Both the manufacturing and shipping sectors have been drastically impacted by pandemic pressures. The disruption has buyers facing ever-shrinking profit margins, paying astronomical prices just to ensure the arrival of their goods.
Meanwhile, the backlog of uninitiated and mothballed programs continues to grow, now with sticker prices greatly exceeding what they were at inception. There are strategies you can embrace to help navigate through this complex challenge.
Invest at the outset.
This may not be the strategy that investors want to hear, especially with the sticker shock that can come with taking on a new project at this moment in history. However, intentional spending upfront can secure partnerships and materials that help catastrophe-proof your project and save money in the long run. Here are some investments to make early on to set you up for success.
Engage a construction manager
A construction manager can help guide the design stage, using their expertise to anticipate and overcome downstream challenges. In contrast to the design-bid-build model where a general contractor is engaged only once the project’s design is approved, a construction manager is able to bid on materials and subcontractors on a parallel path, shortening your time-to-revenue. It also saves you rush costs that can arise when timelines are tight.
Project owners can sometimes get gun shy about design approval
Prioritise trade partnerships
Project owners can sometimes get gun shy about design approval, with the understandable apprehension that downstream deviations from the plan will hurt their bottom line. However, an abundance of hesitation can actually endanger timelines, and therefore budgets. Selecting and releasing funds to key trade partners promptly allows them to manage their cash flow more effectively, and get on top of pre-purchasing materials at a lower cost. Their early involvement means a more accurate and transparent estimating process, and less room for surprise costs.
Procure in advance
Agility of procurement schedules is not always a luxury that can be afforded with the current state of the supply chain. Buying early can help mitigate risks around pricing and availability of materials. It can also help preempt shortages and indicate where the procurement of alternative materials may be necessary.
Holistically, these savings can afford more flexibility around decision making in other areas of your project. Procurement is an area where big picture value may save you money over chasing the lowest price. It may serve your project, for example, to seek a higher ticket price item that you have more assurance will arrive on time, not the seemingly budget-friendly option that halts construction operations.
Protect your timelines
Employ parallel work streams: Overlapping the timelines of various processes helps to streamline the construction site and ensure a punctual delivery. Pushing construction off-site, where possible, can help the safety and efficiency of a project. It means less craft labor occurring on site, and less hurry-up-and-wait as different teams compete for space. Quality of work, cost predictability, and timelines can all be improved with this approach. Off-site construction is one of the more powerful lean solutions that you can employ on any integrated design/construction project.
Similarly, the modularisation, prefabrication and preassembly of component pieces clarifies and standardises the workflow, leaving less of the schedule and operations up to chance and site conditions.
Implement commodity tracking logs: With many teams working simultaneously, it’s imperative that there is a centralised location to track the timelines and budget where equipment and material procurement is concerned. While early procurement is a prudent choice, there can be diminishing returns if shipments and equipment rentals roll in before there is the bandwidth to make use of them.
Commodity tracking logs are a tool that help teams distinguish critical-path materials from ‘nice to haves’. These logs act as a reference point for teams to expedite decision making and get the materials they need, exactly when they need them.
Double-handling construction materials, and paying for offsite storage is an ineffective use of resources
Adapt your processes
Utilise off-site storage: This strategy is completely counterintuitive to historically held best practices. Double-handling construction materials, and paying for offsite storage is an ineffective use of resources when shipments are arriving direct and on time. Alas, that is not the reality of the industry now and for the foreseeable future. Now, the prudent choice may be to lock in prices and ensure the availability of the materials you need, managing their movements so that they arrive on site when you can make good use of them.
A bonded warehouse located nearby to your foreign suppliers may allow you to defer paying duties while accumulating your necessary materials. Depending on your project specifics, you might instead choose a local warehouse close to your jobsite, which can act as a convenient staging or laydown area. Consulting with a project delivery expert and conducting a detailed cost/benefit analysis will help illuminate the pragmatic choice for your project.
Think lean: While so much of the material cost inflation SNAFU is outside of our control, it serves well to focus on what is within our means. We can’t control the price of materials, or put more barges in the water to ship them here, but we can certainly focus our attention on using resources wisely.
Lean design and construction involves planning projects so there are increased levels of productivity and reduced waste of materials. These principles involve all levels of staff at all stages of the process, to ensure projects use the least amount of energy-including materials while still meeting their goals.
This ethos also increases employee accountability, oftentimes resulting in a higher quality end product. Of course this approach does require a level of training and start-up cost, but has compounding, lasting benefits when implemented.
Eliminate procurement roadblocks: The norms set by the design-bid-build model position your procurement team as a failsafe against overspending. However, with the present volatility of material price and availability, chasing the lowest dollar amount could cost you in the long run. To offer a competitive rate, contractors and trade partners may end up overpromising and underdelivering on their bid, leaving you vulnerable to costly change orders. Prioritising value over competition can help espouse a culture of collaboration, building a team that pulls together to get the job done.
As individual actors, and as an industry, it will take a great deal of relearning and deft action to navigate this large scale disruption. That said, all learning is good learning. Implementing these strategies can help cut costs and improve efficiency, for changes that will not only help to offset this temporary challenge, but also redefine best practices for the lasting betterment of the industry.