Construction Supply Chain post-COVID

Paul Hill, Chief Operating Officer Dayhill Group

There’s no question that the effects of the COVID pandemic are being felt across many industries. For construction, two major pain points were labor shortages and supply chain disruptions. Now, post-COVID, the push to build again has further strained the supply chains and have forced contractors to re-think or re-design their supply chains, and it’s forced suppliers to do the same.

External Disruptions Matter

Recently with post-pandemic needs in construction supply, coupled with other issues like the bottle neck of cargo ships blocked by a grounded vessel in the Suez Canal, the construction industry’s heavy reliance on a global supply chain has shown how sensitive it is to these external disruptions. The domino effect of this discontinuity results in increased costs, job delays, and even effects construction lending.

One example of a major component in construction being affected is the cost of lumber. Lumber prices have risen by as much as 375% over the past year, and prices are just beginning to come back to earth. Other supplies like specialty items, flooring, tile and more, which are typically sourced from global manufacturers, have been delayed if not completely unavailable. This has forced construction companies to look more regionally, which has put a strain on that supply as well.

Rethinking and Making a Stronger Supply Chain

If we don’t learn from all of this, then we’ve wasted the experience. I know, it’s not an experience we want to go through again, but my years in the military have taught me that if you plan for the worst, you’ll never be disappointed. This experience has forced many to rethink the Just-in-Time (JIT) supply chain methodology. This isn’t a call for scrapping it completely as it’s a very effective and cost-efficient way to supply the much-needed materials without having to have large stocks on hand. That said, another saying we have in the military is that you can never be really ready, but you can be prepared. Your level of preparedness matters, especially when major unforeseeable events happen. Most manufacturers were not anticipating a virus to shut down their plant or cause labor shortages for long periods of time, and I’m sure contractors weren’t either. Rethinking the supply chain for both manufacturers and contractors to include a hybrid of JIT and on hand stock at both levels has to be more common moving forward. Any new methodology must also include a more diverse supply chain as well.