The pandemic has wreaked havoc on building materials supply chains, driving up project costs and affecting companies from contractors to insurers. Pardis Pishdad-Bozorgi with Georgia Tech’s School of Building Construction discusses a few ways to minimize these impacts and stay within budget.
These include collaborating with engineers and architects during design to avoid selecting materials that may not be available when it comes time to mobilize and procure, ordering long-lead items early to lock in prices and communicating project timelines to suppliers.
1. Availability
The first problem building construction faces is the availability of materials. The extraction of resources and production of building materials didn’t come to a complete stop during the pandemic, but they did slow dramatically and caused issues such as supply chain disruptions, price increases, backlogs, and shortages.
Many of these issues have yet to be resolved. For example, steel and lumber prices rose sharply during 2021 and 2022 and haven’t yet returned to pre-pandemic levels. Additionally, the resumption of construction activity has increased demand for these materials, further contributing to their shortage.
As a result, common construction materials that were readily available before the pandemic are now difficult to find and often come with long lead times. For contractors that want to keep projects on schedule, this presents a significant challenge.
Contractors can mitigate these challenges by working closely with suppliers, establishing flexible procurement procedures, and using alternative materials where possible. Additionally, technology is a critical part of enabling these processes and providing end-to-end visibility. It enables the tracking of material shipments and inventory, enables logistics integrations to manage supply chain disruptions, and provides real-time views that can help companies make decisions on the fly to reduce delays. This is possible through solutions that provide an intuitive platform that enables teams across the organization to visualize and analyze data with ease.
2. Cost
Whether you’re working on residential or commercial construction, the supply chain for building materials can make or break your project’s budget. This is especially true when the price of building materials goes up. Material cost escalations can cause significant delays and potentially push projects over budget. To prevent this, contractors need to take a proactive approach and work with their engineers and architects during the design phase to avoid selecting materials that are not available at the time of mobilization and procurement. Additionally, contractors should communicate with suppliers as soon as possible and place orders to lock in pricing and delivery dates.
Another factor affecting material prices is the overall economic environment. Increased energy costs, which impact a variety of construction products, can also lead to higher prices for materials that require energy to produce or transport. Additionally, new geopolitical crises can disrupt global supply networks.
Labor shortages can also drive up the cost of construction materials. While construction activity is growing again, a lack of skilled workers limits how quickly and efficiently a contractor can complete a project. This, in turn, can increase the number of trips and wait times needed for delivering and receiving construction materials. It’s important for contractors to implement strong supply chain resilience strategies and closely manage their inventory to keep costs down and projects on track.
3. Quality
Construction requires strict adherence to laws, norms and standards to ensure projects are compliant, safe and deliver quality results. However, this can sometimes create a challenge for build professionals when trying to source materials that meet these requirements. This may be due to limited visibility, communication and supply chain integration issues that hinder the decision-making process.
Additionally, shortages can affect the quality of the materials builders are able to procure. For example, during the pandemic, shortages of critical building materials such as timber and drywall led to price increases, longer material lead times and delays for contractors. This also placed stress on alternative materials and caused a ramp-up in demand for those products, leading to shortages of alternative materials themselves.
These supply chain issues make it more difficult for builders to stay within budget and keep their project timelines on track. Builders can limit these effects by collaborating with engineers and architects during the design phase to avoid selecting materials that may not be available at time of mobilization and procurement, ordering long-lead items early to lock in prices and communicating with suppliers about project timelines. By using advanced technology, such as supply chain management software, builders can gain greater visibility throughout the supply chain and have an easier time connecting with alternative vendors to secure required materials.
4. Environment
The supply chain impacts the environment by producing air, water, and land pollution from raw material extraction and manufacturing to transportation. Additionally, it can deplete natural resources such as trees, metals, minerals, and fossil fuels. By implementing sustainability practices that are aligned with environmental standards, builders can minimize the impact of their construction on the planet.
In 2022, a variety of factors impacted the building materials supply chain including the upturn in housing projects following lockdown and global logistics issues caused by new geopolitical crises. This led to shortages of construction materials like drywall and roofing insulation. Additionally, prices increased for materials such as steel mill products and plastic piping.
Builders should consider these price increases and supply chain constraints when planning future projects. It’s essential to communicate project timelines with suppliers, pay supplier invoices on time, and order long-lead items early. Additionally, builders should be open to working with local suppliers when possible as this can reduce product price and lead times while minimizing delays.
Having visibility across the entire supply chain also helps reduce risk by providing a complete picture of all procurement processes. This helps avoid inefficiencies that can cause materials to be out of stock and delays in completing construction on schedule. When this occurs, contractors need to have a backup plan for sourcing alternative materials and maintaining project budgets.