Will Supply Chain Shortages Continue to Stump Construction Projects into 2022?

Material shortages brought about by the global pandemic halted construction supply chains like nothing the labor market had seen before, interrupting cash flow and affecting costs, timing, and budgets. Indeed, supply-related project delays have seen contractors scrambling to extend expiring builders' risk policies. So, with many more hurdles cementing themselves over the last two years, where does this leave construction activities?

Increases in Material Demand, Where Are They Coming From?

Indeed, COVID-19 forced many companies to invest in their supply chain after the pandemic caused factory shutdowns overseas, resulting in lengthy delivery delays. As a result, businesses raced to stock up on products or find new suppliers closer to home, adding further pressure to an already oversubscribed global supply chain of raw materials such as steel. Steelcase CEO Jim Keane revealed, “Steel inflation has increased 150% since COVID”. The Institute of Supply Management reported that steel prices have increased consecutively for 14 months whilst remaining in short supply.

This increase in demand, alongside a global reduction in supply, has caused the price of raw materials to skyrocket with little indication of when (or if) things will return to pre-pandemic levels. A 2021 survey by the US Chamber of Commerce reported that “95% of contractors have experienced product shortages in the fourth quarter, with 27% of respondents believing that steel had the biggest product shortage”.

On 30th March 2022, the Construction Leadership Council (CLC) issued a fresh statement suggesting that the supply of construction materials remains stable with good stocks and availability of most products – including steel. However, supply challenges continue to impact some construction materials, including bricks, aircrete blocks, roof tiles and gas boilers. We spoke with CSG Talent’s Building Materials and Glazing Consultant Matthew Wilkinson who echoed, “during the pandemic, a lot of construction projects were put on hold due to lack of materials, causing time delays. Unfortunately, materials still aren’t coming on time or quick enough for many of our clients even now”.

 For most projects, this only means an increase in the project price. For others, the cost of projects that have been delayed or halted has also increased, resulting in a higher bill than previously anticipated. Several building construction projects which fall into this area have had to pause their project entirely due to overwhelming costs. Similarly, if the structural components of a project are being delayed, other jobs are also pushed back, which can quickly throw off the original projected end date meaning many contractors are double booked. Indeed, shortages in raw materials have caused a domino effect for general contractors adding to labour shortage problems.

The big question is, will these supply chain disruptions continue further into 2022?

Equipment Renting:

CSG Talent’s Construction Equipment specialist, John Deignan, explained how equipment renting has become the best-in-time solution. He detailed, “The impact of the Covid-19 pandemic has meant that orders for construction machinery have a delivery date of 2023 or more. This led to many people renting equipment in the sector”.

Indeed, the supply chain crisis has left fleet managers scrambling for alternatives. This includes renting what little equipment is available, purchasing older equipment and holding on to equipment longer than ever. Again, this has caused a domino effect with greater demand resulting in higher machine pricing. For example, in December 2020, the average price at auction for excavators was around $45,000. By Q4 of 2021, it was up about $10,000.

Technological Innovation:

Technological developments within the construction industry are predicted to improve productivity rates by as much as 60%, delivering a vast $1.6 trillion annually in incremental value. In addition, increasing productivity and time scales may help construction workers better manage their time demands.

These technologies include drone use, industrial-scale 3-D printing, more automated construction robots and self-driving vehicles. Meanwhile, robots and wearable sensors are already helping to improve efficiency and safety.

Undoubtedly, these innovative project management tools can make scheduling and budgeting more efficient.

Cheryl Haines, Senior Consultant within the Engineering and Construction team at CSG Talent shares insights into digital developments within the construction market and how to tap into new talent pools here.

Talent Shortage:

As global economies attempt to bounce back to pre-pandemic levels of construction work and return to longer-term projects, many have noticed a critical shortage of construction workers, with the most significant shortage experienced in the last year is the construction labour force itself. Some of our more remote clients, particularly in the USA, are experiencing a real worker shortage.

Unfortunately, the real-time reality is that the U.S. needs over a million new construction workers within the next two years to meet supply and demand. However, recent insights revealed that the average U.S. construction worker is 43 years old, and young people just aren't lining up to work in construction.

Why are younger people not building a career in construction?

Put simply, the salary bracket may not be attractive to younger workers - the median annual wage of $37,000 (£30,000). Consequently, Associated Builders & Contractors members have invested $1.3 billion to “up-skill” existing workers in the short term.

However, trends reported in Hub International 2022 construction industry outlook have signalled towards a better solution. “Modular construction provides the opportunity to practice a trade in a protected environment. And technology plays a role: not only does it improve productivity but drones, robotics and digital tools in construction appeal to young workers.”. Moreover, younger workers often hold better technological skills that older construction workers might lack, putting that younger demographic in demand, and helping boost entry-level wages.

CSG Talent’s Construction Equipment expert, John Deignan, commented, “In a nutshell, the biggest impact is that businesses are less in demand for salespeople, as they can’t sell what they don't have. Instead, there is a greater demand for after-sales and service skills to repair machines etc. At CSG Talent, we’ve seen an increase in vacancies for services managers and technicians - with some even seeing $5,000 sign-on bonuses”.

Building Materials and Glazing Consultant Matthew Wilkinson, added, “As a whole, companies are slow to recruit right now as they are conscious of what’s happening. On an operational level - efficiency is key. So how can a candidate help? Reduce risk? As a result, clients recognise that they need to bring on experienced production individuals - and to get this talent, they must remain competitive, which includes raising salaries and offering bonuses”.

Certainly, with salaries increasing and considering the U.S. infrastructure bill, investments are gaining momentum, and perhaps, more younger people will opt for a career in construction in the coming years.

Looking To the Future: Is the Idea of Ending the Building Material Shortages A Pipe Dream?

Perhaps. However, we believe that innovation will play an essential part. With alternative materials already being considered. For example, cross-laminated timber, also known as “mass timber”, is recognised for its strength and improved fire resistance, making it a viable alternative for specific applications. Moreover, its domestic manufacturing helps mitigate supply chain problems. Similarly, other developments include “bendable” concrete, holding greater durability than regular concrete; it reduces the need for costly repairs down the line.

Of course, the question is whether we have the talent to facilitate this development. Without a doubt, resilience in managing supply chain risk and labour shortages is arguably the most crucial issue for the construction industry in 2022. At CSG Talent, many of our clients are turning to us to help them build a robust talent strategy providing data-led insights, talent mapping and pipelining so that they can place the right people to help excel in their business innovation and strategic goals.

Are you finding it challenging to navigate the talent market due to disruptions within construction and building materials? We can help. Please reach out to a member of our expert team in Building Materials Recruitment or browse our full range of insights.