Despite the growth within the commercial construction sector over the past few years, there have been some adverse effects as a result of the global supply chain crisis.
Issues with the supply chain negatively affect the overall functioning of the commercial construction industry. So, it’s important to understand what these issues are, how they affect the industry, and what we have done to manage them. We take a look at all of these factors below.
Some Supply Chain Issues and How They Affect Commercial Construction
To make sure you have a well-functioning commercial construction project, you need to understand the supply chain issues that put it at risk.
Below, we take a look at some of these issues and how they affect the commercial construction industry.
The Cost of Materials
Cost fluctuations of materials have a major impact on the supply chain. Many commercial construction contractors are looking to the same suppliers for their usual materials but find themselves coming up short.
This is largely due to the imposition of higher tariffs on materials. The tariffs that have had the biggest effect on the industry include the tariffs on steel, aluminum, and lumber.
As a result, contractors have had to search for cheaper alternatives, which often slows down the initial start of the project.
This sudden price increase has led to cash flow problems, which further hinders the progress of a project. The higher the material costs, the higher the construction estimates and bids. Because of this, many investors have found themselves paying for projects by way of monthly or weekly installments. This leads to disruptions to the overall project.
Labor Shortages
The Covid-19 pandemic has severely impacted the commercial construction industry in several ways.
While the commercial construction industry has faced problematic skilled labor shortages for a number of years, it has been seriously escalated by the pandemic.
With many workers having to self-isolate when presenting symptoms, construction teams are often working with one or two team members down.
Plus, in some instances, potential workers were previously paid more in unemployment benefits than from weekly wages, creating an incentive not to return to work.
Paused Projects and Backlogs
Many of the supply chain issues have a knock-on effect when it comes to other aspects of commercial construction builds. For example, the higher costs and labor shortages mentioned above lead to paused projects and increased backlogs.
Now, construction projects are taking longer to start and finish which significantly hikes up the cost.
Further, unavailable materials have seen many projects paused with little knowledge of when they will start up again.
Global Supply Chain Disruptions
Supply chain disruptions on a global scale may have adverse effects on the local supply of materials. Many local contractors rely on materials sourced from the global market as they are far cheaper.
Plus, many contractors rely on global manufacturers for certain specialty products. For example, certain tiles or flooring.
However, because the products are either delayed or unavailable, contractors have now shifted to sourcing regionally-based materials. This has caused a problem in that there is higher demand with a minimal supply.
But, the pandemic has made this increasingly difficult. These disruptions have led to increased costs and delayed projects.
Global supply chain disruptions have also significantly impacted lender loan portfolios. This is the case where certain construction loans rely on robust labor and on-time deliveries.
How Can the Industry Adapt to Commercial Construction Supply Chain Issues
It is difficult to tell when the industry will normalize. So, it’s important to take note of how the industry can adapt.
Prefabrication
The best way to deal with labor shortages is to consider prefabrication materials. This is where certain components of the build are assembled offsite.
The prefabrication method allows for far more productivity with fewer labor costs. This is because workers don’t need to build or assemble these items on site. As a result, it boosts project efficiency.
Alternative materials
With the increase in material costs and availability issues, it’s best that contractors start looking at alternative materials. For example, cross-laminated timber. This material is great for walls, flooring, and even roofs. It’s widely available and is ready for assembly.
New building methods
To assist with project delays and backlogs, there are new, more efficient building methods to consider. New technologies have been launched that make the process a whole lot easier and faster.
For example, Insulated Concrete Forms are a new building method used to create the form for concrete pours. This method saves both time and money.
Final Thoughts
It’s clear that the construction industry has experienced challenges over the last two years. Cost increases, labor shortages, and the pandemic have not made it easy for all parties involved. However, there are several solutions that can help. These include using more prefabricated building components and using technology to save time and resources.