Recently I went for an interview at a local Chinese company.
To my utter surprise, and at the end of the interview, the Chinese lady interviewing me asked why the Indian contractors always price their tenders very low and thus end up winning most projects.
(She had seen on my resume that I had previously worked with an Indian Company).
One of the reasons that prominently featured was bulk purchasing of construction materials.
You see, most Indian contractors have mastered this art and thus end up having a competitive edge as most clients will go for the lowest tenderer.
So, what are some of these materials they buy in bulk and how do they end up saving on costs?
Cement
As one of the most commonly used material in any project, buying this item at a discounted price will always save you costs.
Take for example a contractor who has a project that needs 5,000 bags of cement.
At this quantity, he is able to bargain with a supplier such as Mombasa cement so that instead of buying one bag at KES 750, he buys at KES 650 thus end up saving KES 100 per bag.
This translates to a net saving of KES 500,000 not to mention the additional savings on transport.
Reinforcement Steel Bars / Rebars
It always good to have a quantity surveyor or construction manager or fundi calculate the quantity needed for your project.
Then, you will need to prepare a very nice storage location with good security for most thieves’ target rebar’s on site.
Carefully choose a company of good repute such as APEX or DOSHI and negotiate for a good / discounted price.
The standard market price per KG is KES 120.
If you are able to convince them to sell to you at KES 100 per Kg and say you need 10,000kgs for your project, you end up saving to tune of KES 200,000.
The other advantage is that your project will not delay / stop especially when building the concrete structure as they will be a steady supply of the material on site.
Always check the quality of the rebar prior to purchase. I recently saw the KEBS body putting an alert to the public not to buy steel from a certain supplier. Be wary cheap be expensive.
Bricks and Stones
Despite Bricks and stones being relatively affordable, purchasing them in bulk will ensure you have a steady supply on site in case of unforeseen breakages or wastage thus avoiding project delays.
Purchasing them in bulk also ensures that you have similar quality, say from the same quarry.
It will also save you on logistics costs. Let us say you are buying your bricks from Ndarugu and your site is located in Limuru.
You will have to pay for county license fees to transfer the bricks. If you buy in bulk, you will pay for this fee only once.
Additionally, if you buy in bulk, you will also be in a position to negotiate better prices with the suppliers.
Timber
Having worked in a timber yard for my uncle after form four studies, I saw the advantages of a buyer purchasing in bulk first hand.
For example, by then the body feet of pine wood was going for KES 50 if you purchased over 2500 board feets. For those buying less than 2500 board feets, we would sell at KES 60.
In fact, there was this contractor who wanted 4 x 1ft and 4 x 2ft for formwork of a new site in Dandora, Nairobi County. He purchased 10,000 board feets and he ended up saving a cool KES 100,000.
Another advantage I saw was that when you buy timber in bulk, you get the same quality. I mean, timber is not always the same quality as most people assume. Trees are always of different ages.
Chances are high that if you buy at a go, the seller had cut them from a batch of trees of the same age and thus the same quality. Again, different woods are always seasoned differently.
Tiles
Tiles are normally used for flooring and walling finishes.
I must insist, for tiles always purchase the required quantities to complete a site and don’t forget to add a 15% due to wastage as tiles are prone to constant breakages during installations.
The situation is more completed if you are importing tiles from abroad.
There was this site whereby the architect approved for us a certain tile called Monza. The tile was to be purchased from CTM Kenya, along Ngong Road.
Upon calculation, I informed my boss that we needed 200 boxes of the tile for the specified works. My boss upon enquiry was told that each box was around KES 4000 meaning he was required to pay KES 800,000.
Being an economical Muhindi, the boss said he would first buy 100 boxes at KES 400,000 and buy the rest as the works progressed. (He was banking on using money from subsequent payment certificates).
Now, as the work continued, I realized we were almost running out of the boxes and informed him to buy the rest. To our utter shock, CTM informed us that the remaining tiles had been purchased and we could only wait. On asking other suppliers, they informed us that they don’t stock the tile and can only be found at CTM.
To cut the long story short, the project delayed and we ended up paying for liquidated damages of KES 750,000 for the delayed handover of the project, and thus total loss.
Paint
Did you know that paint of the same color code and from the same supplier can vary from time to time?
And this not because of the incompetence of the supplier. No. It is due to the color pigments reaction varying from time to time.
This means brilliant white color from Basco purchased in May can be of different shade from the one purchased from Basco at around October of the same year.
And this is why you should always stock the paint in bulk if you have the finances to do so.
It will ensure you have uniformity of the color shades in the same room.
Of course, the above list is not exhaustive of all the materials that need bulk buying.
They are just but examples to explain the benefits of bulk buying of materials which are;
The downside of buying of materials is that;
To my utter surprise, and at the end of the interview, the Chinese lady interviewing me asked why the Indian contractors always price their tenders very low and thus end up winning most projects.
(She had seen on my resume that I had previously worked with an Indian Company).
One of the reasons that prominently featured was bulk purchasing of construction materials.
You see, most Indian contractors have mastered this art and thus end up having a competitive edge as most clients will go for the lowest tenderer.
So, what are some of these materials they buy in bulk and how do they end up saving on costs?
Cement
As one of the most commonly used material in any project, buying this item at a discounted price will always save you costs.
Take for example a contractor who has a project that needs 5,000 bags of cement.
At this quantity, he is able to bargain with a supplier such as Mombasa cement so that instead of buying one bag at KES 750, he buys at KES 650 thus end up saving KES 100 per bag.
This translates to a net saving of KES 500,000 not to mention the additional savings on transport.
Reinforcement Steel Bars / Rebars
It always good to have a quantity surveyor or construction manager or fundi calculate the quantity needed for your project.
Then, you will need to prepare a very nice storage location with good security for most thieves’ target rebar’s on site.
Carefully choose a company of good repute such as APEX or DOSHI and negotiate for a good / discounted price.
The standard market price per KG is KES 120.
If you are able to convince them to sell to you at KES 100 per Kg and say you need 10,000kgs for your project, you end up saving to tune of KES 200,000.
The other advantage is that your project will not delay / stop especially when building the concrete structure as they will be a steady supply of the material on site.
Always check the quality of the rebar prior to purchase. I recently saw the KEBS body putting an alert to the public not to buy steel from a certain supplier. Be wary cheap be expensive.
Bricks and Stones
Despite Bricks and stones being relatively affordable, purchasing them in bulk will ensure you have a steady supply on site in case of unforeseen breakages or wastage thus avoiding project delays.
Purchasing them in bulk also ensures that you have similar quality, say from the same quarry.
It will also save you on logistics costs. Let us say you are buying your bricks from Ndarugu and your site is located in Limuru.
You will have to pay for county license fees to transfer the bricks. If you buy in bulk, you will pay for this fee only once.
Additionally, if you buy in bulk, you will also be in a position to negotiate better prices with the suppliers.
Timber
Having worked in a timber yard for my uncle after form four studies, I saw the advantages of a buyer purchasing in bulk first hand.
For example, by then the body feet of pine wood was going for KES 50 if you purchased over 2500 board feets. For those buying less than 2500 board feets, we would sell at KES 60.
In fact, there was this contractor who wanted 4 x 1ft and 4 x 2ft for formwork of a new site in Dandora, Nairobi County. He purchased 10,000 board feets and he ended up saving a cool KES 100,000.
Another advantage I saw was that when you buy timber in bulk, you get the same quality. I mean, timber is not always the same quality as most people assume. Trees are always of different ages.
Chances are high that if you buy at a go, the seller had cut them from a batch of trees of the same age and thus the same quality. Again, different woods are always seasoned differently.
Tiles
Tiles are normally used for flooring and walling finishes.
I must insist, for tiles always purchase the required quantities to complete a site and don’t forget to add a 15% due to wastage as tiles are prone to constant breakages during installations.
The situation is more completed if you are importing tiles from abroad.
There was this site whereby the architect approved for us a certain tile called Monza. The tile was to be purchased from CTM Kenya, along Ngong Road.
Upon calculation, I informed my boss that we needed 200 boxes of the tile for the specified works. My boss upon enquiry was told that each box was around KES 4000 meaning he was required to pay KES 800,000.
Being an economical Muhindi, the boss said he would first buy 100 boxes at KES 400,000 and buy the rest as the works progressed. (He was banking on using money from subsequent payment certificates).
Now, as the work continued, I realized we were almost running out of the boxes and informed him to buy the rest. To our utter shock, CTM informed us that the remaining tiles had been purchased and we could only wait. On asking other suppliers, they informed us that they don’t stock the tile and can only be found at CTM.
To cut the long story short, the project delayed and we ended up paying for liquidated damages of KES 750,000 for the delayed handover of the project, and thus total loss.
Paint
Did you know that paint of the same color code and from the same supplier can vary from time to time?
And this not because of the incompetence of the supplier. No. It is due to the color pigments reaction varying from time to time.
This means brilliant white color from Basco purchased in May can be of different shade from the one purchased from Basco at around October of the same year.
And this is why you should always stock the paint in bulk if you have the finances to do so.
It will ensure you have uniformity of the color shades in the same room.
Of course, the above list is not exhaustive of all the materials that need bulk buying.
They are just but examples to explain the benefits of bulk buying of materials which are;
- Saves money
- Reduced transportation costs
- Consistency in the quality of materials supplied
- Eases project management by avoiding delays
- Store management activities such as inventory updates are made way easier.
- Buying in bulk fosters stronger relationships with suppliers.
The downside of buying of materials is that;
- you need to have a lot of capital.
- Investing too much money on materials can also affect the cash flow of the project and thus impact negatively other activities such ability to pay wages to workers.
- Bulk buying can also encourage theft on site and thus you need to invest heavily on site / store security.