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the Lingering Impact
To say that the Coronavirus has changed work and everyday life is a massive understatement. Over 2 years have passed and a lot of municipalities and industries are just now dropping their mask mandates. No matter your view on the severity of COVID-19 & it’s variants, what is undeniable is that the lockdowns and precautionary measures we all had to take to flatten the curve, slowed or temporarily halted operations in nearly every industry, worldwide.
How can lockdowns that happened well over a year ago still impact things today? Well, international and local commerce are well oiled machines that are extremely difficult to shut down and fire back up again. From manufacturing to shipping products and materials to the various construction crews, having had to quarantine sick/potentially sick people for weeks at a time means manufacturing and supply chains weren’t firing on all cylinders until recently. Even now, construction and manufacturing are still stabilizing and it’s clear that some things have changed permanently.
Labor Shortages & Costs
We might want to blame the Coronavirus for the continued Labor Shortage in Manufacturing, but that’s not quite right. In fact, prior to the Pandemic roughly 38% of Manufacturers were unable to find and keep skilled workers.
It appears that it was more of a catalyst that has thrown a handful of wrenches into an already worrying labor shortage. How exactly did COVID disrupt things further?
In an enclosed shop, when a worker tests positive that often means several of their coworkers need to be quarantined for weeks at a time. The more specialized their job, the more of a hinderance their absence is on operations.
During times of peak-infections a lot of manufacturers had to either shut down intermittently and/or temporarily discontinue some product lines, or try to power through and achieve their targets with half their staff.
Whether they close shop temporarily or scale back production, there are less-than-obvious impacts on the businesses they source materials and parts from. Suppliers (that face the same labor issues) adapt to the modified demand for parts & materials, sometimes discontinuing certain products themselves.
Inevitably, the choices suppliers make to adapt usually drive up prices. When manufacturers restore their full product lines they find they have to source parts and materials from new vendors, often at a higher prices.
Powering through with skeleton crews costs a lot more than most people realize:
- Higher rate of production errors due to experienced staff shortages/unskilled personnel filling in.
- Unskilled temporary employees reducing overall quality of products.
- Remaining experienced personnel being overworked, increasing burnout, causing them to quit.
The end result is that labor shortages are forcing prices up across all manufacturing. Discouraging is knowing that prominent issues that were serious concerns in the Spring of 2021 are still just as prominent today.
Higher Costs Due to Labor Rates
From the folks overseas and local shops making hardware and premium materials for many aspects of your renovation projects, labor costs have increased due to the steps companies have to take to mitigate labor shortages and supply chain disruptions:
- Paying existing employees well for sticking around and taking on more.
- Accelerated training to bring new employees up to speed.
- Making sure to have larger crews so quarantine protocols don’t delay/shutdown operations.
While COVID infection rates are at an all-time low and it appears that local commerce is returning to normal, we are seeing labor costs drive prices up before stability is restored to supply chains for the manufacturing sector.
Material Shortages and Increased Rates
Material & Product shortages have plagued the construction industry for well over a year now. From IKEA Kitchen Systems to high-end Appliances, manufacturing and shipping delays create scarcity while the high demand drives up prices significantly. Of course, the increase in prices reflect the increase in costs for everyone down the line. A worrying number of manufactures have had to temporarily discontinue certain product lines.
For instance: Alongside with issues Coronavirus itself presents, the global semiconductor shortage in Spring 2021 significantly impacted quality appliance manufacturing worldwide. While the semiconductor shortage was prompted in part by labor issues posed by COVID-19 itself, other market factors that caused severe imbalance in supply and demand.
The fact that the semiconductor shortage started in the Spring of 2021 and isn’t expected to level out until Spring 2023, perfectly illustrates how difficult it is for industries and supply chains to find stability at this moment.
As mentioned above, Labor Shortages were already plaguing manufacturers long before COVID-19 hit. Then Market Uncertainty, Delivery Delays, and Increased Costs, along with consumer’s isolation reshaped demand early on in the Pandemic. This drove a lot of smaller manufacturers out of business, forcing supply chains to be reconfigured, driving prices up even more.
Increased Lead Times for Materials
The way labor shortages and complications reshaped business practices is not uniform across the world economy. While some sectors are finding more stability after having experienced temporary labor shortages due to the Pandemic, supply chains are far from stable.
Businesses that only had labor issues due to the virus often still rely on other companies that are impacted by trade barriers, and demographic changes in regional labor markets. Even when local shops have reestablished stability after such a chaotic time, they still experience scarcity because of where we have to source certain parts and materials. This translates to increased lead times.
No matter the cause, manufacturing quality and productivity is down significantly. To strike a balance and maintain output rates, manufacturers are paying more and having to hire traditionally less qualified workers, and establish accelerated training programs. The undeniable global reality is:
- Labor Costs are up. Prices are now higher.
- Manufacturing output is slower. Lead Times are significantly longer.
How These Issues Can Impact Your Project?
A frustrating issue we’re seeing is an increase in manufacturer errors, from many reputable manufacturers, making their way to the job site. When your Contractors receive products, parts and materials that were made incorrectly, both of you can have a difficult choice to make, all of which will cost time & money:
- Sending the products back to have it done correctly – risking unforeseen delays and costs.
- Fixing production errors on site – adds direct labor costs and can void warranties.
It’s recommended that you have a plan in place to deal with such issues, to know how you will contend with these kinds of problems if they arise.
Contractors & Project Scheduling
To avoid undue stress it’s important to realize that flexibility is a virtue. Construction is about the materials and acquiring them can still be a bit unreliable. Finding the right General Contractor that knows how to navigate the chaos and make sure it happens within a reasonable timeframe, is something you have control over.
When hiring your team it’s a good idea to take a look at who had the foresight to prepare and adapt to the changes we’ve seen. Who continued to complete their projects despite the chaos? Which subcontractors were and are they using? Making sure you hire a skilled, reliable team to manage your project means they can take on and manage that additional stress with experience and expertise.
Increased Lead Time & Permits
As is the case with so many businesses and government agencies, Permitting Offices had to start operating remotely during lockdown. While the average business and the quality of their products & services potentially benefit from some of their workforce working remotely the same can’t necessarily be said for more bureaucratic agencies.
All of the red tape involved with state and local agencies issuing permits is made worse by having key personnel working remotely: the lead times needed for processing and approving permit requests has measurably increased. Even though the Pandemic is potentially in it’s end stages, keep in mind that delays in acquiring materials can end up requiring permit extensions.
Written by Todd Zimmerman
Producer of the John Webbccast