Unprecedented supply chain impediments continue to threaten the construction industry after an already costly year of widespread material shortages. The latest rise in lumber prices amounted to more than an $18,000 increase on the average single-family home, according to the National Association of Home Builders. With price spikes, shipping delays, and an on-going labor shortage, the problems are compounding for contractors.
As of May 2021, shortages in 21 product categories were impacting more than half of builders—in some cases, the impact was nearly universal. According to Kative Kovac of Phil Kean Design Group, extreme lead times for materials like “lumber, trusses, windows, and fixtures” are causing unprecedented delays and pushing back project deadlines.
Meanwhile, a lack of skilled labor also leaves building sites without the help needed to complete existing projects. “Labor has probably had the largest impact on our projects, which has greatly impacted the completion date for our homes,” says Kovac. “All trades are so busy that they can only allot so many of their workers to our job sites instead of an entire crew like they have in the past.”
Expect Delays to Continue
While multiple, persisting problems test professionals in every vertical of residential construction, product delays have been especially pronounced this last year. Bryan Sebring, owner of Sebring Design Build in Naperville, Illinois, attributes his 2021 frustrations to changing delivery dates and, what he says, feels like an endless cycle of delays. Worst of all, there seems to be no quick solution.
“I have talked to many people that work shipping and logistics, and what I’m hearing is that this is not going to change for at least 18 months.” According to Sebring, institutional changes must come first. “Lobby our government to increase benefits for more of these products to be produced in the US. Too much is produced in foreign countries.”
On a smaller scale, Sebring suggests keeping consumers in the loop throughout the building process and conveying the reality of the situation early on. “Set expectations during the first sales meetings and throughout every single meeting. I find that telling stories about what has happened with similar projects helps set a tone of what could happen,” says Sebring.
Setting realistic expectations for a project’s closing date may seem like a futile endeavor so far in advance, which is why some pros like Manal Bala, Senior Purchasing Agent of Thrive Home Builders, are keeping their deadlines open-ended. “We do not set closing dates until the cabinets are installed in the home to ensure we can meet the closing date,” Bala says.
Monitor Fluctuating Lead Times
After months of problem solving, Kovac suggests strategizing for a more efficient year ahead. Backorders are likely to extend into the first quarter of 2022, but by making quick changes now, builders can be prepared for the obstacles still to come. “The only advice that I can provide to other builders is to plan ahead. In construction we’re always planning ahead, but now it’s planning even further ahead,” Kovac says
Kovac suggests that other builders may better stick to project timelines by working to get ahead of orders and keeping up with lead times. “It’s making sure that you study and learn the lead times of every product needed during construction and making a plan to order ahead,” she says. “We’ve started ordering things so far in advance and storing them either on-site or at another location to ensure the items needed are readily available when we need them to install in order to not slow a project down.”
Be Flexible and Empathetic
Though industry-wide issues impact some aspects of the job more than others, many builders found that the pandemic had a domino effect on their businesses. When the first problems were introduced in the early months of the pandemic, many more followed closely behind, affecting everything from marketing to building production.
Despite the inevitable irritation that comes with industry-wide shortages, Bala encourages her peers to keep their patience and understanding. “I would say: be flexible in your specifications and diversify manufacturers. Treat your trades with respect and empathy because their jobs are not getting easier,” she says.
Builders should be open and communicative with their partners not only now but in the months ahead with more potential obstacles on the horizon. Bala suggests having “stronger and more transparent relationships with your trade partners. For example, we moved most of our order tasks in our schedule to occur 3 weeks before we start the home to ensure our trade partners have enough lead time for material orders to meet the schedule. We also have a trade partner council that has been in place for 4 years. The primary focus this year was what we can do to minimize the impact the pandemic has had on our operations.”
Had the pandemic never happened, Bala believes Thrive Home Builders would be ahead of its agenda with no lost cycle time and surging demand from consumers. Instead, the Denver company has closed 124 homes in 2021, 19 short of its original projections. Nonetheless, Bala encourages builders not to linger on the problems at hand, but to focus instead on the solutions.
“So many people in the industry use the pandemic as an excuse to why something is on backorder or why their job is taking so long,” she says. “These challenges that we’re currently facing are reasons to make a change and improve the industry or to improve your business.”
The challenges ahead are daunting to say the least, but national builders have already worked through two years of a supply chain storm, and many have acclimated to a work environment now susceptible to quick changes. Kovac credits this success to the resiliency of the construction industry at large as it continuously evolves to accommodate an inconstant business landscape.
“In our niche of the construction industry, we’re always striving to improve our system and increase our efficiency. That’s what comes with growth. Business models constantly evolve from year to year because the industry is ever changing and evolving as well.”
With evolution comes adaptation, and 2022 is likely to be a year of big change for industry leaders and the construction sector as a whole. As national builders look onward to the new year, they’re laying the necessary groundwork to tackle a supply chain crisis and to get back on their feet for good.