Improving Purchasing Strategies for Australian Property Management

This report analyzes the current purchasing strategies of an Australian Property Management company and provides recommendations for improvement. The company currently follows a mix of multiple and sole sourcing strategies for different service aspects, such as building management, facilities management, concierge services, car parking, and cleaning services. The report suggests implementing multiple sourcing strategies for building management and facilities management, long-term agreements for facilities management, sole sourcing for concierge services, and multiple sourcing for car parking and cleaning services. These recommendations aim to increase the company's profit margin and provide better value-added services to tenants.

Property Management

Table of Contents
Introduction.................................................................................................................................................2
Current Purchasing Spend of the Australian Property Management..........................................................2
New Strategy Development for Australian Property Management.............................................................3
Final Report.................................................................................................................................................4
The investigation conducted and results.................................................................................................4
Data collected and constraints, such as inaccuracies or access to data...................................................4
Effectiveness of the current purchasing strategies..................................................................................5
Improvisation of current purchasing strategies.......................................................................................5
Recommendations.......................................................................................................................................5
Conclusion...................................................................................................................................................6
References...................................................................................................................................................7
1

Introduction
This report puts forward an essential view of the Australian Property Management company
located and operating in Victoria. This report goes on to assess five service aspects provided by
the company that has been efficient in incurring a profit margin. The report shows rough data of
finance and procurement derived from the company that would be able to assess the current
purchasing strategy in building management, facilities management, concierge services, car
parking, and cleaning services1. The mix of multiple purchasing strategy used along with ole
purchasing strategy is inefficient in providing bet value-added services and incurring more in
term of profit margin, and hence recommendations are provided through this report for the same.
Current Purchasing Spend of the Australian Property Management
As per the rough figures provided by finance and procurement the amount incurred from one
resident for annually around $2000 including value-added services. The information availed by
the finance and procurement department extremely limited. The company in five different
categories for one residential building is as follow:
Building Management- 1 vendor
Facilities Management- 2 vendors
Concierge Service – 2vendors
Car Parking- 1 vendor
Cleaning- 2 vendors
The rough figure for expenditure remains undisclosed. But as reported by the finance and
procurement department out of the total spending for maintenance and service, the company
spends 30% in Building Management, 30% in Facilities Management, 10% in Concierge
Services, 10% in Car Parking and 20% in Cleaning services2.
1Al-Aali, Abdulrahman Y., and David J. Teece. "Towards the (strategic) management of intellectual property: Retrospective and
prospective." California management review 55, no. 4 (2013): 25.
2Alexander, Keith. Facilities management: theory and practice. (Routledge, 2013).
2

New Strategy Development for Australian Property Management
From the information of finances and procurement procedures, it is evident that the procurement
process for each residential building involves single sourcing currently in most cases except the
facility management and cleaning service. This sort of a unique sourcing strategy is detrimental
for the company. In term of value-added services, a property management company provides, the
organization can earn more profit3. Such value-added services can only be presented at the best
of their abilities when the sourcing is from multiple vendors. Category wise purchasing strategy:
 Building management- Building management involves a lot of responsibilities, including
administrative duties, cleaning, having a concierge at all time to electrical work, and
others. In this case, the company manages cleaning and concierge duties separately. The
sole sourcing strategy would only be able to provide sub-par services in this case.
Multiple suppliers sourcing is a must in this case.
 Facilities Management- In term of facilities management, the Australian Property
management company would be better off with long term supply agreement. This would
help them provide proper service within a given period.
 Concierge Service- For the concierge services, the amount of assistance necessary per
building is quite limited. But the company has two vendors providing these services
which seem to be a problem and the company, in turn, is spending more than necessary in
this case. The investment percentage for this aspect is less as it is. But it can be lower and
more efficient from sole sourcing and having a single vendor supplying human labor.
This would reduce the cost of this aspect4.
 Car Parking- The car parking services provided for the residential building is supplied by
a single supplier with 10% of the total maintenance expense going into this aspect. It
seems like an easy task, but it has also been reported that an inefficient car parking
3Ansoff, H. Igor, Daniel Kipley, A. O. Lewis, Roxanne Helm-Stevens, and Rick Ansoff. Implanting strategic management. (Springer,
2018).
4Britton, Paul Stewart, Julie Elisabeth Campling, Noreen Dalton, Richard Raymond Dowell, Victor Jodean Grimes, Theresa Marie
Rynard, and Catherine Glot. "System and method for facilitating strategic sourcing and vendor management." (U.S. Patent
8,682,703, 2014).
3

service can be detrimental to the overall value-added service, which the company can
charge from the renters. It would be beneficial to go for multiple suppliers in this case.
 Cleaning Services- the company seems to apply multiple sourcing for cleaning services,
while that is an excellent strategy by having two vendors for a single residential building
of only a few occupants is entirely unnecessary5. There are multiple good quality sources
from which the company can purchase the supplies for this service, and only one quality
vendor would be sufficient.
Final Report
The investigation conducted and results
From the data provided by the company, it seems that the purchasing strategies followed in the
five chosen aspect of building management, facilities management, concierge services, car
parking, and cleaning are inefficient in earning the company an adequate amount. It is evident
that the entire expenditure is not utilized in the best possible way, and the current purchasing
strategies are to be blamed here along with other parameters, including procurement. If the
company better able to utilize its resources, it is possible to earn even more for value-added
services from the tenants more than the usual 10% cut of rent6.
Data collected and constraints, such as inaccuracies or access to data.
The data collected is insufficient to go for a thorough analysis and is only a rough estimate to
work through the issue faced by the companies. But the data collected does provide a percentage
wise estimation of the amount that is spent by the company in providing these services. The
company currently able to provide enough services to build an excellent reputation but it is
essential to go through the strategies being undertaken at the company to provide an overall view
of the changes that would be sufficient to develop new purchasing strategies7.
5Di Minin, Alberto, and Dries Faems. "Building appropriation advantage: an introduction to the special issue on intellectual property
management." California Management Review 55, no. 4 (2013): 10.
6Eppinger, Elisabeth, and Gergana Vladova. "Intellectual property management practices at small and medium-sized
enterprises." International Journal of Technology Management 11 61, no. 1 (2013): 75.
7Lee, Eugene M., and Dietmar C. May. "Computer assisted and/or implemented process and system for annotating and/or linking
documents and data, optionally in an intellectual property management system." (U.S. Patent 9,460,414, issued October 4, 2016).
4

Effectiveness of the current purchasing strategies
The current practicing strategies are inefficient to provide the best possibilities that the company
could have. The reports provided show that they do have a mix of multiple purchasing strategy
and sole purchasing strategy. This shows that the inefficiency that exists in strategizing the
purchase carried on by the company is not the best tracks to follow. It is easy to see that the
multiple purchasing strategy that is undertaken by the company for cleaning services and
facilities management insufficient in providing a great value-added service on behalf of the
company. Having long term agreement purchasing a strategy or ole purchasing strategy would be
enough to help the current situation.
Improvisation of current purchasing strategies
Building management and facilities management are two very important part of property
management other than value-added services. These two integral parts need multiple loyal
vendors and a long term agreement with quality vendors for each residential building. The other
three value-added services car parking, concierge and cleaning, are also of extreme importance
and hence the company mu tenure that they have a regular supply of services form the vendors
for the respective purpose of upkeep and maintenance of residential building along with multiple
purchasing strategy, long term agreements, and sole purchasing strategy as discussed8.
Recommendations
 Building management
 This type of service need upkeep often involving electrical work and other aspects of
maintenance for the building; this would need more than one vendor and hence a multiple
purchasing strategy instead of the ole purchasing strategy.
 Facilities Management- This sort of facility needs to have a long-term agreement solution
with a quality vendor as this would be a regular maintenance procedure that is prone to
face multiple hurdles.
 Concierge Service- the Company, has a multiple supply strategy put in place for this
service, it would be more effective to have a sole purchasing strategy in this case as that
would help with the increase in profit margin.
8Parker, David. "Property investment decision making by Australian unlisted property funds: An exploratory study." Property
Management 34, no. 5 (2016): 390.
5

 Car parking- The car parking service has a sole strategy purchasing method which is not
adequate; it would be beneficial to go for multiple supply strategy in this case9.
 Cleaning- The cleaning service has two vendors in this case for each residential building.
This is the strategy that is completely unnecessary depending on the size of the property;
it would be effective to make ole purchasing strategy in this case10.
Conclusion
In conclusion it can be said that the findings of this report suggests that although the data
provided is insufficient to assess the entire finance report but the procurement strategy involving
the purchasing strategy is not secure enough to have a grand profitable margin, instead of
implementing sole purchasing strategy for aspects of regular effective services the company
would need to implement long term agreements and multiple purchasing strategies as and when
required.
9Falkenbach, Heidi, TuuliJylha, Deborah Levy, Patrick McAllister, and Hilde Remoy. Outsourcing Property Management? A
Comparative Study. No. eres2016_149. (European Real Estate Society (ERES), 2016).
10Ye, Q. I. U. "Root causes of property management disputes in residential communities: analysis based on the perspectives of
structural deformation of property management contract and degeneration of contract binding power." Urban Problems 1 (2016): 15.
6

References
Al-Aali, Abdulrahman Y., and David J. Teece. "Towards the (strategic) management of
intellectual property: Retrospective and prospective." California management review 55, no. 4
(2013): 15-30.
Alexander, Keith. Facilities management: theory and practice. Routledge, 2013.
Ansoff, H. Igor, Daniel Kipley, A. O. Lewis, Roxanne Helm-Stevens, and Rick
Ansoff. Implanting strategic management. Springer, 2018.
Britton, Paul Stewart, Julie Elisabeth Campling, Noreen Dalton, Richard Raymond Dowell,
Victor Jodean Grimes, Theresa Marie Rynard, and Catherine Glot. "System and method for
facilitating strategic sourcing and vendor management." U.S. Patent 8,682,703, issued March 25,
2014.
Di Minin, Alberto, and Dries Faems. "Building appropriation advantage: an introduction to the
special issue on intellectual property management." California Management Review 55, no. 4
(2013): 7-14.
Eppinger, Elisabeth, and Gergana Vladova. "Intellectual property management practices at small
and medium-sized enterprises." International Journal of Technology Management 11 61, no. 1
(2013): 64-81.
Lee, Eugene M., and Dietmar C. May. "Computer assisted and/or implemented process and
system for annotating and/or linking documents and data, optionally in an intellectual property
management system." U.S. Patent 9,460,414, issued October 4, 2016.
Parker, David. "Property investment decision making by Australian unlisted property funds: An
exploratory study." Property Management 34, no. 5 (2016): 381-395.
Falkenbach, Heidi, TuuliJylha, Deborah Levy, Patrick McAllister, and Hilde
Remoy. Outsourcing Property Management? A Comparative Study. No. eres2016_149.
European Real Estate Society (ERES), 2016.
Ye, Q. I. U. "Root causes of property management disputes in residential communities: analysis
based on the perspectives of structural deformation of property management contract and
degeneration of contract binding power." Urban Problems 1 (2016): 15.
7