Over the last two years, reports of supply shortages and labor shortages have permeated nearly every industry and the construction industry was certainly one of the major markets affected. We recently spoke with Bill Sutton, Vice President–Customer Experience, to find out more about these challenges and hear how Mowery is working towards creative solutions as the pandemic causes these supply chain issues to persist. In the following Q&A, learn how Mowery manages to continue to deliver a remarkable client experience during these ever-changing circumstances.
Talk to me about some of the challenges you’ve experienced this year with the supply shortages we’ve been reading so much about.
The challenges in the supply chain within the construction industry are a result of a very high demand for materials with a decrease in supply. Throughout the pandemic, we’ve seen the manufacturing of products dip and then struggle to get caught up, leading to frequent supply shortages. Also, we’re seeing log jams within the supply chain such as logistics. There’s just so much product, even locally sourced materials, to be moved and delivered and not enough capacity, whether it be from labor shortages, or because of transportation issues, to handle all that movement. And, with rising costs across the board, it’s unfortunately not only costing time, but money.
What are some of the materials you’re struggling to obtain?
The major materials we’re struggling to obtain are steel joists, pre-cast concrete wall panels, and roofing materials. For these categories, there are about four major suppliers who provide the lion’s share of materials throughout the industry in our region. They’ve been inundated with orders and are just not able to keep up. This pushed lead times from a traditional 3 to 4-month window to now anywhere from 10 to 12 months. While we’re seeing some improvement in recent months with more refined processes, we’re still seeing the demand continue and we predict these long lead times will continue for the foreseeable future – even into 2023. Other products where we’re seeing longer lead times than usual now are piping, doors & hardware, electronics, and pumps. Any product that needs to be custom made, such as underground concrete structures, pumps, switch gears have doubled in their lead times recently.
Are there materials that you no longer use because they’re too difficult to obtain? What are they and what alternatives have you tried?
For certain smaller projects which were designed with joist and deck roof structures, we are redesigning them to include beams and deck to avoid getting into the queue with the joist suppliers. For the pre-cast wall panels, we’re seeing more projects go with Tilt-Up panels which can be constructed on-site. Also, new materials are coming to the market such as the Nexii building wall systems and a wide bay purlin system from the pre-engineered building manufacturers.
What is the general timeline for ordering materials and how has that changed in recent years?
Lead times across the board have increased in the 2 to 3 times range. We were able to get out in front of this and inform our clients of what their project schedules look like with the new lead times and, based on these conversations, they understand they need to make decisions sooner on starting projects and releasing materials if they have a certain end date in mind.
Are you having trouble locking in pricing? How have you managed to handle that for your clients and how has it affected the way Mowery conducts business?
We are having trouble locking in pricing for certain materials. The largest issue has been with roofing. Because of the volatility of the energy and oil markets, the roofing manufacturers will not lock in pricing at the time of order. The pricing will be assessed at the time the material is received. We strive for full transparency, so we work very openly with our clients to manage this risk and set aside material escalation contingencies to account for this potential increase in material costs. Literally every week we are seeing pricing escalate.
How do you see the issues of today altering the industry in the long run?
Unfortunately, the issues of today with material scarcity and pricing volatility appear here to stay for the foreseeable future, or at the very least the next year or two. This is pushing up the overall construction cost on our projects. In some markets, the cost to construct the same building has doubled over the last two years. That’s a major shift and certain markets can absorb that cost and pass along to the various shareholders or tenants, but there are also markets that cannot withstand the increase. Certain markets are putting projects on hold or making drastic changes to their scope to reduce the project in order to do it within their desired budget. Nearly every one of our projects in the last 12 months have come in above the budget and our teams work collectively with the client and design team to value engineer and redesign so everything still meets the client’s needs at a budget that makes sense. On average, when we provide value engineering insight to the team, we are saving our clients 15% on their projects. Sometimes tough decisions have to be made but at least their projects are able to move forward.
Any other special insights you can share on the current supply chain issues? Do you see a light at the end of the tunnel?
We are exploring creative ways to circumvent the supply chain issues. Whether it be pre-purchasing materials or just getting involved with projects earlier in the decision-making process. Another major initiative we’ve made is investing in technology to speed up our buyout process. We’ve created applications for quick review and distribution throughout our company and electronic signature software to speed up the back-and-forth to execute our agreements faster. The demand in our core markets continues to rise so I don’t see this letting up for quite some time. This for us has become the new normal.
At Mowery, our experienced construction management team of project managers and estimators can help you strategically and creatively plan for supply chain shortages and labor shortages to ensure you still have a remarkable construction experience start to finish. If you are looking for general contractors or a design-build team who can bring your vision to life on time and within your budget, connect with us today.