According to Supply Chain Dive:
Material shortages are curtailing construction's recovery before it's even gotten started.
While contractors are still optimistic about projects coming back online in the second half of 2021, and the Architectural Billings Index, a key leading indicator of demand, notched up its first two-month win streak since the beginning of the pandemic, one leading construction economist has now pushed out recovery until at least next year.
"I think the nonresidential construction market, as measured by spending and probably headcount, will stay flat," said Ken Simonson, chief economist for the Associated General Contractors of America, during a webinar this month. "It will be 2022 before I expect a significant increase."
He cited spiking material prices and shortages, continued supply chain bottlenecks and hesitancy among owners to build in the current environment as reasons why.
First-quarter quagmire
Material costs and supply chain issues are taking the wheels off the recovery, even before they get rolling. Q1 2021 results have already started to paint a bleak picture.
According to Dodge Data & Analytics, supply chain delays took a heavy toll on civil contractors in the first quarter, with nearly three quarters experiencing serious issues getting materials to projects. Moreover, more than three quarters of civil contractors are now concerned with cost increases for construction materials over the next six months, whereas about half had similar concerns in late 2020.
US contractors' concern over the cost of construction materials has grown
Respondents to recent Dodge Data & Analytics surveys have expressed growing worries about the cost of construction materials.
Those results caused Dodge, which has been tracking construction data for more than 100 years, to question how quickly recovery will come.
"While it is unclear whether this would impact the large infrastructure investments currently recommended by the Biden administration, they may impact the degree to which the civil construction sector can successfully bounce back in the first half of 2021," the Dodge report read.
Leveraging technology
Contractors are taking various approaches to keep projects moving forward in the face of these challenges.
Some are scaling back the initial phases, to make use of the equipment and materials they can get. Others are changing the sequencing of their builds to put the materials they already have in place first. Still, some are using technology to track what supplies they have where to plan accordingly.
Take Matt Gramblicka at Graham Construction & Engineering, based in Calgary, Ontario in Canada, which focuses on commercial construction throughout the U.S. and Canada. As vice president of information technology and enterprise applications, Gramblicka has been trying to leverage technology to stay one step ahead of supply chain and material challenges.
Where projects had been booming in Alberta in Canada pre-pandemic, he's seen a shift to Seattle and Ontario, simultaneously, since then. That has caused him to have to pivot to get more equipment and materials in those markets from the suppliers who have them.
"It's really about having visibility into where that market shift is, and making sure that we have the right connections with people to actually get the supply in the first place," Gramblicka said.
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By: Supply Chain Dive
May 17, 2021
