Related AssetBusiness Continuity Toolkit for General Contractors
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Even before COVID-19 there were concerns in the construction industry around the supply chain and costs of construction materials. Trade tensions across the globe, especially between two key supplier-buyers — the United States and China — led to rising costs and issues with materials acquisition process for some contractors.
"The cost increase of imported materials from China as a result of the newly implemented tariffs have shown the most significant impact on material costs so far this year,” Marc Padgett, president of Summit Contracting Group Inc., told National Real Estate Investor in November. “Approximately 60 percent of the cost increases we’ve seen recently are directly related to tariffs.”
Now, as COVID-19-related shutdowns and business disruptions factor into the construction material supply chain, contractors are facing a new unknown. A recent article from PNC Insights notes that the pandemic has clouded the ability to effectively forecast material costs and availability.
“There is a lot more uncertainty surrounding construction activity, costs and completion times,” says Ken Simonson, chief economist for the Associated General Contractors of America (AGC). “But actual impacts on projects under way have been minimal so far.”
But as quarantines shut down factories and cut supply chains around the world, some materials might become difficult or impossible to get — and that could drive prices up for those materials, even in a potential recession.
“Even when factories in affected countries re-open, they may not be able to get all of the inputs or labor they need,” says Simonson. “In addition, disruptions to internal transport, ship loading and unloading at U.S. ports will add to delivery delays, possibly for many months after the virus itself subsides.”
For commercial and residential general contractors, lumber and glass are often among the most in-demand materials. Lumber costs are on the rise again after prices dropped sharply over the summer of 2019. Good quality wood is not only expensive but hard to come by as well, and delays in shipping during the pandemic could mean less lumber to work with. Glass, despite being common, tends to be among the pricier materials used. It is also hard to work with, as certain types of glasses are very delicate, requiring specialized workers to handle.
Though costs of some materials, like steel, have dropped recently, COVID-related work stoppages or slowdowns in steel mills, cement and asphalt plants, manufacturing facilities and more could affect material production chains used in commercial, heavy-highway, utility and civil projects across the globe. Though as roadway, utility and other infrastructure contractors have largely been deemed as essential during the pandemic, their work continues. And they’re all keeping a closer eye on their current material usage.
Specialty contractors, including the electrical, mechanical and plumbing trades are also closely watching their material usage. Steel, aluminum and other metals, for instance are key to piping and ductwork and consistently in demand. Copper, meanwhile, is essential to everything from electrical wiring to plumbing. Already considered a semi-precious metal, contractors have had to keep copper under lock and key thanks to increases in theft from jobsites.
Fuel too is being closely watched as oil refineries halt production with less demand and transportation issues could mean wildly fluctuating gas prices in the months ahead.
While there’s no crystal ball for predicting tomorrow’s materials costs, preventing material waste is among the toughest — and costliest — challenges contractors can face. With so many moving parts on projects today, it’s easy to overlook just how materials, parts, tools and more are being utilized and accounted for. However, with already razor-thin profit margins and supply chain uncertainty in the near future, it’s clear that contractors are going to be scrutinizing their materials processes more.
Misuse of materials, theft, destruction and other material waste issues cost contractors tens of millions of dollars each year in potential profit. And, the volume of annual construction waste is expected to double by 2025 to nearly 2.2 billion tons worldwide, leading to a greater push for closer material tracking and recycling programs in construction.
The problem though, is that many contractors are not equipped with the right tools to effectively do so. As noted in the recent report, Improving Performance with Project Data, produced by Dodge Data & Analytics and Viewpoint, most contractors were still on some form of manual processes like spreadsheets or paper. In fact, in a comparison on use of automated software solutions versus spreadsheets, more than half of contractors noted spreadsheets still account for at least half of their data collection processes. And, 13% of general contractors and 9% of specialty contractors relied on only spreadsheets.
Spreadsheets, paper, and disconnected software solutions all leave the door wide open to errors, misinformation and delayed information, meaning that contractors are hard-pressed to achieve accurate material counts in real time or effectively track material usage and waste — while there’s still time to make course corrections or plan ahead.
To effectively track and manage materials, contractors need a modern, connected software solution that can provide real-time updates from the jobsite to the warehouse to the vendor supply chain.
The ViewpointOne suite of cloud-based construction management solutions provide just that. ViewpointOne gives construction companies an integrated software suite that seamlessly connects back-office professionals with field operations and entire project teams. Hosted in the cloud, ViewpointOne combines Viewpoint’s own leading construction ERP offerings with its collaborative team and field products, giving customers a single source of truth in an integrated and flexible system for managing operations, improving productivity and enabling better decision making.
ViewpointOne solutions let contractors:
Staying on top of materials, whether prices rise and supply chains struggle, or prices fall and materials are in long supply, will help contractors gain a competitive edge over their competition. When a contractor can show owners their house is in order and run a tight ship to control costs, they’re much more likely to develop long-term relationships and win more work.
Contact Viewpoint today to learn more about how ViewpointOne can help your organization gain control of its materials management, and operate in a more productive, seamless cloud environment.