Timely announcements of various matters potentially affecting our clients.
October 6, 2021
Construction Challenges: Whys, Wherefores, and Ramifications of Today’s New Reality
You may have heard the ironic curse: “May you live in interesting times!” Most of us would agree the present moment qualifies. The fault lines in an overwhelmingly complex, interdependent global
economy are laid bare by the pandemic, and construction is a
bellwether sector experiencing shocks and shortages.
At MasterWerks, we observe our clients, subcontractors, vendors, and suppliers all struggling with an array of challenges and pressures, at unprecedented levels. For the foreseeable future, these difficulties constitute the new normal.
To cope requires patience, extensive preplanning, improvisation when the best-laid plans derail, and more patience. Maintaining a sense of humor doesn’t hurt, either. But to cultivate these survival skills, we need insight into the underlying conditions.
The Construction Industry: Systemic Shortages and Rising Prices
The Supply Side: Reeling From Demand Shock
Think of the construction industry as being like a large river system, with many tributaries flowing together to emerge at the delta.
Each construction project, large or small, requires a custom assembly
process, involving many contributing subsystems.
Electricians and plumbers, for instance, assemble various components in custom configurations, but those components—switches, electrical wired parts, piping, fixtures—come from a range of manufacturers, each with their own network of suppliers, foreign or domestic. Even custom cabinetry derives from the same formula: varied wood suppliers, hinges, and mechanical parts supplied by other companies. Disruption within any of these subsystems results in shortages, delays, and back orders.
The key to this manufacturing mayhem is lack of vertical integration. Rather than relying on inventory, manufacturers pump out products based on production units and orders, and they have not developed the capacity for scaling up quickly. This leaves the entire industry extremely vulnerable to demand shock. When push comes to shove, manufacturers prioritize larger commercial orders, with little concern for the ripple effect this triggers throughout the network.
The Labor Side: Skilled Workers Now an Endangered Species
Just as the MasterWerks caliber of construction requires thoughtfully selected materials and parts that don’t allow ready substitution, those standards equally apply to our handpicked workers. We rely on skilled, experienced tradespeople committed to high-performance outcomes. In many cases, these artisans are nearing retirement, financially secure, and resistant to overextending themselves with simultaneous projects. The young people they might have mentored in the past are entering other industries, and so their ranks are thinning.
It takes years to assemble a team that is capable of superior performance, and showing respect for each team member’s mastery, time, and well-being is essential. When a team member is unavailable, they cannot simply be replaced with someone unproven, and attempts to secure other competent tradespeople are usually stymied, because they are already booked, overcommitted, or otherwise unavailable as substitutes. The people who are available in these times are typically marginal and unproven, without competency to deliver to our standards. If no one appropriate is available, we are forced to wait.
Right now, material and labor shortages affect all commercial and industrial sectors, with major impact on construction projects.
Virtually every day brings word of availability issues with critical building components, such as roofing membrane, insulation,
cement, rebar, sheetrock, even paint.
Each link in the supply chain—production, distribution, transportation, and of course, labor—is impacted, resulting in limited quantities and extended delivery schedules for items like appliances, tile, windows, and doors. Manufacturers and dealers are finding it impossible to guarantee dates or provide much advance warning when shipments are delayed.
Going back to Economics 101, when demand exceeds supply, prices rise. Most of us have heard about the spike in lumber costs, but the list, in fact, is much longer, including electrical, wire, siding, garage doors, appliances, and other components.
The combination of systemic shortages and rising prices inevitably triggers project scheduling delays and budget hikes. These random shifts and shake-ups are unpredictable, defying the most sophisticated calculations and anticipatory efforts.
The global construction industry is like a huge river system, with interconnected suppliers, labor teams, and transportation modes. In an ideal world, the river flows. But in today’s world, the pandemic and other factors are causing myriad blockages. For instance, if the window manufacturer misses a lumber shipment, it can trigger a domino effect of downstream scheduling delays.
“Catch 22”: Supplies Without Labor and/or Labor Without Supplies = Stoppage
All the issues described above flow into residential and smaller commercial
construction projects, with serious consequences: uncertainty, missed delivery dates, and delays. Because of the inherent linearity of construction—Step A must precede Step B, and so on—if a late delivery delays A, then B must be rescheduled.
Meanwhile, tradespeople and subcontractors—who are independents, not employees—must keep busy for their own economic survival. When a sudden lack of supplies prevents them from fulfilling their step of a construction process, they naturally take a project elsewhere. Once the blockage is corrected, we succeed in looping these valued workers back in, but at that point each of the downstream supply and labor steps must also be rescheduled, exacerbating holes in the calendar.
When MasterWerks clients ask us, “When will the job be done?”, the honest answer—given so many contingencies—is sometimes: “We don’t know.”
Culture Clash: Professional Style v Tradespeople’s M.O.
One other issue to be aware of is that MasterWerks clients tend to be professionals, at ease with digital communications and inculcated with the value of clear processes, action plans, quantification, measurements, and results. Tradespeople and artisans, on the other hand, still largely function in an analog world. Email is a challenge, and they rely on phone calls, face-to-face communication, and occasional voicemails. While their commitment to quality outcomes is absolute, there is far less reporting and
paper generated than clients take for granted in corporate environments.
Many of our best tradespersons are digitally challenged.
Given this inherent culture clash, it’s understandable that there can be a total disconnect regarding deliverables. We see clients becoming frustrated in the face of delivery delays, missed workdays, and scheduling extensions, while tradespeople may become defensive about variables they can’t control and don’t always communicate successfully. MasterWerks strives to bridge this communications divide.
Every link in the supply chain—production, distribution, transportation, and labor—is impacted by the pandemic and other issues. As a result, we see limited availability and lengthening delivery schedules for key items like trusses, windows, doors, and cabinetry, as well as many other essential building components, such as appliances, plumbing and lighting fixtures, etc. Because construction assembly involves linear processes—Step A must happen before Step B—if a late delivery delays Step A, then the labor and materials involved in Step B must also be rescheduled, often causing severe gaps in the total building process.
Overcoming the Hurdles: Deploying New Means and Methods
While no single strategy can slice through the tangled web that constitutes today’s construction industry, we are preplanning extensively and deploying an array of tough tactics to help protect MasterWerks clients. On the supply side, these include insisting on advance selections and deliveries, which also gives us more time if we need to make reselections or substitutions. We’re shifting to front-of-sequence ordering, as early as possible. And we’re making up-front deposits to nail down product orders.
To cope with unpredictable supply chain blockages, we’re also developing more fluid labor schedules, to reduce labor intensity and pressure on valuable subcontractors. The more advance notice we give them, the less likely we are to confront delays and cancellations on their end. These new processes require a much larger managerial time commitment, in terms of communicating, checking, and coordinating, greatly increasing the administrative load at MasterWerks.
In addition, we’re delaying project starts until we’re sure we have essential supplies in hand and labor teams committed. This is particularly important in situations where remodeling projects are interruptive, requiring owners to carry on with their lives amid the challenges of a deconstructed space.
While these processes necessitate patience and forbearance, the outcome continues to make the hassles worthwhile: Everything wraps up with a thoughtfully designed, elegantly crafted space that serves your needs and supports your fiscal goals. Excellence is never compromised, in keeping with our steadfast MasterWerks standards.
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