Are We Suffering Supply Chain Issues As a Result of Covid?
All across the construction industry, building firms both large and small are struggling to procure materials at usual prices and times. The downstream effect this has on the industry is enormous, because it puts pressure on delivery times, margins and project management.
Whether working on small domestic extensions or large scale infrastructure projects, the ability to get hold of materials at expected prices and lead times has caused additional headaches for construction companies and project managers alike.
Dealing with the perfect storm of supply issues
Construction firms are dealing with a perfect storm of problems at the moment, forcing them to act to protect supply chains. These problems have come from both expected and unexpected sources…
● Record low interest rates have lowered the cost of money to fund construction projects, which has seen an uptick in demand
● Covid closed down manufacturing plants the world over, reducing production of timber, steel, cement, plaster products and piping
● Brexit trade delays have seen goods from the continent delayed at the channel border
● The Suez Canal delay was something nobody saw coming, but has had significant (if short term) impacts on the delivery of Asian steel and materials.
In order to cope with these issues, construction firms have had to stockpile materials when they become available. The problem of course is that this creates shortages and drives prices up, impacting the wider industry and makes the problems of material supply and price worse.
The only real winners in this scenario are the merchants, who are seeing record profits. Even then, they are having to disappoint customers with long lead times and limited supplies.
Supply chain issues and rising prices
There is widespread reporting of the inflationary pressures on building materials. Basic supply and demand have seen prices of timber rise 80%, steel and copper rise 40% and paints rise up to 60%. This has squeezed margins for construction companies and has seen the price of construction work rise rapidly.
The impact affects everyone in this circumstance, so the industry is hopeful normality will resume soon.
Post-pandemic supply chains will look dramatically different. The flaws in the current system have been exposed, so governments and businesses will seek to address these issues by increasing domestic production of materials. The over-reliance on offshore supply of essential goods has put many countries on the back foot.
Some sectors of the construction industry have benefitted from the short term price hikes, but the wider industry has suffered from the high prices and lack of availability of essential materials.
If we’re going to build our way out of the Covid setback, we have to ensure our construction firms are able to procure materials quickly and at reasonable prices.
Project Management Support
With current additional problems of supply and margin pressures, construction projects have never been more difficult to manage. By using the MPS contract management software you can make a tough job significantly easier, staying abreast of all aspects of contract management regardless of whether you are using NEC3, NEC4 , FIDIC or JCT.