Ever since the 2020 COVID year, the Construction industry has been on quite the roller
coaster. Similar to how spring in MN is unpredictable, the construction industry has also had its unforeseeable challenges. When will this industry get back to normal? Or will it ever?
"When will this industry get back to normal? Or will it ever?"
There are still new challenges popping up in 2023 or lingering on from recent years. Staffing, supply chain, and technology are some of the challenges that might be part of the new norm.
When it comes to staffing, there are lots of stats and projections on how the construction workforce is shrinking. Bottom line is that there are more construction workers retiring or exiting the industry, than are choosing to go into this profession. Even though the demands for construction are still strong, I’ve heard trending stats in the range of the US is losing a net deficit of nearly 500,000 workers per year. Staggering!
Over the last couple of years, the supply chain challenges have been like whac-a-mole. Previously it may have been a change in lumber, then drywall shortages arise, and now today it may be electrical equipment. There have been various reasons why shortages and delivery issues have popped up - but there’s no doubt that labor shortages are a part of the supply chain issues.
Welsh has experienced both delays in materials, as well as materials being delivered well in advance of when the jobsite needs the materials. Both of these circumstances cause a big challenge.
If the materials are delayed, this may cause a revision in the project schedule impacting many trades. On paper, a jobsite schedule seems pretty straightforward to adjust. But in reality, when a schedule is revised, this doesn’t always play out where all of the trades are all available sequentially, as originally scheduled. A2-week delay in materials for example, may actually cause a much longer delay than 2 weeks in the project schedule because construction workers are re-deployed to other projects. Getting all of the trades back in 2 weeks is a huge challenge, since their demands are high and schedules are tight.
Conversely, if the materials are delivered well in advance of where they are needed, this creates storage issues. Oftentimes the project site doesn’t have room for a few extra semi-trailers of materials delivered early. It may sound better for materials to be delivered early rather than late, but the early delivery adds additional storage costs, security costs, and additional costs to move the materials from storage.
Technology has in most cases benefitted the construction industry, though it has not eliminated the dependence on professionals with tangible experience and skills. The ability for a construction company to offer technology for their staff is a big draw especially to the younger generation. Many of the college graduates aren’t choosing the construction industry as their niche though, because oftentimes construction companies are behind on the technology frontier. I think over the next 10 years, this will become an even more prominent concern. Project Accountants for example, are already difficult to hire, especially at the younger ages coming out of college.
Each of these challenges, oftentimes overlaps with each other. I don’t have all of the answers on these challenges, but recognition is a critical first step. At Welsh, we have addressed many of these issues on a regular basis, consuming many hours of strategy discussion. The goal in our discussions is engineering a way for all parties involved in a construction project to experience success. Committing to a good construction project team and onboarding the general contractor early in the planning phase can play a significant role in achieving this success.
Will the whac-a-mole analogy get easier in 2023 and future years? I’m going to hope MN sees 70 degree temps by mid March 2024, and also hope for a good future with improved trends in this construction industry I so appreciate and enjoy.
Written by:
Allen Overturf
CFO, Welsh Construction