Maintaining service in the face of the uncertainty created by COVID-19 has challenged many construction businesses over the past several months. Emerging supply chain disruptions have caused a renewed focus on potential increased costs and backlogs in deliveries that will impact the scope of work both in profitability and completion times.
COVID-19 has begun to cause delays from suppliers overseas in areas severely impacted with restrictions that have impacted lighting, steel, equipment, plumbing and other fixtures. International and domestic suppliers are finding it difficult to navigate local ordinances and quantify the effects of the economic impact with unpredictable demand.
It’s not just disruptions in the global supply chain of materials that are cause for concern. As COVID-19 has continued to change the economic landscape, protecting the health and safety of workers continues to be a concern.
Businesses that have taken measures to improve resiliency in their supply chain and labor force are likely to experience less of an impact from COVID-19. Being adaptable and able to move resources around when disruptions occur will help companies to be more successful in a volatile national and global economy.
So, what should construction companies be doing right now to prevent, prepare for or mitigate the impact of supply chain and labor force disruptions? Here are some suggestions:
- Gain a deeper understanding of resiliency in your supply chain. Understand the risks to your supply chain and where there may be exposure in certain materials. This includes general contractors monitoring their subcontractor’s supply chain and their ability to source materials. Collaborate with your critical suppliers and project partners. If possible, look for ways to use your company’s logistics to streamline your supplier’s ability to get their materials to you faster if that is causing delays.
- Understand quantity availability and constraints in the sourcing process when evaluating new supply chain partners. Begin to identify alternate supply sources and ensure they can meet your demands in the appropriate time frame. Be sure to consider the past track record of these alternative sources as part of your evaluation.
- Focus on ways to increase your supplies on hand to combat disruptions in your normal supply chain. To avoid disruptions in current or upcoming projects, forecasting will need to occur to determine the cash flow implications and the timing of purchases based on expected delivery.
- Look for ways to reduce costs when possible without compromising quality.
Customer/Demand Impacts:
- Establish a plan to identify and communicate with key customers to gain an understanding of their anticipated demand. Declines in demand will occur for many companies based on ongoing uncertainty and financing. Having a real-time knowledge of these declines will be crucial as companies work to make informed decisions about current and future projects.
- Understand where your materials are across all vendors and job sites.
- Look for ways to stay connected and updated on global changes. The faster you can see through the supply chain at all levels, the faster you can react to minimize disruptions.
- Look for ways to work with your customers and vendors to shift stages of the project or completion times based on the availability of materials. It is crucial to be adaptable while remaining efficient to maximize resources. Is there another part of the project that can be completed while you are waiting on the materials that have been delayed?
Workforce Impacts:
- Establish safeguards for your workers who are essential and cannot work remotely. Make sure job sites adhere to all ordinances and guidelines to protect the health and safety of workers while still getting the job done. These include extra disinfecting measures, use of protective masks and other gear, and distancing as appropriate.
- Move resources around as jobs are delayed. Adapt your workforce to changes in demand that may arise as a result of supply chain disruptions or shifts in customer deadlines.
- Establish IT structures that can support a large number of remote workers who are not on job sites.
- Have a contingency plan in place if one of your key employees becomes ill. Consider cross-training employees to avoid disruptions in these situations.
- Ensure key processes and responsibilities are documented to avoid loss of critical knowledge should a key employee be out. If this has been previously neglected, now is the time to make it a focus.
Supply chain and labor force disruptions as a result of the pandemic are likely to continue and even worsen in the coming months. Companies that respond by taking a critical look at their supply chain and workforce strategies and making improvements where needed may come out stronger as a result.
Tom Massimi, CPA, is an assurance services partner at Weaver.
