Tips for Overcoming Supply Chain Issues in the Construction Industry
From transportation to general retail, the global supply chain crisis has impacted every industry, and construction is certainly no exception. In fact, sectors where companies use raw materials and profit margins are tight are currently feeling the brunt of this worldwide issue. The U.S. Census Bureau and Whitehouse.gov recently stated that supply chain issues are pervasive in the manufacturing, construction, and retail sectors. Data also shows that these shortages are limiting business activity and growth.
While many economists initially predicted the supply chain crisis would come to a close in 2022, it’s clear it isn’t going away in the near future. To ensure you stay profitable and operations continue to run smoothly, Join, an industry-leading preconstruction software company, highlights three tips to position your business for healthy growth, even during the supply chain crisis.
The State of the Global Supply Chain
The Covid-19 Pandemic broke many of the most critical links in the supply chain. Between high demand and low supply, daily operations have become a struggle. For businesses operating in the construction industry, material shortages and shipping delays are now par for the course. From lumber and steel to flooring and concrete, every physical ingredient of a successful build seems to be scarce.
However, it’s important to realize that the current supply chain crisis is the product of more than just Covid restrictions. For instance, logistics companies need to reroute millions of containers due to the Russo-Ukrainian War. Between switching from land to sea travel and extending routes, the cost of raw materials and shipping has skyrocketed. The MIT Sloan Management Review and American Shipper found that the cost to ship a container from Asia to the U.S.’s East Coast climbed from around $1,400 per container to roughly $20,000.
The panic purchasing during the pandemic also sent suppliers into severe shortage issues, which caused the supply chain to buckle under unprecedented demands. As consumer demands increased, there were also massive labor shortages occurring across the United States.
To add to the confusion, the shipping industry had to deal with a whole lineup of unforeseen circumstances. Extreme weather conditions such as floods, fires, and a polar vortex altered or even stopped some shipments from making their voyages. Plus, the week-long backup at the Suez Canal prevented nearly 400 ships from making their timely deliveries.
Manufacturers also realized a significant weakness in just-in-time (JIT) inventory management. While it allows companies to operate leanly, it also minimizes the probability of having a safety stockpile for emergencies. So while there are a myriad of benefits of JIT, such as quality control, reduced financial liability for businesses, and decreased environmental waste, it doesn’t do well in unpredictable times.
All that being said, there are strategies to combat the challenges of the current supply chain crisis. With the right technology, you can organize a new timeline during preconstruction that’ll keep you on track from concept to completion.
1) Place Orders in Advance (Where Possible)
If we accept that supply chain issues will continue for the next one to two years, it’s essential to meet these challenges with foresight. More specifically, companies should place orders months in advance to ensure they’re ready when construction starts.
While there are many materials that a client needs to select during the preconstruction phase, you can get ahead of it by outlining clear milestones. These milestones should include not only architectural choices but also sign-offs on specific building supplies. Be it the windows, doors, ceiling paneling, or light fixtures, it’s essential to get orders in early.
Using collaboration software as a service (SaaS) specifically designed for construction can centralize decision-making. By tracking, monitoring, and documenting decisions, you can dramatically improve information flow between stakeholders during preconstruction. When you get approval on one of your milestones, get your building materials ordered quickly.
*Pro Tip: If you haven’t already, you might want to consider writing a policy into your client proposals that details when, how, and if material changes can be made. Because building materials are harder and more expensive to source than in previous years, any last-minute changes to a project will be costly. Ensure you’re going into each build with a firm understanding between you and your client about what can and cannot be changed, and who will ultimately incur the cost.
2) Have Proof that Prices Have Changed
Every business in the construction industry is dealing with material and shipping price increases—plastic construction products jumped 30 percent, aluminum rose 37 percent, and steel mill products soared 142 percent since October 2020. Yet, until the cold hard figures are in front of them, many stakeholders may be unaware of just how significantly supply chain issues have impacted pricing. Instead of using rough estimates and ballpark pricing, generate up-to-the-minute project reports that break down costs for pending decisions.
For instance, with Join, every stakeholder can have all the information they need to collaborate effectively and keep projects on budget. The project’s overall cost is recalculated with every pending and accepted decision. Not only will clients see what they’ll going to spend, but they’ll also see how much they’ve saved.
3) Use Tools that Promote Flexibility
In complex and uncertain times, business agility is essential. In order to adapt to market changes, respond to changing customer needs, and find your competitive advantage, you need a solution that adds stability in the wake of chaos.
Using preconstruction collaboration software can help you ensure you can respond effectively and expeditiously to new opportunities, minimize the risk of rework, and streamline collaboration and communication with every stakeholder. With up-to-the-minute reporting, your team and your clients will always be ready to pivot and add value to every element of your project.
Leverage Tech to Minimize Supply Chain Risk
Join customers are growing faster than their peers in the construction industry. With collaboration software, this user-friendly and robust, you and your team can plan, implement, and deliver top-quality builds and avoid many of the new pitfalls of the global supply chain crisis. If you’re ready to streamline your workflows and maximize your profits, request a demo to see what Join can do for you.