Southwestern Suppliers

Suppliers Navigate Supply Chain Turbulence

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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.”

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As Material Supply Chain Worsens, Suppliers Vet Contractor Requests

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Suppliers continue to vet contractors’ material orders and navigate insane freight cost escalations during the most challenging time many can recall in the construction industry.

According to a recent analysis by Construction Dive, building material prices have hit a 35-year high, with prices on roofing materials, bar joists and steel pipe increasing at least 50 percent just in the past 12 months.

Paired with the price spikes are ever-lengthening, unpredictable delivery dates. Commercial contractors continue facing material lead times of eight to 10 months for roofing, roofing materials and steel bar joists, and six to 10-month waits for precast concrete wall panels and structural steel.

What’s a supplier to do?

Negwer Materials VP of Marketing and Product Development Pete Wilhelms says frequent communication with longstanding, loyal contractor customers is essential. Negwer and other suppliers face the daunting task of vetting both the material orders and the requested delivery dates.

“It’s very similar to the toilet paper shortage of 2020,” he said. “Each contractor is advocating for itself and its client. That’s understandable. But it’s up to us to weigh which project-specific orders are legitimate, time-sensitive requests versus orders for a project that’s starting later. Getting the true dates on when that material is needed helps all of us.”

If a contractor specifies that bar joists are needed at the project site by May 1, for example, and later moves that date to June 1, Wilhelms says there’s a ripple effect throughout the channel. “When surprises come about or embellishments of when they actually need the material occur, it definitely creates issues in the overall supply channel,” he said, “especially on the delivery end because trucking is running at an extremely tight capacity.”

Across the country, contractors are building and leasing warehouses to hold material that isn’t yet ready to be used at the jobsite.

Rob Webb, president and CEO of Tampa-based Southwestern Suppliers Inc., says cash is king, credit is rare and price quotes expire in as little as five days.

“It’s more insane than I’ve seen it in the more than 30 years I’ve been in the industry,” Webb said. “As a wholesale distributor of rebar and concrete-related products, we’ve stayed on top of material costs by having a tremendous amount of inventory which gives us some latitude to distribute costs over these commodities. But right now, we don’t have the material or bandwidth to take on many new clients.”

A year ago, Southwestern Suppliers decided to challenge soaring material prices. The wholesaler said no to $20,000 worth of material with a $5,000 freight cost that morphed into $15,000 when it came time for the manufacturer to ship. “We found ourselves getting to the back of the line, paying an even higher price for the material and the freight,” said Webb. “Ocean freight has gotten even worse. The dependability of arrivals is out the window.”

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