April 21, 2022   //   Construction   //   By PKF Mueller Solutions

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The supply chain tide continues to tsunami the construction industry. A city’s labor force of 1.1M is shut down due to three COVID cases while the Ukraine/Russia crisis is banging on the door of aluminum shortages. Although the pandemic is tapering, the construction industry will continue to wrestle with a variety of political, economic, and new-age labor issues impacting supply chains. Contractors and other stakeholders in the construction industry must mitigate the effects of these challenges – or they risk losing market share by becoming less and less competitive. How can businesses in the construction industry build resilient, sustainable supply chains?

Supply chain challenges have resulted in material shortages and logistics delays. But of course, labor shortages – due to labor force attrition, political unrest and natural disasters – are the root causes. With a dwindling labor supply and high demand for products, materials costs continue to climb.

To alleviate these challenges, businesses are hoarding materials, offering higher wages to workers and enticing them with sign-on bonuses. But there are more sustainable options – they include:

Use alternative materials – With many building supplies and materials in short supply – and consequently, more expensive to acquire, contractors should consider alternate or substitute materials as they may be more available. In fact, some substitute materials or prefabricated products may even have greater sustainability and a lower carbon footprint – a double win.

Build resilience – Supply chain obstacles are not a question of “if” – they are a question of “when.” For that reason, contractors should analyze their supply chains for weak links – vendors with limited resources, suppliers with a history of missed deadlines and other obstacles that come with few alternative options. From there, businesses should think ahead for “plan B, C and D.”

Share data – Contractors and other stakeholders in the supply chain should leverage data to collaborate for a supply chain that is real-time. Accessing a network that feeds current data to all constituents of the supply chain enables quicker reaction times and mitigates miscommunication.

To manage material costs, it is imperative to gain control over the factors that influence it. supply chain greatly impacts cost of goods sold, general overhead, accounts receivable (supply chain issues can cause delayed payments), inventories, and more. Contractors and other construction industry stakeholders are encouraged to build sustainable supply chains that are bolstered by technology and innovative thinking.

To learn more, contact:

John A. Bibeau, CPA, CGMA, CCFIP

Partner

jbibeau@pkfmueller.com

+1 708 428 5308