The past year has brought some ups but many downs as it relates to materials for commercial construction projects. Like nearly every part of the country, the Twin Cities have seen delays in projects due to material shortages, missing parts, port delays and work slowdowns. Most recently, we have seen issues with electrical lighting and components, flooring, appliances and wall coverings.
Managing the supply chain has become critical component to project success but just how can a construction company, like Welsh, go about doing that when often the material selections are typically made by designers, engineers and owner team members – and are seemingly out of our control?
In the construction industry, one of the main roles of a project manager is to manage the overall master schedule, and in the past, project managers were very adept at understanding this process as it relates to long lead items that are needed relatively quickly and early in a project, such as reinforcing steel for concrete foundations, steel anchor bolts and door frames. A good project manager also knows to focus on the really long lead items, like precast wall panels, structural steel materials and HVAC roof top units. The other area to keep a close eye on as a project manager is the highly detailed items that could take multiple approvals, such as cabinetry shop drawings that designers and clients often go back and forth on several times before the design is finalized.
"project managers are having to relook at all their procurement practices in every trade section"
Now that the worldwide pandemic has upended even items that were typically easy to procure previously, our project managers are having to relook at all their procurement practices in every trade section. In doing so, we have focused on three areas that can make a huge difference in material procurement outcomes:
1. Engaging Supply Members Early
2. “Or Equal” Material Options
3. Analysis of Sourcing Total Cost
Let’s dive into what each of those areas look like.
Engaging Supply Members Early
One of the ways we create excellent outcomes for our projects is in our Start Strong process. This process is all about planning and getting everyone on the team aligned with the project goals and required outcomes. As part of this process, we have seen a need to include additional time and understanding from our material trade partners and their constraints, both from their typical lower cost country sourcing, as well as opportunities in local or USA sourcing. In our discussions with these groups, we can uncover obstacles that might be overcome by a material commitment (i.e., an early purchase order to hold material for our project).
We recently had that situation on an interior renovation project with a long lead carpet selection. By working with the client to get contractual authority to purchase earlier, we were able to keep the expected schedule and deliver the project on time to our client. Without the initial conversation with our trade partners and their suppliers in the planning stages, the project would have been in for a negative surprise when the carpet was unavailable in a timely fashion.
“Or Equal” Material Options
Another way that we can help ensure a good outcome is to discuss with the designers the need to have more than one material selection or color palette of available finish materials. Even with the best preconstruction materials planning and engagement, these days it has been increasingly common that something in stock and ready to ship in 2-4 weeks can be all the sudden completely out of stock in an instant. That situation could mean added manufacturing time, which can really extend material delivery dates. One tactic that has helped us increase the likelihood of supply chain success, is to have additional material options that would be acceptable to the client and the designer selected from the beginning in case availability changes down the road. Having a fallback plan for material procurement, can keep the project moving when the supply chain might be shifting and help everyone from scrambling later in the project.
Analysis of Sourcing Total Cost
One area that has been gaining traction in the industry is balancing project risk through analysis of the sourcing total cost. For example, let’s say a lighting fixture option is supplied by a low-cost country source. In looking at the cost of the fixture and then analyzing the cost for delivery delay in terms of lost production, additional general conditions, etc. we can come up with a total cost of the fixture versus simply just the initial cost. Then the same analysis is done on a fixture that is sourced here in the U.S., which might have a higher initial cost, but the overall total cost might be lower than the low-cost country source.
We are seeing changes like these in the material supply chain on nearly every project these days, which can bring many obstacles to the construction process. However, they can also bring great opportunity to improve our practices that have long term effects in our project success while we are still amidst the pandemic and into the “normal” days ahead, post-pandemic!
MEGHAN HUBER President, Welsh Construction