Now that we are in year three of the Covid pandemic, the effects of global material shortages have reached nearly everyone. From toilet paper to hand sanitizer to fresh produce and meats, we have waited in line, settled for inferior brands and ingredients, searched endlessly for online solutions, and often have gone without. For those of us in the commercial and residential construction and development trades, the cost and lead times for construction materials are at all-time highs with no end to increases in sight. Most other industries have been similarly affected by similar shortages.
Here we will take a brief look at how we got here and how these issues manifest themselves into our mindset and our everyday lives. In addition, let's look at how we can better manage this chapter to lessen the negative impact such deficits can have on our health and mindset.
According to the National Associated of Manufacturers, from 2009 to 2016, U.S. manufacturing output had steadily increased at an annual rate of 3-5%, with the exception of 2015 (when it had declined by less than 2%). Starting in 2016, manufacturing output increased at an annual rate of 5-7%. During this period, we saw an increase in imported goods to help meet the growing consumer demand. Since that time, natural disasters, trade wars and instability in some foreign markets have all played their part in creating an out of balance trade cycle that would become compounded in 2020 by Covid related shortages and absences, an already diminishing trade workforce, and a general populace workforce that seeks greater compensation, improved working conditions, and better benefits. The solution of 2009, when a company could invest in technology to more efficiently manage inventory and control costs, is no longer as effective given today's complexities.
With no foreseeable end in sight to the ongoing fulfillment delays and escalating prices, as well as the reduction of available qualified contractors, a majority of individual consumers have placed their remodel plans on hold. In many of these scenarios, the consumers' assumption is that this is a phase, and that prices will stabilize, and lead times will be eventually reduced.
However, expecting this resolution to occur in the short term was not realistic prior to the war in Ukraine, and is less so now. Most experts predict that inflation will run its course and that this will help to reduce demand when products are no longer affordable. Although, since we've become reliant on worldwide supply sourcing, the current shortages of shipping containers and the increase in shipping costs will continue to exacerbate the challenge of filling back ordered materials, while further delaying new releases. Data from the March 2022 Logistics Managers' Index report confirms 40% increases in freight volume at some U.S. ports over the end of last year. There is also the threat of a potential West Coast dockworkers strike. These factors will prolong the current supply chain debacle, as arriving materials will not fill suppliers' inventories, let alone meet their needs to complete existing projects.
At one time, many of us thought that finding toilet paper back on the supermarket shelves meant that things were returning to normal. Unfortunately, identifying changing dynamics is considerably more complex. Many of you have read the recent report from Larry Fink, the Black Rock CEO, where he proposes that the Russian invasion of Ukraine, combined with 2 years of pandemic-related issues, has negated the globalization efforts of the past 3 years, leading to "reevaluation of dependencies on manufacturing and assembly footprints". This does not take into account the lack of available containers for export to the United States, which adds another layer of delays and price uncertainties.
So, how do we manage to get through the rest of this cycle without losing our sleep, our hair or our health over it? Yoga, Deep Breathing Exercises and Axe Throwing are all viable options.
Here at Mega Supply Pro, as well as at our sister company Vetrina Windows, we prioritize customer communication and transparency above all other practices. The more clearly and the earlier in the process that we can set customers' expectations, the more likely they are to have a positive experience with our company and their projects. This is true whether they choose to purchase from us or not.
As a society that has become reliant on technological development, we have all become accustomed to rapid responses to our inquiries and to instant gratification that rewards our efforts. Maintaining these standards will continue to deplete the gains that companies have made to their marketing and process integration as they attempt to produce more material with fewer available resources. This is why Mega Supply Pro places such a high priority on communication.
The majority of our current customers are those that are fortunate enough to not already be under stress from having faced illness, job loss and unpaid bills, and have not felt the full effect of the pandemic's financial impact (this data is supported by the National Kitchen & Bath Association's report that reflects specifications for higher end materials, and an increase in budget and scope of work over the previous year). However, these homeowners have had enough other stress causing issues without us adding any further problems due to unexpected price and lead time increases.
Interestingly, similar solutions to this dilemma exist within the commercial and residential markets, and both require us to adjust expectations. Proper project and budget management practices in today's world require taking a less passive approach toward communication. You will want to know that your contractor or supplier is aware of the status of your material, and that all transportation costs have been included in your final price. Delays and surprises are still going to happen, but staying involved may help you to pivot toward reprioritizing a different part of your project, if necessary.
Per Forbes Advisor, the basic steps to prepare for your project and avoid unexpected charges are Planning, Budgeting and Repurposing existing materials (such as new hardware and a fresh coat of paint on kitchen cabinets). Projects need to be approached with an inflationary mindset – the longer that you delay, the higher your project cost will be. Realistic expectations for a project's completion should also be extended by as much as 15-20% longer than originally estimated. Adapting these practices will help you to anticipate and make alternate plans when the inevitable delay messages arrive.
Black Rock's Mr. Fink also states how the decelerating of globalization "has left many communities and people feeling isolated and looking inward". How do we take all of this negative information and turn it into something positive?
Here's one thought. Set a personal goal that you intend to complete by the time your project is scheduled to be finished. This can be a health-related goal, such as weight loss, adding strength or increasing endurance. Other subjects to consider for personal accomplishments are reading a specific book (or series), volunteer work and starting (or finishing) a family project. Six months later, when your project is still delayed, at least you'll be able to point to what you've accomplished during the interim and you'll still have time to achieve more! When setting goals, try to remember the SMART rule. Goals should be Specific, Measurable, Attainable, Relevant and Time-bound. In this way, we can try to minimize the anxiety that is manifested through uncertainty in material availability and inflation.
Whichever way you break it down, the immediate future looks very similar to the immediate past. Perhaps by Q4, Russia's invasion of Ukraine will have been turned away, inventory levels will have risen and prices will have stabilized. As with the direction of the stock market, we can only speculate.
Brace yourselves for another bumpy ride and find some solace in completing the small things. Daily accomplishments will go a long way toward elevating your endorphin levels, while reducing stress and anxiety, leading to an improved outlook. For the bigger things, you may want to still keep that bottle (of aspirin) nearby and make sure that you write your calendar notes in pencil and that your pencil has a good eraser. You'll probably need it.
Mega Supply Pro sources and delivers building materials and finishes for multifamily and mixed-use projects directly from manufacturers, for any budget. We will take care of all logistics, and coordinate deliveries with your project’s schedule. From lighting fixtures and appliances to windows and flooring – we'll get you what you need, when you need it, with no headaches or supply chain issues. Contact us for a free quote on building materials, finishes, appliances, and fixtures for your multifamily or mixed use project.
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This article was written by Frank Martin, one of Mega Supply Pro’s procurement and purchasing experts.