The construction and trades industry is being hit by a number of challenges simultaneously. As construction continues to ramp up across Australia despite the current skills shortage, construction materials are becoming much more scarce and business owners are dealing with supply chain shortages that are affecting every area of their business.
Not just in Australia, either. Across the world, the construction industry is experiencing shortages of materials such as timber and concrete, therefore becoming much more expensive or having long wait times. In fact, it is being called “the worst timber shortage in 40 years”.
In the construction and trades industry, clients cite expediency and turnaround times as the main factors for working with a company.
“57% of construction businesses have reported significant revenue losses due to supply chain issues”
According to a study by EY
With supply chain delays projected to still be an issue for the next few years, business owners must be able to navigate around this shortage to deliver great turnaround times for their clients.
Trade and construction business owners are tasked with balancing competitive schedules with the delays in the supply chain industry. The demands for construction are as high as ever, and trade businesses that can deliver during these times will take advantage of the growth in the industry.
In this article, we will share our strategies on how to mitigate supply chain issues, prepare your business and remain competitive.
Look ahead, be prepared and be transparent
One of the first things you can do to prepare your business for the supply chain issues ahead is to be aware of the shortages which can affect you.
Talk to your suppliers and ask them if they are experiencing or expected to experience any shortages or delays in supplying your goods.
If they are, you can place advanced orders early on to ensure that you will receive those supplies as soon as they’re available.
By being aware of potential supply issues your business may face, you can prepare and inform your clients accordingly – so that they, too, can prepare. They will thank you for it.
Suppose there is a supply chain shortage in your trade industry on the horizon. taking a look at your WIP and plan how best to begin to build up inventory now so that you have enough materials to continue work.
Priority should be given to essential items to work being performed, for example, shingles for roofing companies. By taking advantage of the lead time and building up an adequate inventory, you can ensure that work will not be halted once the supply chain issues appear.
Perform a comprehensive review of all the items that your business is likely to need and plan ahead.
If the lead time for some of the supplies goes from two weeks to two months, what will that do to your business? Prepare now. Build up inventory, inform your clients early, and have contingency plans and a backup schedule that allows you to move work around in line with your supply chain deliveries.
If your business is experiencing supply chain issues, don’t be passive and accept your suppliers at their word. There are a number of steps you can take to be proactive to source the supplies you need.
As business owners, we like to develop long relationships with our trusted suppliers. That means we tend to not look elsewhere.
However, in this struggling supply chain environment, now is the best time to reach out to other suppliers in your area and see if they can produce the supplies much more quickly.
By being able to shop around and talk to different suppliers, you are more likely to find a supplier who can deliver much more quickly and at a reduced cost and consider checking out suppliers in areas where there isn’t as much demand.
For example, if most of your projects are in a high-density area, it can be much more cost-effective to order suppliers in a location away from here and pay extra for shipping it to your job site.
When project turnaround time is important for clients in this market, being able to bring the supplies on time can lead to being able to charge higher pricing.
Protect Your Business!
Supply chain shortages are inevitable, especially with the state of the world at the moment.
As supplies grow short and become more difficult to procure, prices will go up in order to reflect the supply and demand circumstance.
Whenever possible, it’s best to negotiate with your suppliers.
The sharp price increases often lead to larger profit margins for the suppliers and can likely be reduced if negotiated effectively, despite the huge demand at the moment.
As an example, while the price of timber has skyrocketed over the past year, while supplies slowly build up, use this opportunity to negotiate and work with several suppliers to find the best price.
The supply chain issues in Australia have led to numerous problems in the construction industry due to the lack of supplies leading to delays, incomplete jobs and contract closure.
However, by preparing accordingly and being willing to work with different suppliers, you can help mitigate the supply chain issues your business faces.
In an industry where turnaround time and efficiency are huge factors for winning jobs, being able to procure the supplies you need can lead to gaining a huge advantage in the trades and construction industry.
As with any “hurdle” in business, you must afford yourself “business owner time” (i.e. minimum 2 hours per week, no distractions, to focus solely on the big picture items in your business) to think about what is happening / could happen to ensure you stay ahead.