Issues with the supply chain are a struggle for everyone, and construction companies are no exception. With recent supply chain disruptions, Sandra Hernandez of Azul Works, and Balmore Hernandez, formerly of Azul Works discuss in the article below how some construction companies are handling shortages, disruptions, and sourcing different materials to get their projects completed and avoiding even more delays.
The outbreak of the COVID-19 pandemic caused widespread disruptions in global supply chains, leading to product shortages and rapidly rising prices. These effects have impacted industries around the world, including the construction industry, which had previously suffered from a lack of investment following the housing crisis in the late 2000s.
Despite ongoing difficulties, Sandra Hernandez of Azul Works says, the construction industry is navigating current supply chain issues by aggressively negotiating with suppliers, accounting for the risks of climate change, employing and training new workers with a massive influx of funding from the Biden administration, and relying on domestic materials. Thanks to these efforts, American construction has been able to overcome some setbacks and break ground on major infrastructure projects.
Charging Suppliers for Disruptions and Delays
In order to recoup some of the costs associated with supply chain disruptions, construction companies have started charging suppliers for delays and other disruptions explains Sandra Hernandez of Azul Works. This approach has been effective in some cases, but it has also led to conflict between construction firms and their suppliers. In some cases, suppliers have refused to accept responsibility for disruptions, leading to lawsuits and other legal disputes.
In other cases, construction firms have been able to successfully negotiate with their suppliers to cover the costs of disruptions. Sandra Hernandez of Azul Works says that this approach has been especially effective when construction companies have been able to demonstrate the financial impact of disruptions on their business. By showing suppliers how much they stand to lose, construction firms have been able to get them to agree to cover some or all of the costs.
Despite the successes, though, this approach is not without its risks explains Sandra Hernandez of Azul Works. In some cases, construction firms have been forced to accept lower-quality products in order to avoid delays. In other cases, suppliers have used the threat of disruptions to negotiate higher prices for their products. As a result, construction firms must be careful when using this approach to avoid getting taken advantage of by their suppliers.
Accounting for the Risks of Climate Change
Climate change is causing more extreme weather conditions that can damage construction sites. As a result, construction firms are starting to account for the risks of climate change when designing and building new projects. In some cases, Balmore Hernandez, formerly of Azul Works says that this has meant using different materials that are more resistant, as well as designing homes with the ability to withstand more extreme weather conditions.
In addition to using different materials and designs, construction firms are also starting to account for the increased risks of flooding and other weather-related disasters. In some cases, this has meant building homes and other structures on stilts or elevated platforms.
Sandra Hernandez of Azul Works says that by accounting for the risks of climate change, construction firms are able to build homes and other structures on time and with the materials they have available. This has helped to reduce delays despite ongoing supply chain issues.
Employing and Training New Workers
The construction industry is facing a labor shortage as a result of the COVID-19 pandemic. In order to fill these gaps, construction firms, like Azul Works are now employing and training new workers using the billions of dollars made available through the Biden Administration’s infrastructure bill. By doing so, firms are able to overcome the lack of skilled workers and continue to build homes and other structures.
Relying on Domestic Materials
The COVID-19 pandemic and subsequent labor shortages have led to major bottlenecks at unloading bays, causing sudden shortages of construction materials, including lumber, steel, and concrete. In order to overcome these shortages, construction firms have started to rely on domestic materials explains Sandra Hernandez of Azul Works. This approach has been successful in some cases, but it can also lead to a lack of quality materials.
In order to address the lack of quality materials, construction firms are using a mix of domestic and imported materials, although with contractually stipulated fees for imports. This approach has been successful in some cases, but it has also led to an imbalance between the client’s preferred materials and what construction teams can provide says Sandra Hernandez of Azul Works.
These issues may soon be resolved, though, as factories have increased their production levels and shipping companies are beginning to overcome their labor shortages. It may take another half-year to reach pre-COVID conditions but there is light on the horizon.
The Takeaway
As with most industries, COVID-related supply chain disruptions forced the construction industry to reassess its business model. In response, Sandra Hernandez of Azul Works says that the firms have had to aggressively negotiate fees for late deliveries, shift to domestic materials, and account for ongoing natural disasters as a result of climate change. Although it hasn’t been easy, the industry continues to grow and produce quality work
