Construction in a time of tangled supply chain

Builders look for workarounds to survive headaches caused by shortages and delays.

Workers at Scotch Plywood in Clarke County do their part to make sure supplies are at the ready.

I’ve never seen anything like this during my career,ā€ said Gray Skipper, vice president at Scotch Plywood.

The pandemic continues to take its toll on lives and livelihoods; families and finances; individuals and industries.

In fact, every aspect of the economy and business has been adversely affected by a labor shortage, plant and business shutdowns and a broken supply chain.

The construction industry has, itself, been impacted on several fronts — price spikes, supply chain issues, lack of labor, revenue, schedules.

Factories have shut down creating a scarcity of building supplies. The lack of workers and surplus stock has contributed to construction delays and pushed deadlines.

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Billy Norrell, CEO of Alabama Associated General Contractors

ā€œOur industry is struggling mightily with the labor shortage,ā€ says Billy Norrell, CEO of Alabama Associated General Contractors. ā€œEvery one of our guys has a sign on their mailbox that says ā€˜Apply Inside.ā€™ā€

Construction companies must work within the time constraints of contract deadlines. Prices are set and budgets are settled.

But even the most-experienced contractors have never encountered this so-called ā€œperfect stormā€ of pandemic-labor shortage-supply chain issues. While project managers plan ahead to make sure they have the materials, if a single item is delayed, that can be a potential disaster for the project.

ā€œIt’s squirrely how to predict trends down the road,ā€ Norrell says.Ā 

ā€œWe try to lock down prices,ā€ says Alex Whaley, of Whaley Construction in Troy. ā€œWe used to know what nails cost; what screws cost. Things you never dreamed of doubled overnight.ā€

By ordering the supplies earlier and purchasing them in bulk, some managers have been able to avoid shortages.

ā€œWhen COVID hit, we realized there would be shortages,ā€ says Michael Hendrickson, vice president of preconstruction and estimating for Birmingham-based Capstone Building Corp. ā€œWe did everything we can to secure the supply of materials.ā€

Meanwhile, double-digit price increases in building materials have appeared ā€œovernight.ā€

Michael Hendrickson, vice president of preconstruction and estimating for Capstone Building

ā€œYou have to change your mentality in the way a contract is written,ā€ Hendrickson says. ā€œIt’s difficult times across the board.

ā€œIn construction, you’ve always dealt with the same issues you have today — delivery, shipping. Today, though, the lead times are a lot longer.ā€

Another kink in the supply chain has been a shortage of truck drivers to transport products from manufacturers to the market. And it’s not just over-the-road deliveries; there have also been problems with the railways.

ā€œOur main thing in the supply chain is getting products from our mill to the customer,ā€ says Scotch’s Skipper. ā€œThe railroad has been horrible; there are hundreds of complaints from the South and Midwest.ā€

All in all, logistical bottlenecks have suddenly become the norm.

ā€œThere’s no way to see when the bottleneck will end,ā€ Norrell says.

Skipper says his Clarke County-based company is having to deal with unprecedented demand from his customers, too.

ā€œThere have been very wild swings in demand … never seen before in our 50-plus years of existence,ā€ he says. ā€œUsually, in December, demand tails off but now we’re seeing an unprecedented demand.ā€

Companies are moving supplies and materials from site to site to avoid construction delays. Others are using warehouses to store materials in the event of shortages.

ā€œWe rented warehouse space to keep the employees on hand and business running,ā€ Skipper says. ā€œAnd we’ve emptied warehouse space. We’ve done this three times since April (2020).

ā€œWe’re in negotiations to purchase the warehouse we rented because we see a swing in demand over the next two years.ā€

Workers at Scotch Plywood make the sheets destined for a construction site.

Contractors are no longer relying on just-in-time delivery, and materials that have been ordered ahead are taking up space on job sites. Carrying the inventory will increase costs and can create safety issues.

ā€œThe first reaction is to secure and obtain all the materials,ā€ Hendrickson says. ā€œThe lender has to realize there will be a cost to that — you have to pay the owner for storage.

ā€œYou have to have a conversation with the owner.ā€

It’s just not a shortage of building supplies that is creating problems. Steel, which is used for buildings, is also used for appliances. And these appliances can be in short supply — be they washers, dryers, stoves.

This not only affects consumers but also creates problems for construction of multifamily residences and single-family houses.

ā€œWe’ve got manufacturing problems with appliances,ā€ says Hendrickson, whose company only deals with the multifamily industry. ā€œSome models are affected more than others.ā€

With the arrival of the Omicron strain, a return to lockdowns and shutdowns is probable. And it’s a situation that is concerning to everyone.

ā€œI don’t know where it ends,ā€ Whaley says.

ā€œWe are concerned about what the future will hold,ā€ says Norrell. ā€œIt’s fortunate we have companies with innovative thinking.ā€

Bud McLaughlin is a Huntsville-based freelance contributor to Business Alabama.

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