Skyrocketing costs hit construction materials

by | Jul 27, 2021 | All, Materials

The construction industry continues to get hit hard by increasing materials costs and shortages, straining production schedules and profit margins for all stakeholders in projects around the country.  According to a recent report by the Associated General Contractors of America, costs for materials increased 19.7% in the twelve months ending April 2020.[1]  Some of the cost surges are due to increasing demand in the building sector while others are due to continuing tariffs and quotas on imported construction products and raw materials.  The global pandemic also wreaked havoc on the supply chain, causing additional increases. 

While materials management is an important aspect of any project, in times of uncertain cost and supply, it adds an additional level of consequence for stakeholders.  As prices fluctuate, the importance of securing materials can determine whether a project is financially feasible or a proposal is worthwhile.  Uncertainty in the supply chain impacts the ability of contractors and the trades to properly hit timetables and for a project to come in on schedule. 

Project stakeholders can achieve some measure of stability through the early integration of a materials management playbook in project planning.  Certainly, the first estimates of needed materials are not going to be set in concrete–pun intended–because they can and will be updated as the project progresses.  However, such a list can help procurement managers understand what materials and products are needed so they can leverage suppliers to obtain the best pricing and delivery terms. 

Early procurement of materials can sometimes offset the increasing costs as commodities–like steel, copper and gypsum–see pricing rising.  Locking in materials and products using these estimates often results in lower prices as procurement managers scour available vendors, who watch commodities futures markets to determine possible price shifts on their supplies. 

These preliminary estimations on materials needs can also help supplies plan for production of the materials, making timely delivery to the project site more likely.  Getting your place in line for materials allows you to track your orders and communicate with your suppliers about materials availability, helping everyone in the supply chain and project management anticipate deliveries and potential delays. 

Effective materials management is more than just making sure things arrive on the jobsite on time.  It’s a process by which every stakeholder in the workflow optimizes the design, procurement and delivery of materials for the benefit of the client and to ensure the client’s satisfaction with the finished project.  While there isn’t a lot that can be done regarding the increasing costs of raw materials, minimizing the impact of price increases on the overall costs of the build 

[1]Proliferating Materials Price Increases And Supply Chain Disruptions Squeeze Contractors And Threaten To Undermine Economic Recovery,” https://www.agc.org/news/2021/05/13/proliferating-materials-price-increases-and-supply-chain-disruptions-squeeze, accessed 1 June 2021

 

For more ways to integrate materials management to improve cost and supply chain performance, contact eVolve Materials for an analysis of your needs.

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