Though multifamily is supported by a set of solid fundamentals, it's not surprising that workforce shortages, rising expenses, inflation, and global uncertainty have shifted the focus of multifamily proptech investment from consumer-facing technologies to those that solve operational challenges and reduce costs.

"Operational costs from property management to maintenance and utilities are also on the rise…Navigating this scenario necessitates the search for innovative solutions to optimize efficiency, without compromising quality." (B. Wallace, Fifth Wall)

WHY FOCUS ON VENDOR CONTRACT MANAGEMENT?

Multifamily operators and managers rely heavily on their vendor ecosystems to ensure the smooth and efficient operation of their business and their properties. And, vendors bring significant value to the businesses they partner with, including:

• cost-efficiency via outsourcing;
• expertise and access to cutting-edge innovations;
• risk mitigation through diversity of vendor choice or alternatives;
• the ability to scale when business demand rises or falls – and finally;
• competitive advantage by outsourcing non-core functions so that internal employees can focus on moving the business strategy forward.

The flipside is that vendors represent a significant part of an organization's budget. After taxes and personnel, vendor (supplier) related costs are the next largest operating expense for the apartment industry. (NAA)

Another way to look at it: A large portion of an organization's spend is locked in vendor contracts or agreements. Business value from vendors is achieved only when their contract commitments are met with quality.

So, doesn't it make sense to get a handle on the way your company organizes and manages its vendor ecosystem and contracts?

WHY IS THE MULTIFAMIY INDUSTRY LAGGING?

Despite its obvious importance, other industries are ahead when it comes to best practices, processes and technology to help manage vendor contracts (and relationships). These industries include technology, consumer goods, healthcare, media, and so on. It's unclear exactly why the multifamily industry is behind, but some reasons may include:

• Reliance on outdated legacy systems: Lacking flexibility and integration.
• Fragmented solutions: Existing software doesn't address multifamily-specific needs.
• Complex vendor ecosystem: It's a daunting challenge to manage a diverse range of vendors from maintenance, security to ILS or software providers across a portfolio of properties.
• Lack of awareness: Multifamily professionals may not be fully aware of the benefits of modern vendor management tools. Education and awareness are essential.

THE TIDES ARE TURNING! 

During a series of industry interviews with decision makers about their priorities and challenges, more leaders expressed the desire to gain control of their vendor contracts to reduce associated risks and contain costs.

"I wish there was a better way to save time getting, storing, and researching vendor contracts."

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"Centralizing our contracts has been on our roadmap for the last five years, but we still haven't done it yet."

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"My biggest problem is when contracts auto-renew from an unwanted vendor."

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"We don't know where our contracts are, when they renew, or if they align with our budgets"

At the end of the day, the proactive lifecycle of vendor contracts cannot end (be shelved and forgotten) once the document is signed. Fully realizing the value of your vendor investment is dynamic and ongoing. And, while vendor contract management may not be the most exciting subject, it is essential to reducing costs, waste and risk for any multifamily organization that works with vendors.

What do you think?