Navigating The Supply Chain Crisis
It is no surprise that the construction industry has faced great adversity since 2020. As firms grapple with global supply chain disruptions, general contractors continue to fight an uphill battle to maintain project budgets and schedules. Moreover, as the demand for construction projects continues to increase, the need for materials increases as well, creating a surge in demand that’s been weighing heavy on the supply chain.
What can contractors do about these issues? The good news is that the supply chain will inevitably reach equilibrium again, but in the meantime, contractors must be willing to adapt. At G&G Builders, we recognize that now is the time to make a positive, well-planned shift and utilize different approaches when working with clients. Here are our tips for navigating the supply chain crisis and ensuring your projects are completed with the highest quality and care.
Material Shortages & Rising Prices
Material shortages and rising prices are two common areas where construction companies see supply chain issues. These issues are not only creating challenging setbacks but are also causing the cost of materials to skyrocket. For example, the average cost of home-building products has risen since the pandemic began. In-demand items, such as lumber, concrete, metal, and general labor, are topping the list, with the cost of lumber alone reaching four times the cost of what it was in February 2020. In short, prices have fluctuated over the last two years while staying far above pre-pandemic averages, affecting budgeting goals and plans.
Increased Fuel Prices
Increasing the price of diesel is not as straightforward as simply paying more at the pump. In 2008, the price per gallon for gas hit a historical high of $4.11. In 2022, this record was far exceeded — with the average price per gallon reaching upwards of $4.25 (Custom Truck). As a result, construction companies are forced to factor in the high cost of running equipment and transporting workers to and from job sites. In addition, they also have to adjust pricing and budgeting to combat the rising costs of materials that require fuel for processing. The result? To offset the significant costs of doing business, construction companies are grappling with the dilemma of increasing prices for clients and risking them longer being able to afford construction services.
Strategies For Mitigating Disruptions
Each firm’s circumstances and resources may vary, but contractors can use these key strategies to navigate today's supply chain crisis. These five tactics likely will not eliminate supply issues, but they can help limit setbacks, delays, and shortages.
1) Pre-order What You Can
Work with suppliers to lock in material purchases before any schematic designs are finalized. If fast-tracking the submittal process falls through, make down payments on materials that can be fabricated later; this can help keep a project moving forward, allow you to have prices locked in, and may give a competitive advantage by securing steel or lumber before competitors do so.
2) Find Alternatives
Research how alternative materials can fit into your project and provide options for moving forward faster. While one material may be preferred over another, delaying a schedule by several months may not be worth it if an alternate design or manufacturer is an option.
3) Quickly Determine Scope of Work
In today’s world, excellent strategic planning is more crucial than ever, especially for those hoping to get their facilities up and running quickly. The faster the scope of work can be approved, the better it will be for their project’s lifecycle.
4) Be Up Front With Clients
Be straightforward and honest about delays and setbacks due to supply chain issues. Offer realistic estimates to potential clients, even if it is longer than they would prefer.
5) Consider Prefabricated Construction
Prefabricated structures produce a variety of time-saving benefits for both the owner and contractor. Proven in minimizing weather delays and scheduling issues, these structures expedite the inspection process and reduce material lead times - all while standardizing the level of quality and saving the client time and money.
It is difficult to predict when the supply chain will return to pre-pandemic rates and prices. However, at G&G Builders, we recognize the importance of delivering high-quality results that consistently leave customers satisfied, even amid an ever-changing supply climate. Our team genuinely cares about your project’s goals and scope. We’ll always be upfront about budgeting and keep lines of communication open to ensure you know what’s happening every step of the way.