Four strategies for mitigating supply chain disruptions in a construction project
Construction firms are fighting an uphill battle to maintain project budgets and schedules as the industry grapples with global supply chain disruptions.
The Associated General Contractors of America (AGC) reported that material prices for nonresidential construction soared 21% from February 2021 to February 2022, and analysts predict costs will continue going up. Additionally, logistical bottlenecks such as overseas shipping delays and shortages in the transportation sector are drastically impacting project lead times.
Stellar’s industry veterans are discovering there are ways to mitigate supply chain disruptions and their effects on construction projects — but only if construction firms are willing to shift their paradigm and use a different approach when working with their clients.
Here are four ways our teams are navigating the waters.
Four ways to keep a construction project on track
1. Determine scope of work as quickly as possible
When an owner signs off on a new build or renovation project in 2022, they must face the reality that there isn’t time to waste. Excellent strategic planning is more crucial than ever, especially for those hoping to get their facilities operational quickly. The faster the scope of work and designs can be defined and approved, the better it will be for their project’s lifecycle.
Over the past two years, we’ve seen certain materials take months or more than a year to arrive on-site. While it was previously standard to go through an approval period lasting several months, even a few weeks’ delay could cost owners more in today’s market. Material price spikes are driving up project costs faster than ever. The sooner project managers can place orders, the more likely a project will be able to stay within initial budget estimations.
2. Pre-ordering what you can
One method of saving time on bidding and compressing a schedule is to work with suppliers to lock in material purchases before schematic designs are finalized. When fast-tracking the submittal process does not work, making funds available to place down payments on materials that can be fabricated later can help keep a project moving forward, lock in prices and may give clients a competitive advantage by helping them secure steel, lumber or equipment before their competitors do so.
Locking in tonnage rates for steel joists has helped Stellar maintain schedule on the firm’s design-build project for a national cold storage firm. By locking in joist tonnage rates with the fabricator/supplier, Stellar was able to secure a production slot for the material. By the time design was finalized, including the specific joist type necessary for the facility, the steel was available and ready for fabrication. In the end, Stellar was able to gain three to four weeks on the project schedule that we would have otherwise lost.
3. Finding alternatives
The current state of the supply chain has emphasized the need for value management as construction costs soar. Design can sometimes occur three to six months before material procurement, but in today’s market, those material costs can increase upwards of 20% to 30% by that point. With spiking prices and scarcity of materials, owners must be flexible and open-minded as project developers and managers approach them with alternative design suggestions.
Researching alternative materials and how they fit into your project can provide owners options for proceeding with their facility’s construction. While they may prefer one material over another, delaying a project schedule by several months due to long lead times may not be worth entertaining if an alternate design or purchasing from an alternate manufacturer improves the project schedule.
For example, steel joist manufacturers are experiencing extreme delays. Some owners have switched designs from use of prefabricated and pre-engineered joists to use of steel beams to meet schedules. Beams are typically more expensive than joists, but they will arrive on-site significantly faster. Given current market conditions and the notable material price escalation for joists, the cost tradeoff for beams in the right scenario can be negligible.
Balancing lead times and schedule deadlines can be tricky even under normal circumstances. With the current state of the industry and supply availability, owners must be nimble and prepared to make changes.
It is important to keep in mind whether or not your client has established design guidelines for their facilities. These guidelines typically evolve based on owner experience on prior projects. Finding an “equal alternate” to the design guideline without compromising quality or owner expectations can be challenging. It involves educating and collaborating with the owner while walking through the proposed alternate. This extra step may be necessary for minimizing lead times and preserving construction schedules.
4. Resequencing your schedule
To preserve or accelerate your schedule, it may sometimes be necessary to rearrange the sequence in which the builder would typically accomplish tasks.
In an effort to counteract delays brought about by the shortage of steel, Stellar has started pouring concrete slabs before exterior walls are installed at some facilities. Ideally, the exterior walls and roof are in place before this step so the concrete can be placed, finished and cured in a controlled environment. However, project managers need to be flexible and adapt to the marketplace to maintain scheduled end dates.
Benefits of working with a fully integrated firm
Working with a fully integrated design-build firm can save you time and money on new facilities and renovation projects. These companies not only offer design and construction management oversight, but may also self-perform certain scopes of work. They are uniquely poised to navigate the challenges of the present-day supply chain to help streamline your project.
The value of an integrated design-build approach is that every discipline on a project, from design to field services, is involved in the process from inception to completion. This method allows teams to better collaborate and streamline communication, especially compared to a traditional, non-integrated firm that relies on coordinating different contractors and consultants throughout various stages of the project lifecycle.
Additionally, the design-build method allows for more flexibility since the designers and builders are working together from inception to completion. The enhanced level of communication this provides allows crews to move more quickly. Construction can begin while design is still being completed since architects and engineers can communicate anticipated needs, giving project managers a jump-start on ordering materials to minimize lead times from the beginning.
Managers and developers can also work hand-in-hand with manufacturers and suppliers to negotiate deals beneficial to both parties, such as buying directly from a manufacturer instead of a distributor when securing supplies.
Labor is a valuable resource that integrated design-build firms can leverage to a client’s advantage. According to an analysis released by Associated Builders and Contractors in February, the construction industry needs to attract 650,000 additional workers on top of the normal pace of hiring to meet the demand for labor in 2022. Integrated firms can offer clients self-perform work for various trades to guarantee labor, saving the owner from needing to bid out those scopes of work to subcontractors.
– This originally appeared on Stellar’s Food for Thought blog. Stellar is a CFE Media content partner.
Original content can be found at stellarfoodforthought.net.
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