By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE
Suppliers and contractors alike are continuing to navigate worsening supply chain disruptions, facing not only materials cost increases and scarcity but also sudden spikes in shipping costs.
“It’s as insane as I’ve seen it in the more than 30 years I’ve been in the business,” said Rob Webb, president and CEO of Southwestern Suppliers Inc., a wholesale distributor of building materials and an independent rebar fabricator. “We’re staying on top of material costs by having a tremendous amount of inventory which gives us some latitude to distribute costs over these commodities…but there’s very little margin to work with. Ever since Covid, it has been a delicate balance between having material with extremely high costs or being out of material. It’s like going to the restaurant and ordering the grouper at market price. It’s at ‘today’s price,’ no matter what that is, plus a premium.”
One year ago, Webb’s company challenged its manufacturers and shippers with “enough is enough” and said no to a $20,000 shipment of material carrying a $5,000 freight cost. “That cost ultimately increased to $15,000 when it came time to ship,” Webb says. “We found ourselves getting to the back of the line, paying a higher price for the material and paying a much higher cost of freight. That’s what we learned the hard way.”
Ocean freight costs have spiked even more, with dependability of arrivals a rare thing, according to Webb. “Even with a new arrival notice from overseas, where we’d ‘normally’ have had three to five days to clear customs and be ready to go, now we’re seeing three to five weeks and we still don’t have the assurance we’re going to get the shipment,” he said. “For a while we were able to blend new costs with old costs, but now we’re running out of materials period so we’re having to take significant stair-steps with costs.”
Negwer Materials says strong communications, realism and precise preconstruction timeframes enables the company to equip customers with the adequate quantities and types of materials they need when they them.
“In many respects, it’s akin to the toilet paper scenario of a few years ago,” said Pete Wilhelms, vice president of marketing and product development. “The challenge for us is vetting each project-specific request and pinpointing the dates as to when the products are needed. The pre-planning our customers do really helps us out. But it’s when surprises come about, or embellishments as to when the product is needed, that create issues. If contractors are ordering materials earlier than when they truly need them, that wreaks havoc in the distribution channel because trucking is also tight.”
The two principal distribution network components – manufacturing and trucking – must be working in sync, now more than ever before, says Wilhelms, or every entity in the channel is impacted.
“If a customer tells us, ‘We need it on May 1,’ then everything is built into the channel to make that date,” Wilhelms said. “If the customer later says, ‘Now we don’t need it until June 1,’ that slide could hit the distributor or the manufacturer if it’s a direct shipment to the site, or it could hit the installing contractor. If the installing contractor can’t store it at the project site, the product may have to be trucked to and stored in a warehouse. It’s a ripple effect.”