Ask the Expert: Construction and the Supply Chain

The Experts:

Lisa Unger, Principal, Unger Consulting and Insurance Services

Pete Fowler, President, Pete Fowler Construction Services; and Construction Consultant

QUESTION: What is the current state of the supply chain disruption?

Lisa Unger: Supply chain issues became apparent during the lockdown and continue to have the attention of many across the globe. Currently, the world is not only grappling with ways to find a “new normal,” but also to find ways to return to its pre-COVID existence. Interestingly, statistics have shown that, even before COVID, homebuilders found themselves facing challenging times.

Since 2008, evidence supports that construction projects across the board began to decline. Unfortunately, just as the industry started to regain momentum, it was faced with the worldwide spread of the COVID pandemic. This modern day challenge has wreaked havoc on all aspects of the construction industry, from initial planning to implementation to ultimate delivery.

Shortages in materials such as wood, steel, copper, and resin have all contributed to the supply chain logjam. Adding further complications, there are multi-dimensional roadblocks worthy of note. The construction industry has been forced to face the skyrocketing cost of materials, plagued with delays in production and unforeseen delivery stagnation, ultimately inflating price and negatively impacting the bottom line.

Pete Fowler: Detailed, advanced planning had always been what separated the best contractors from the rest. Because of the current supply chain issues, planning far in advance has become a make-or-break requirement. From the beginning of my career, we could reliably source virtually any material and product, or their functional equivalent, at relatively stable prices. No longer. Fixed price and completion date guarantees are harder to come by than ever. From a construction cost estimating and planning perspective, projects are now more expensive and taking longer.

Q: How do you see the supply chain bottlenecks being opened?

Fowler: In a word: slowly. The big interconnected machine that the world economy is today, it seems to me, is going to take a long time to get back to normal. My hope is that the additional planning discipline required, due to these trying times, stays with the construction industry as a “new normal.”

Unger: While supply chain issues remain unpredictable and severe, implementation of change—forced or organic—has created opportunities for outside-the-box thinking. With the goal of achieving pre-COVID productivity, economies around the world are still being resuscitated. Many non-conventional solutions are being sought as workarounds for the supply chain chokehold.

Companies have been forced to focus on supply and demand planning, creative inventory optimization, automation, and technology to curt both the short- and long-term effects of COVID-19 and supply chain issues. Furthermore, these issues have provided unforeseen opportunities for the maximization of technology and the advancement of the construction community as a whole. In order to predict success, we cannot just focus our eyes forward, but must also keep a glimpse of the pitfalls by way of a rearview mirror. This will allow construction businesses to build flexibility, lessen disruption, increase responsiveness, and enhance risk management as action plan initiatives. By taking some of the proactive and immediate actions, there is great potential that risk can be decreased, mobility increased, and operations in the construction world returned back to optimized with respect to productivity and results.