With a squeeze on the supply of construction materials continuing to push up prices for the whole of the housebuilding industry, Matt Jarratt, assistant director of Operations at Procure Plus, looks at what those operating at every level of the supply chain can do to minimise disruption
At Procure Plus, we have seen unprecedented increase in demand for framework activity during the opening four months of the financial year, with a rise of 55% against last year’s transactions and 36% against the average of the last five years.
This is in line with many of the wider economic observations that the UK economy is growing at the fastest rate in 80 years, and some predict that it will be back to pre-pandemic levels by the end of the year.
However, this increase in demand is putting more pressure on the supply chain as they find their feet, after a year which included both the global pandemic and Brexit, and we are continuing to see supply being an issue in effective delivery.
Many landlords have been approaching Procure Plus to request our view of the current market conditions and how it will affect their programmes in the short, medium, and long term.
There seems to be massive challenges and opportunities throughout our sector at the moment. We will endeavour to summarise our experience of it and how the sector can continue to move forward.
The raw materials our suppliers use to produce their products are continuing to increase. We have seen increases of 13% Timber, 22% Steel, and 15% Plastic over the last quarter alone; and suppliers are continuing to request that these increases be passed on to the end user.
The online retail sector grew massively during the pandemic, and with Christmas just around the corner, this continues to pose challenges to the logistics of our products.
During the pandemic there were 35,000 HGV tests cancelled, and the UK lost around 15,000 drivers due to Brexit, leaving over 33,000 current vacancies in the construction sector alone. This is inevitably affecting price as driver pay increases to secure the roles, and the production line of new drivers is slow.
The implications of the pingdemic are affecting the construction sector massively, with factories frequently having to pause and reduce production as their operatives are forced to isolate. We have even heard reports of certain operatives visiting many locations each weekend to increase their chance of a ‘ping’ and isolation.
“Relationships with the supply chain is becoming increasingly key to ensuring continuity of supply at a reasonable price”
The government is trying to address this using different mechanisms, and we look forward to seeing how the new initiatives ensure production capacity gets back to the high levels required to meet the demand.
Global availability of key components
We are still seeing backlogs of containers from certain countries as ports struggle to deliver the required capacity, and with shortages comes more expensive alternatives.
Materials are certainly available, but in the current market they are going to the highest bidder. Relationships with the supply chain is becoming increasingly key to ensuring continuity of supply at a reasonable price.
During the first lockdown, we frequently met with all our suppliers and many times with the managing director and Finance director (the rest of the organisation were on furlough) to share experiences and ensure we were all ready for the new normal.
We are seeing some of the current challenges are temporary and are therefore working with the supply chain to accept temporary changes that will enable us to ensure continuity of supply and revert back to previous terms when the market settles down.
Extent of the problem
Although these challenges are affecting many of our suppliers, with the average lead time being increased by four weeks, we are also seeing some signs of normality, with one of our window manufacturers now back to a three week lead time for windows and one of our boiler manufacturers applying a price reduction to their boiler.
To everyone, we recommend you provide as much notice as possible for your projects to allow the supply chain to be managed proactively, which should lead to efficiencies.
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