Exploding Material Costs and Delays: Temporary Problem or the new normal?
As we head into Summer, most of us are looking forward to a more relaxed pace and leisure time with our families. While vacation is important, it will be a difficult Summer to disconnect in the construction industry as we are working incredibly hard to help clients solve the craziness that we are seeing and reading about in regards to cost increases and delays to materials: I thought it best to answer a few questions that many have expressed surrounding these issues.
Why is this happening?
Plain and simple: it's what we call a perfect storm.
Leading up to the pandemic: there was a strong demand for construction services and products.
In the heart of the pandemic: much of the supply chain shut down because manufacturers were ordered to do so, or they chose to do so if they could not safely provide a work environment for their employees.
In some cases, they expected demand to shrink.In the meantime, stimulus checks were dispersed to individuals and business and the increases for construction products and services did not slow down as some had expected.
Throw in low interest rates and plenty of cash in the hands of individuals, companies and banks and the demand just kept increasing.
As a follow up to these problems, we are experiencing extended employment benefits that have kept some workers from aggressively reentering the market place for work. Need more? How about a ship blocking the Panama Canal supply chain for weeks and a crazy storm on the gulf states in February! We do think this is a short-to-medium-term problem, but increases in many materials and delays in delivery appear to be continuing. Let's look at the chart below to illustrate:
What are we doing about it?
Here at Harman, we have been informing our clients for years about the value of including the builder early in the construction process. That is more important now than ever. We have been busy working with our clients trying to advise them on the timing of when to purchase products to ease the pain of these increases as much as possible. In some cases, we have strategically released some of the long lead time items that require shop drawings or approval long before the final details of the contract are in place and other less time sensitive material have been ordered. In some cases, as a design builder, we can change design quickly to identify products that can be purchased more cost effectively or quicker. None of it is simple, but there are strategies that can be executed to navigate these uncertain times.
We will get through this season like we always have. Our industry, like our Country is resilient. Enjoy your Summer. We'll sweat the details for our clients so they can enjoy some time taking life at a different pace... while we check on that plywood delivery for you!
