The whipsaw change over the past two years has fragmented the construction supply chain, leading to bottlenecks that were never envisioned before the pandemic.
Contractors say that their biggest challenge is getting materials to job sites for installation. Items like structural steel joints, windows and door frames that used to take a couple of days to deliver are now taking months to arrive.
RSM monitors bottlenecks like these in the broader economy through its proprietary RSM US Supply Chain Index, which tracks the state of the supply chain over the past 20 years. Although the delays have eased in recent months, they are still far worse than in normal times, the latest reading shows.
For construction firms, the delays are creating significant logistical problems for an industry that depends on keeping a tight schedule and minimizing volatility. If just one material is held up, or one subcontractor cannot meet a deadline, an entire project can be delayed.
The result can be a setback of days, weeks or even months, with a commensurate impact on profitability. That is why our clients and contractors have told us that they are more concerned about supply chain bottlenecks than the rising cost of goods.
| Your local Yanmar dealer |
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| CLM Equipment Co |
But most contractors are spending the majority of their time editing and re-editing project timelines to ensure that the right people are on the right job, with the right materials, at the right time.
A survey conducted last year by Associated General Contractors noted that 88 percent of construction firms were experiencing delays, with 75 percent of those citing longer lead times and shortages of materials as the reasons for the delay.
The biggest roadblocks, contractors are telling us, are steel and lumber. Both products have soared in cost, with the increases made worse by tariffs imposed in recent years. The Trump administration, for example, imposed a 25 percent tariff on steel, and the Biden administration doubled the tariff on Canadian lumber to 17.99 percent from 8.99 percent.
Many construction trade groups, not surprisingly, have lobbied for reductions in these rates, but to no avail. At the same time, China, the largest exporter of steel, cut production last year, and plans to continue those reductions this year. Lumber production in the United States continues to be hurt by wildfires in the Pacific Northwest and by a mountain pine beetle infestation.
Find Alternatives
Can other materials be used, and are they available?
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| Kirby Smith Machinery |
Look at the Contract
What are your contractual rights, including general conditions and price escalation clauses? And are you making sure that appropriate terminology is included in all new contracts?
Communicate Early and Often
Are you in regular contact with suppliers and customers about the status of their projects? This is the most important step to take. Communicating with suppliers about delivery dates and needs for a project will help them understand what is needed and allow them to plan appropriately. The same goes for customers. It’s a simple step, but it goes a long way in ensuring project success.
