Labor Shortages, Supply Chain Issues
What needs to change in construction?
Damaged and derailed by acute labor shortages and a supply chain crisis, the construction industry needs to take a serious look at doing things differently. Connor Butler suggests where the solutions lie.
Want to buy a new car? Need an electrician? Trying to get your hands on a stack of PVC pipes? Then you’ll know the problem. Actually, if you don’t know the problem, you’ve probably been living on the moon this past year.
The construction industry is struggling through a double crisis of acute labor shortages and supply chain chaos. And the consequent surge in demand has inevitably stoked extraordinary price rises. According to Bloomberg Businessweek, a 40-foot container that two years ago cost less than $2,000 to transport goods from Asia to the US can now cost as much as $25,000 if the importer pays a premium for on-time delivery. That might be great news for the container shipping industry but it’s bad news for just about everyone else. And the transport costs are inevitably being passed down the supply chain.
The hyper-inflated price of lumber was bad enough but now we’re seeing the same issue with a wide range of plastic and metal materials. It didn’t help when several Texas-based petrochemical plants were forced to shut down in February due to winter storm power outages. According to S&P Global, 75% of ethylene production was taken offline, and we’re still catching up.
Then there’s the accompanying labor shortage. I do a lot of work in the UK. The number of job vacancies there recently rose above the one million mark for the first time since records began. Some are blaming that on Brexit, but I also work in Ireland, which remains part of the European Union, yet is experiencing similar problems. And of course, it’s a big issue here in the US. Indeed, it has been for a decade – COVID-19 just made it even worse. According to the 2020 Construction Outlook Survey from the Associated General Contractors of America, 81% of construction firms have trouble filling both salaried and hourly craft positions.
An underlying problem is that we have an ageing workforce. For every person joining the construction industry, five have been leaving. And the pandemic crisis has disrupted work migration patterns. As I saw someone in the UK press put it: “The wrong workers are in the wrong place at the wrong time”.
Get to know your supply chain
So what can we do about it? There’s obviously no silver bullet – these are complex problems. But there are changes you can make, changes that have significantly helped our clients.
Let’s look at supply chain shortages. What we’re encouraging our clients to do is to go beyond thinking about this simply as a problem with ordering stuff and to start being a lot more proactive. Get to know your supply chain. Talk to them, listen to them, hear their problems. Bring them into your process and treat them as a critical component of what makes you successful. And don’t just do this in times of crisis, do it all the time.
Secondly, if you’re working in a big construction organization, how good are different parts of that business at talking to each other. I’m still astounded how many organizations manage construction projects as if each one was a separate company. I’m even more astounded when a shortage of a raw material or product occurs, and the people heading the construction project don’t call other parts of the organization to see if a pile of what they need might be sitting unused on a site elsewhere. It often is.
Furthermore, it doesn’t just have to be an internal thing. I’d like to see the construction industry come together as a community. There’s a great opportunity here for companies to help each other out by creating a secondary market for scarce building products and raw materials. Everyone benefits.
And there’s much more we can do. This should be a time for experimenting. We can help with different ways of contracting and procurement – for instance, the old-fashioned idea that you simply go out and ask for three bids needs to change.
Where have all the people gone?
So how about the labor shortage? One simple thing that I encourage clients to think about is that, when they’re looking at the people that work in their organization, there are really just three variables. There’s the number of people that are working, the number of hours they work, and then the rate at which they get the work done.
So often in construction, we get stuck on the number of people and then we go to the number of hours, yet we never think properly about the work rate. There’s a lot we can do to improve that productivity. And it’s not about cracking the whip – it’s about good planning.
Construction workers spend an enormous part of their day working around problems that are easily fixable. Sometimes, they also spend time a lot of time waiting for something else to happen before they can move on. This can be addressed. We find that by helping our clients focus on productivity, they get a lot more done, even with less people.
Something else that slows a lot of operations down is the practice of submitting a request for information – or an RFI. The first thing I’d say here is that if your way of asking a question needs an acronym, you’re already in trouble. The second thing is that the average response to RFIs in our industry takes four days. So how did we get into a situation where waiting four days for an answer is just a normal part of the business? Ensuring that your team is always ‘work ready’ is therefore an area of huge potential gain.
Another opportunity that I’d urge people to explore is modular construction – I’ll be talking about that in my next blog.
There will come a point in the (hopefully) not-too-distant future when the construction community looks back to the world we’re in now and says: “Why didn’t they plan better? Why didn’t they collaborate more? Why didn’t they work to a production cycle? Why were people running around, jumping all over each other, instead of stopping to think about how to do things better?”
They’re fair questions. No wonder we have labor shortages and supply chain issues. Now let’s do something about it.
- Want to hear more? Check out my People Build Projects podcast series. In Episode One, I discuss labor shortages and supply chain issues with someone else who has a lot of thoughts as to how to tackle them – Sean Cole from Currie & Brown.
- And to find out how Relevate can transform your project delivery (contact Connor Butler, firstname.lastname@example.org).