How to Survive the Unstable Materials Market

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July 20, 2021 | All, Construction

Although many consumers are just starting to take notice, contractors have been dealing with the unsettled pricing of raw materials for residential and commercial construction since 2014. In 2018, The Construction Association (AGC) reported that construction material costs had risen 7.4% over the previous year. In May 2021, Forbes Advisor reported that the price of lumber had doubled in less than six months. Things will probably improve as domestic production increases, but the volatile markets are expected to continue through 2021 at least. Lumber, iron, steel, copper, glass, gypsum, concrete, asphalt, and fuel prices have all been affected.

The problems started with complications caused by wildfires, added to by rising costs of imported materials, spread to domestic supply chain labor issues due to the pandemic in 2020, and continue today as contractors try to cope with potential losses due to fixed price contracts and projects that were delayed or stalled. Buying in bulk to save money just exacerbates the problem by resulting in real and perceived shortages.

Although you cannot control what has been happening with raw materials, there are still ways to protect your company and manage for the instability caused by the wild changes in materials pricing. They include:  

Technology

  • The process of building information modeling (BIM), though not new, is increasingly important for companies to design and build a project with fewer change orders, less materials waste and less rework.
  • Drones can be used on jobsites to keep track of production and safety.
  • Project management software can ensure your workers are on the same page when it comes to project tasks. It helps you avoid mistakes, delays and waste caused by miscommunication.

Alternative Building Methods

  • Modular processes streamline the construction process and help your company make the best use of the materials you have on hand. With a modular process, you can better estimate costs and schedules and reduce risk from onsite variables like weather.
  • Prefabrication, even on a small scale, improves your schedule, reduces carbon dioxide emissions, reduces construction waste, and cuts costs.

Talent

  • The skilled labor shortage complicates the pressures caused by unstable materials markets, so develop a plan to attract and keep the best inhouse talent.
  • Offer internships to build a resilient workforce.
  • Use mentoring to train new workers on your industry and the way your company does business.

Communication

  • Communicate with customers up front about price volatility. Let them know how the project budget can be affected by schedule extensions and design changes.
  • Contract terms and conditions need to be specific to protect your company, with built-in safeguards against complications like pandemics and shortages.

As we endure the current situation until domestic production catches up and smooths out the volatile materials markets, it’s best to plan ways you can protect and manage your company for better stability through 2022 and beyond. Because, as we’ve seen, if it’s not materials costs, it seems that something else will come along to afflict the construction industry.


If you need a partner with industry-experienced specialists who track and understand the trends that affect you and your business, contact Applied Software today.