• Handling Supply Chain Problems in Your Contracting Business

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    May 06, 2021
    Since construction is so dependent on materials, the success of your contracting business depends heavily on your supply chain. As the recent delay of shipping due to a trapped ship in the Suez Canal revealed, there are a lot of issues you might face at the moment. Here are a few ways to minimize them.

    Update Your Estimates
    Issues with the supply chain can create two different problems for your estimates: cost and time. When suppliers can’t get access to regular building supplies, the price for materials that are available will go up. This is why you’ve probably noticed that the price of lumber has risen significantly over the past year. When supply goes down but demand remains the same, it may take longer to source the materials that you need. If you are relying on estimates and research that you made in 2019, you probably need to update it. Avoid assuming that anything will cost the same or require the same delivery interval because so much of the industry has been impacted.

    Scale Back Expectations
    The supplies that you need, and the way that you get them, may depend heavily on the niche you’re working in. For example, if you’re working in luxury home construction or renovation, you might try to set your business apart through unusual or high-end materials. While they are available at a similar price, this may not be a problem. That is, until your supplier runs out and has to dramatically change their pricing or timelines. Given the volatility of the market at present, it may make sense to scale back some of your expectations as you can. It may be better to complete projects with reasonable supplies you can get than to have a project stall or fail because you couldn’t get what you needed.

    Give Projects Extra Time
    A good contracting business owner already knows to add extra time to the project, just in case something unexpected comes up. When it comes to sourcing the supplies you need for construction, you may need to renegotiate your timelines. Tasks that used to take several weeks may take a few months or longer in this environment. Although many people in the industry expect that going over the deadline is common, it may be unwise to rely on that for your business. Giving accurate estimates about the time projects take to complete can help you avoid stress and conflict when it takes longer to deliver.

    Cultivate Multiple Supply Relationships
    It’s not always possible to have multiple suppliers that you can rely on for materials or finished components, but right now is the time to try. If you like to cultivate long-term working relationships with the people in your supply chain, it may be difficult to imagine using a different one. However, the ability to complete a project is dependent on the efficacy of your supply chain. You might have the best relationship with a supplier who simply can’t deliver right now. They should be able to understand that you will need to fill your order another way. That’s a good reason to research multiple options and start building relationships with a variety of people.

    Check Unreasonable Project Plans
    As a business owner working in the construction industry, you are probably already aware of some of these problems. You may not be able to expect the same from your clients. In the early months of the pandemic, many property owners shelved ideas for projects because they could not find businesses available to take them. Now, construction is surging and many of those clients are hoping to complete the projects, but they did not revise their budgets or timelines to accommodate the changes in the market. As you contemplate bidding on projects, try to get more information about the client’s expectations, as well as when they were set. It may be better to decline to take on a project with unrealistic expectations than to find yourself cutting profit margins to try to complete it.

    The supply chain for construction is a big issue at the moment, but your contracting business can meet it. To get started on the road to becoming a licensed contractor, contact CSLS today!
    Mary Birch, Business Development Manager
    maryb@cslscorp.com, (818) 458-7842
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