How Are Supply Chain Issues Affecting the Construction Industry?

Like most industries around the world, the construction industry saw heavy affects since the 2020 COVID-19 pandemic, 3 years later they are still working to overcome these disruptions. As we move forward, construction businesses and contractors are still working diligently to create new ways to stay within their project budgets, find new materials to outsource, and recruit skilled laborers for the future.

Increased Project Costs

Supply chain disruptions have significantly changed the cost for construction which has made it difficult for construction companies to stay within budget for their projects. One solution to this problem is during the design phase, avoid selecting materials that may not be readily available when it comes time to procure. This process may require making material substitutions that stay within your budget and ordering your raw materials as soon as possible to ensure these products arrive within time.

Skilled Labor Shortages

In 2020, when the pandemic struck the world, many construction projects slowed down and even stopped completely. Due to construction being put to a halt, the Associated Builders and Contractors reported that an estimated 1.2 million workers will leave the construction industry altogether to seek out a new career path. As businesses learned to mitigate the effects from COVID-19, construction projects have resumed but labor shortages remain an issue. These labor shortages have increased the demand for skilled workers but the current construction workforce is made up of low-skilled workers such as laborers. These low-skilled construction workers will drive up demand, wages, and cost skilled labor.

Material Shortages

Before the pandemic, common construction materials were readily available to be purchased by construction companies. In the last couple of years, procuring these same materials has been difficult as these materials have been on backorder or unavailable altogether. Since these materials have always been available, contractors have now found themselves considering material substitutions to maintain project budgets and schedules. It is important that your business to communicate project timelines with suppliers, order locally if possible, and order product ahead to lessen the impact of material shortages.

High Prices

In April of 2021, the Associated General Contractors of America issued a Construction Inflation Alert which recorded a jump of nearly 13% in material costs for contractors and subcontractors. When prices began to inflate, contractors found themselves paying a much higher price for the same projects. Essential construction materials like steel saw a price increase of 20% or more, which is most likely caused by the losses from the pandemic. Though the U.S has been recovering from the pandemic, contractors are still struggling the high prices for their projects and are finding ways to mitigate these issues until prices drop.

Recovering from supply chain issues amidst has been an uphill battle as the construction industry finds new ways to overcome labor shortages, increased cost, and lack of materials. As a reputable 3PL with over 30 years of comprehensive supply chain management, NewStream understands first-hand the difficulty of overcoming these disruptions amidst the pandemic. Our team of experts are equipped with the knowledge and expertise your business needs to outsource proper materials and let someone else handle the details so you can focus on the bigger picture and love your supply chain!

Ready to get your business back on track? Let’s chat, our experts are waiting to help!