The following content was originally published February 2023 on IBM’s Category Insights Newsletter.
In my end-of-year Industry Watch article, we discussed the impacts of inflation, housing starts, commodity prices, labor constraints, and supply chain constraints on the construction industry.
We closed that article stating that all of these constraints are expected to persist in 2023.
While that statement is largely true and we expect all of those factors to influence construction, there are two constraints that will be more impactful than the rest.
Supply Chain Constraints
When I consider what is likely to impact construction in 2023, lead times for materials are at the top of the list. Longer lead times mean longer construction durations and that means more cost overall.
Mitigations for these longer lead times must be explored at the early stages of design. Avoiding long lead items is your first opportunity for mitigation. In some cases, your Architect or Engineer could specify alternative systems avoiding highly constrained products. These opportunities should be explored in coordination with your Construction Manager.
After that, I would look to partner with a Contractor that takes a proactive approach to supply chain management. This is critical because the vast majority of contractors do not do this. Investing time and energy during your due diligence to learn about a contractor’s supply chain strategies can be invaluable in making award decisions.
Finally, early procurement of long lead items is essential. This can be done through a contractor, but to limit exposure, you may choose to buy these items direct. Of course, a strategy like that requires appropriate contractual guard rails to protect all parties, so tread carefully.
Second on my list of anticipated impacts on construction in 2023 is labor shortages. As previously reported, there is no relief in sight on this issue.
Immigration reform is the closest and most likely intervention to relieve this constraint. According to an article published on Yahoo News, President Biden has expressed a desire to, “stem illegal crossings by incentivizing asylum seekers to apply from their home countries”, but his plan has received criticisms from both sides of the aisle.
A comprehensive and more streamlined immigration plan focused on closing our labor shortage would provide immediate relief.
So what do you think are the top two concerns for 2023? Are supply chain and labor constraints at the top of your list? Or do you think there will be something else that will be more impactful? Tell me your stories.
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