Who We Serve - Construction

The State of The Business

Estimates indicate that by 2050, commercial building floor-space will reach 124.3 billion square feet, or an increase of 33 percent from 2020. Over the next thirty years, there will be an enormous need to repair or replace over half of US building stock due to population growth and migration, along with the continuing need for more housing. Aging infrastructure is also driving this increase in construction activity, with 42 percent of US bridges at least 50 years old. Federal infrastructure funding for repairs and upgrades to the electrical grid, roads and highways, and renovations for US airports will ensure that the construction sector is fully engaged and busy for decades to come. New construction of office towers, schools and research centers, commercial spaces, and new housing will also contribute to this massive wave of building. However, this construction does not come without significant costs.

Skyrocketing Money Costs

The costs of this new construction have increased astronomically, mostly in response to supply chain issues and high demand. For example, according to the National Association of Home Builders, lumber prices have gone up 101% annually, adding more than $18,600 to the price of a single-family home. Framing lumber added another $30,000 to single-family homes and over $10,00 to multi-family dwellings. Concrete and cement products have already increased three percent, with forecasts estimating another 7.7 percent increase annually. Steel prices have also increased by 88 percent, copper by 61 percent, and aluminum is up 33 percent as well.

The cost to transport these raw materials has followed suit, with the price of diesel fuel soaring by 444 percent from May 2020 to May 2022. So not only are the materials themselves more expensive, but the cost of getting them to the job site has also increased, with most of these increases being passed on to clients and consumers.

Skyrocketing Time Costs

Without the timely supply of parts and materiel, construction backlogs and delays also continue to grow. Sixty-five percent of contractors in the construction industry are experiencing bigger backlogs than they had a year ago, with three-quarters of them expecting the situation to remain constant or worsen. Lead times for roofing insulation and other roofing materials are among the longest in the entire construction industry. Roofing membranes have a 35-to-45-week lead time, which is an 800 percent increase over the previous two years. Roofing insulation sits at 40-to-50 weeks of lead time, or a 667 percent increase over the previous two years. Key housing materials like drywall and metal studs have a lead time of 14 to 16 weeks, or an increase of 600 percent over the last two years.

With delays like this, it is no wonder that homebuilding and other construction is significantly resource constrained. Since many construction materials are not readily available, this has led to stockpiling and bulk purchasing behavior by builders to ensure stock on hand and to protect project timelines. Some contractors find themselves forced to consider material substitutions in order to maintain project budgets and schedules. While it may be hard to justify the cost of additional inventory, recent experience has shown that there are increased costs to construction contractors if there is a delay in obtaining necessary materials. However, inventory stockpiling creates additional pressure on the supply chain and also presents its own problems of storage, transport, and theft prevention

A Movement Mitigation Strategy

Since supply chain disruptions have a direct impact on construction costs, contractors are finding it more difficult to stay within budget. Concurrently, maintaining a project schedule is more difficult due to building material lead-times. As a result, builders are now trying to obtain more supplies locally when possible, ordering long-lead time items early, or make material substitutions when those items are not available. But one strategy that is paying dividends in the construction industry is partnering with the right third-party logistics (3PL) provider to help quickly move those materials and equipment to critical job sites. Working with the right 3PL - one who knows and understand the construction industry - can help you overcome those time and material delays through the use of many air and ground options. Your 3PL partner for the construction industry is absolutely HotShotTrucking.com.