Why are there material shortages in construction and how do you track prices?

Material shortages in construction can be a significant challenge for residential building firms. Shortages pose risks to project timelines, costs, and even the future of the business. These shortages, which have worsened in recent years, are driven by a complex mix of global supply chain disruptions, increased demand, and local economic factors.

And the word on the street… someone’s going to buy all the blocks again soon. Remember how difficult it was to get any during the pandemic??

I’ll refer you to this recent article in Specification Online relating to the Construction Leadership Council.

“The CLC’s key advice to everyone involved, particularly SME contractors and housebuilders, is to plan in advance, work closely with your supply chain and communicate your requirements early with suppliers, distributors and builders’ merchants. As we learned during the pandemic, collaborative, ongoing communication throughout the whole supply chain is mutually beneficial and essential to a healthy, productive UK construction industry.”

And it’s good advice. You’ll see further down the page, how HBXL can help make their advice achievable. The important news – it’s not all doom and gloom for construction when it comes to material shortages – far from it! And I’ll give you a clue – it involves embracing digital technology!

Causes of material shortages

Global supply chain disruptions: The COVID-19 pandemic had a real impact on global supply chains. Lockdowns and restrictions led to factory closures and reduced production capacities. This disruption was not only immediate but had a cascading effect, with materials taking longer to reach their destinations. Additionally, shipping container shortages and port congestion only added to the delays. Then on top of that, there are the current hostilities at sea, which has resulted in diversions, with containers taking many days longer to reach their destination.

Brexit: The UK’s departure from the European Union has introduced new trade barriers and customs regulations, causing delays and increasing costs for imported materials. Small firms, which often lack the resources to navigate complex import procedures efficiently, are particularly affected. By the time the products reach you, the retail price can  have jumped significantly.

Rising demand: Post-pandemic recovery has spurred a surge in construction activity as governments and businesses invest in infrastructure and development projects. This increased demand has outstripped supply, leading to competition for available materials and driving up prices. Once the big players have taken their share, there’s not always much left for the SMEs…

Fewer raw materials: Certain raw materials, such as timber, steel, and cement, have faced global shortages. Factors include reduced logging activities due to environmental regulations, and geopolitical tensions affecting the mining and production of metals.

Labour shortages: The construction industry also faces labour shortages, further complicating the supply chain. Skilled workers are in short supply, affecting the production and transportation of materials. Additionally, the pandemic has caused shifts in the labour market, with many workers leaving the industry.

How might your building firm be impacted?

Small construction firms are particularly vulnerable to these material shortages. You or someone you know will have been hit by limited purchasing power and just about everyone working on residential projects has a smaller financial buffer compared to larger commercial firms.

Project delays: Delays in obtaining materials lead to stalled projects, affecting timelines and potentially resulting in penalties for late completion. This can strain relationships with clients and harm your firm’s reputation.

Increased costs: The law of supply and demand dictates that scarcity drives prices up. For small firms, increased material costs can significantly erode profit margins. The problem is, you just can’t absorb these costs so it requires a conversation with the customer. Someone who says they can do it cheaper will charge the customer eventually.

Cash flow issues: Cash is king for a small business. You need to know when money’s coming in and when it’s going out – on a daily basis. Extended project timelines and increased upfront material costs can create cash flow problems, potentially threatening your ability to pay wages and stay on top of other operational expenses.

How to overcome these challenges

Cost your jobs accurately: You can’t afford to overlook any of your materials, or the correct quantity. Last minute purchases are likely to cost more, if you can get them at all. EstimatorXpress our award-winning estimating software, has hundreds of estimating calculators pre-configured to account for every stage of every build phase. Every screw, sheet of plasterboard, tube of mastic, roof tile… all costed and ready for you to pass on to your suppliers.

Know your prices: Our unique Price Tracker+ system means that we give you the latest material prices to use in your quotes. The last thing you want to do when times are tough is to be using out-of-date prices, and worse still, guesstimates. We update our material prices catalogue every month so you don’t have to phone round or spend time looking prices up online. And you can also allow for inflation thanks to the Inflation Tool in EstimatorXpress. If the job isn’t starting for nine months, you don’t want to absorb inflated material costs down the line.

Build strong relationships with your suppliers: It can help secure more reliable access to materials. Give them plenty of notice. They’ll thank you for it. Share your materials schedule early on. EstimatorXpress automatically produces one when it creates the estimate. Print it off or email it to your builders merchant. It’s that simple!

Know when you need the materials: Your build programme is crucial. EstimatorXpress knows the exact day you’ll need each item of material down to the last brick. Simply import the estimate into our cloud-based job management tool, BuildProjex, and it will give you a full overview of all the build phases andwhat needs doing when. Everyone will be able to see who’s responsible for ordering the material, whether the delivery has arrived, if anything needs postponing and so on.

Stay on top of cash flow: Maybe consider strategic stockpiling of essential materials to provide a buffer against short-term shortages. Look at your cash flow to make it possible. If you’re on top of your finances, you’ve got a bit more flexibility. Again EstimatorXpress and BuildProjex, in partnership, can keep you on top of it all.

What next?

Material shortages in construction are an issue we can’t avoid – it’s how you meet the challenges you’re faced with. You can hope it all works out, or you can be proactive and make sure you’re ready for anything. So try EstimatorXpress and BuildProjex for free and soon you’ll be pricing your materials accurately, and giving yourself a better chance of securing them.