March 26, 2020

How to Avoid Disruptions in the Construction Industry

Author: Stockpile Reports

We’ve all had a difficult few weeks because of the coronavirus. As if the uncertainty surrounding the virus wasn’t enough, we also have to deal with shutdowns, delays, and staying physically away from our loved ones for unspecified periods. Work has likewise been affected. The economy is struggling and unemployment is rising.

While the construction industry isn’t as disrupted as, say travel and hospitality, it – and the 11 million-plus workers it employs – is still experiencing major turbulence. According to a survey conducted by The Associated General Contractors of America (AGC), 28% of participating contractors are being asked to halt or delay work on active and upcoming projects. With the pandemic not showing any signs of letup in the US, the number may soon climb higher.

If you are in the construction industry, there are rough seas ahead. You have to be prepared. But the situation is by no means untenable. We expect companies that think positively and take proactive action to emerge out of this crisis intact. There will be some scratches and dents, but you will assuredly be in one piece. And you know what they say – what doesn’t kill you makes you stronger.

In this article, we cover some common disruptions you may face if you are in the construction business. We also offer some solutions and workarounds for said problems.

The disruptions you may face if you’re in the construction business:

#1: Delays

22% of the respondents from the AGC survey said a supplier had canceled deliveries. Also, China has mostly shut shop and 30% of US construction products come from there. Consequently, there may be delays around every corner. You may have to deal with hiccups in your material and equipment supply chain. Government shutdowns, travel restrictions, and labor shortages due to illnesses could also cause obstructions.

Suggestions:

• Look into getting alternative suppliers to keep the materials coming in. Make efficient use of what you currently own.
• When travel restrictions are in place, you can get your teams to stay at home and work remotely where possible.
• If possible, utilize drones when labor is scarce for tasks like stockpile measurements. You can conduct drone flights from just outside your sites, without doing any face-to-face interaction with onsite staff. Stockpile Reports also has local pilots who can conduct a contactless drone flight for you.

#2 - Suspensions

With projects getting delayed or postponed indefinitely, you’re going to be staring at a lot of suspensions. Your equipment, machines, and whole factories may grind to a halt – costing you money to maintain. Then there are all the wages of the workers you’re paying in the interim when they can’t produce value. You may also have to pass up opportunities to make a profit and when you finally get the go-ahead, getting everything back up and running may also cost you extra resources. Time is money, especially in the construction business.

Suggestions:

• Estimate how long your manpower and machinery may be idle. Figure out how – and if – you can afford to pay for them. Idle machinery can sometimes be rented out to other contractors. The extra income may help you tide over.
• Cross-train employees to perform other tasks. If they’re idle presently, they could possibly be of use in other departments.
• Look at contract provisions – some of them may afford relief. And don’t forget insurance coverage.

#3 - Price Increases

16% of the respondents from the AGC survey report shortages of essential supplies and equipment. Also, many workers are choosing to stay at home to self-quarantine or care for their families. This is causing a heightened demand, low supply situation. And when products and manpower are scarce, prices rise exponentially. You have to plan for increased prices in the near future.

Suggestions:

• Efficiency is essential if you want to beat high prices. Run more efficiently by only ordering and producing what you need.
• Meet contractual and residual requirements, don’t aim to over-produce. The market may be down for a while.
• Know what you have so you can make good use of it. You can use SR to better keep tabs on how much you have and where it’s located. The more insight you have into your inventory numbers, the better finance and operations decisions you and your team can make.

#4 - Health and Safety

Your and workers’ health and safety should be paramount. You can’t run a business without healthy and stable workers. However, keeping workers safe could prove to be a challenge, especially in virus-hit areas like Seattle and New York. Further, the impact of the coronavirus isn’t just physical, but also mental and emotional. Nothing kills productivity and enthusiasm like fear and stress – and 70% of companies are reporting spikes in anxiety among workers as their primary challenge. Also, 11% of contractors from the AGC survey are reporting a shortage of contract workers because of self-quarantine and other reasons.

Suggestions:

• Reduce fear with education about the coronavirus, assurances, and clear directives. People are likely to feel safer if they know how to protect themselves and their families.
• Facilitate social distancing by keeping your employees home with their families. Stop them from traveling around the country and state, staying in hotels, renting cars, and coming in contact with groups of people. You can utilize our drone pilots to complete inventory counts instead of sending your people out in the field.
• Keep people engaged with important tasks – remotely, when possible. Reviewing and reporting, making better business decisions, and becoming more efficient are some areas you can address.

#5 - Legal Complications

Reduced work, delayed projects, and missed deliveries give rise to legal complications and strained relationships. Most contracts in the construction industry are time-sensitive, meaning you may have to foot the bill for delays and other damages. There may be arguments and legal battles with clients, suppliers, and workers. While you will most probably be able to claim force majeure, you must review existing contracts with your lawyers regardless.

Suggestions:

• Review your contracts with the help of your lawyer and make sure you keep to your obligations.
• Be prepared to handle opportunistic as well as legitimate claims and lawsuits.
• Consider drafting new contracts for workers to make testing and quarantine mandatory for existing workers.

Will there be help from the government for the construction industry?

The government has passed a $2.2 trillion aid bill that should assist construction companies in trouble. The tax and loan provisions in the bill should help make up for the reduced demand. Still, employers are being asked to pay for sick and family medical leave out of their own pockets, which is a setback. Also, there are no compensation measures for lost work or new investments in infrastructure. To put it simply, you can expect a measure of help from the government, but probably not enough to entirely offset your losses.

What's the future of the coronavirus?

You may have heard that the coronavirus is expected to die off in the heat of summer. President Trump also hopes the US will shake it off by Easter so that the country can reopen its borders and make it business as usual again. But these optimistic beliefs may be misguided, according to the BBC. The virus may become seasonal. There might be a dip in cases in the summer months. Still, that’s good news. It’ll give our healthcare systems enough time to prepare and counter it. We predict that you’ll get major relief in the next 2-3 months, but don’t take our word for it.

Conclusion

You will pull through. It’s only a matter of time. Society has survived several calamitous pandemics over the years, at a time when the healthcare system was about half as advanced as it is now. Covid-19 will be countered in the next few months. If you remain adaptable, keep your workers safe, and stay on top of the constantly-changing market, then you will thrive even during the crisis.

Now more than ever it’s important to know how much inventory you have and where it is because that’s a built-in cash reserve think of it as big piles of $5 bills stocked away at all your sites). Efficiently managing your inventory is critical to avoid disruption in your business. SR enables companies to know exactly how much they have, so they can sell as much as they can and only produce what they need. Reach out to us now to learn how we can assist during this crisis. We want to stand with you through the tough times.