Supply Chain Outlook for General Contractors
In 2022, the demand for commercial construction has nearly returned to pre-pandemic levels. General contractors are beginning to fill backlog orders from the hiatus created by COVID-19. Fortunately, most of those projects are, once again, underway. However, while developers have regained their confidence in the market, issues with the supply chain continue to persist.
As the first major shut down gets further away in our rearview mirror, more obstacles have begun to surface. The combination of several major factors have ensured that the supply chain issue will continue for at least the next two quarters.
NO MORE “JUST-IN-TIME” DELIVERIES FOR CONSTRUCTION PROJECTS
Bottlenecks have emerged at major U.S. ports, including Los Angeles and Long Beach, where a large portion or our imports are processed. This has severely impacted “just-in-time” deliveries for general contractors, who became accustomed to receiving materials right around the time they were needed for projects.
NO ONE TO DELIVER CONSTRUCTION MATERIALS
One unanticipated effect of the pandemic was seeing so many older workers opt for early retirement. General contractors not only saw the size of their crews dwindle, but trucking companies were forced to slow their operations because of driver shortages. With a limited amount of drivers, deliveries were delayed, or in some cases cancelled altogether. Compound this issue with the recently skyrocketing price of gas, and the delivery of construction materials has not only become more difficult, but it has also become much more expensive.
HOPE FOR GENERAL CONTRACTORS
It’s abundantly clear, at this point, that there is no overnight solution to this issue for the general contractors. However, the recently passed Infrastructure Investment and Jobs Act includes $17 billion to be allocated toward port infrastructure and waterways. President Biden has also negotiated a deal with the Ports of Los Angeles and Long Beach to operate on a round-the-clock schedule to alleviate as much of the backlog as possible.
In the meantime, all general contractors can do is be transparent with their customers about this fluid situation and continue to be conservative on any timeline expectations for their new construction projects.