvious key reason to aim for supplier buy-in of your selected software is that you can get better value for your organization. Building strong supplier relationships to last across multiple investment projects can bring dedicated service and preferential pricing. Through this, your supply chain becomes more efficient, cost-effective, and productive. On the contrary, when “forcing” new ways of working to suppliers without a proper implementation process, suppliers might start seeing interactions with you simply as negotiations and they might not be interested in mutual growth opportunities.
In the case of the Material Handling System, the role of supplier buy-in is especially highlighted. Materials and procurement can represent over 70% of an investment project’s costs. Getting materials delivered on time and having transparent material flows is a key player in the success of a capital project. In the Material Handling System, the information on the products and deliveries for the project team is only as good as the suppliers input.
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