The pandemic has disrupted nearly every aspect of the global supply chain — that ethereal pathway of goods and supplies for construction, manufacturing, transportation and an entire host of other wants and needs for consumers. At the end of the chain there is a company or a consumer who is hoping for a finished product. In many cases, that disruption and the scarcity that follows has caused the prices of many things to increase.
The disruptions go back over a year now, to the beginning stages of the pandemic. The globe’s manufacturing hubs, places like China, South Korea and Taiwan as well as Southeast Asian nations and European industrial giants like Germany were all hit hard by coronavirus cases. Many factories shut down or were forced to reduce production during the lockdown. The same is true for all of North America.
What followed? Shipping companies adjusted their schedules in anticipation of a drop in demand for moving goods around the world. In the states, Americans took the money they used to spend on experiences and dining out and redirected it to goods and projects for their homes, which suddenly also became offices and classrooms. They bought building materials for projects to add or improve spaces in their homes. They added different small electronics and other devices to make their new lifestyle easier and more enjoyable. The timing and quantity of consumer purchases swamped the system. Factories whose production tends to be fairly predictable did their best to ramp up to satisfy a surge of orders.
On top of that, China shipped huge volumes of protective gear to places that generally do not send much product back to China — regions like West Africa and South Asia. In those places, empty containers piled up just as Chinese factories were producing a mighty surge of other goods destined for markets in North America and Europe. Because containers were scarce and demand for shipping intense, the cost of moving cargo skyrocketed. Before the pandemic, sending a container from Shanghai to Los Angeles cost perhaps $2,000. By early 2021, the same journey was fetching as much as $25,000. And many containers were getting bumped off ships and forced to wait, adding to delays throughout the supply chain. Even huge companies like Walmart and Home Depot had to wait for weeks, even months to get their goods onto ships.
At ports in North America where containers continue to arrive, the heavy traffic of ships still outpace the capacity of docks. In Los Angeles, dozens of ships are at anchor out in the ocean for days before they can be handled . Shipping a container through a major U.S. port now takes triple the time it normally does. In September, about one-third of containers at the L.A. and Long Beach ports sat longer than five days before being shipped out, according to Goldman Sachs. Offloaded containers dropped by 9.1% at Long Beach and 3.6% at Los Angeles.
The pandemic didn’t spare the construction sector. Building materials are in short supply and have seen price spikes, driving up projects and rebuilding costs and affecting companies from the start to the finish of the construction pathway. Worker shortages are taking a toll on the capacity of mills and manufacturers to make products even as the demand for those products continues to rise, which again raises the cost, leading to the current cycle of price inflation for consumers and businesses.
Just about every mill, manufacturer, fabricator, and distributor in the construction supply sector is announcing a price increase for the upcoming year. One of the main reasons cited is an increase in delivery and logistic expenses. Delivery expenses could add 1 percent in real inflation to the sector as providers struggle with managing costs as well as increased delivery expectations.
How can companies overcome this disruption in the short and long term - collaboration and construction-driven design is key.
Collaboration among key entities, especially in a typical design-bid-build project, can overcome misunderstandings of the availability of materials or their long lead times. More and more this needs to be addressed during the design phase if stakeholders want to avoid significant project delay and budget overrun.
The need for construction-driven design and integration of supply chain participants is more important than ever. The result is that each of these entities can benefit on a given project in terms of cost, schedule, and productivity. Through collaboration, the designers and builders could explore innovative, more sustainable ideas to overcome
If only there were forward thinking companies working toward this end....
DigiBuild is a blockchain-enabled construction project management platform. Our customers manage workflows such as procurement, budgets, schedules, contracts, and payments. DigiBuild allows for collaboration across 50+ disparate construction stakeholders – all on a single platform.
We are the first to merge our construction management expertise with blockchain technology to create the world’s most revolutionary technology bringing risk management and visibility to your projects.
Through verifiable collaboration, we eliminate risk, disputes, save time and create a healthier and happier global construction industry.