Looking Ahead to 2022

MBCEA In the News,

Looking Ahead to 2022

After fighting the COVID challenges, the industry faces the supply chain disruption

I’ve got that old feeling again! We are in for a very bumpy ride in the coming months, thanks to supply chain issues and the customer service problems that will inevitably follow.

The trade deficit has crammed the docks with empty containers, which is exacerbating the shortage of workers to unload ships. Warehouse space is at an all-time high-capacity rate, meaning there is no more room to store products. China has a severe electric power shortage, reducing production by 10% to 20% in some instances. Steel plants are at capacity while raw materials are delayed due to worker shortage and shipping constraints. The impact on prices is just as severe; in September, the median cost of shipping a standard rectangular metal container from China to the West Coast of the United States hit a record $20,586, which is almost twice what it cost in July, which was twice what it cost in January, according to the Freightos Baltic Index. Imports this year are up 22% while shipping resources are up only 8%. All of that means supply issues, shortages and price instability.

One associate I spoke with who is a manufacturer of fasteners says there will be a screw shortage. Another colleague warned of price increases and long lead times for paint. It seems everything is impacted. We often focus on the steel and take miscellaneous consumables for granted but, of course, every component is vital.

Just like with the COVID-19 pandemic, when we needed to pivot quickly and adapt to the new normal, this is no different. Gone are the days when you plan around the longest lead time item, namely the building; every component of your project now has a long and erratic lead time. It goes without saying that long and erratic lead times also mean prices are incredibly unstable and short-lived. Planning materials and labor now require incredible skill, finesse and foresight.

These supply chain issues are pervasive and not going away soon. It is easy to blame the fallout on the pandemic, but that only covers some of it. For years we focused on just-in-time inventory, which is now biting us in the proverbial backside. We have a shortage of truckers and longshoremen. We have infrastructure problems and so much more. There are smarter brains than mine that can explain how we got into this mess; my goal today is to make sure we survive the ensuing chaos.

I think about supply chain issues from a very basic perspective. If we don’t have material, we can’t build. And if we can’t build, we can’t bill. And if we can’t bill … Houston we have a problem!

So, what do we do? We prepare like we did for the pandemic. First, take care of yourselves and your family. It’s hard to concentrate at work when you are stressed at home. Don’t hoard but make sure you have plenty of—yes—toilet paper, paper towels, cleaning supplies, canned goods, etc. Second, really focus on long-range planning. Too often we bounce from one project to the next, but today you need to be constantly looking ahead and juggling multiple things simultaneously. Every project needs to be reviewed with a fine-tooth comb. Get your orders in and consider those items that were not necessarily specified but you know will eventually be needed.

Although I typically direct my comments to my fellow contractors and erectors, this last bit applies up and down the chain, whether you are a supplier or a subcontractor. Communicate, communicate, communicate! Bad news does not improve with age. There is no sugarcoating to make delays and backlogs more palatable. We are all in this together. It is your job to manage expectations and keep your customers informed.

As small business owners who have built our businesses and reputations on the quality of our installations, we do not always place an appropriate value on soft skills such as customer service and communication. But these are integral skills that you need now more than ever. Ignoring a problem does not make it go away. In fact, the longer you delay, invariably it gets worse. Get out in front of bad news rather than blindside your colleague.

As with every downturn or setback, only the strongest will survive. Your strength comes from your ability to plan, your tightly managed cash flow and your communication skills. Know that you are not alone; we are in this together. Use the resources at your disposal. Look to the MBCEA for assistance. Plan and communicate. We will get through this together.

Buckle up and enjoy the ride!

Art Hance has been owner and president of Hance Construction, Washington, N.J., since 2000. Hance takes great pride in his work and the numerous awards for the quality and complexity of his design and construction. He has held multiple leadership roles in the MBCEA and actively served on many committees. He is a well-respected Butler builder, often called to add his voice and expertise to committees and/or subject matter. He is a passionate voice for quality, safety, training and excellence.