fbpx

Blog

Top 10 Challenges Construction Material Suppliers Face

Top 10 Challenges Construction Material Suppliers Face

May 30, 2019

Material suppliers are the unsung heroes of the construction industry. Without the correct resources arriving in the correct location at the correct time, no building or bridge or highway will ever be constructed.

As one of the most important participants in any construction project, building suppliers have to provide the correct resources in the exact measure and kind and deliver them at the right time in order for a project to run according to schedule.

Construction projects however do not always go as smoothly as planned. Issues often crop up, and these issues make it more challenging for material suppliers to do their job.

From managing employees to handling finances, here are 10 of the most common issues that construction material suppliers face:

Labor Management

construction employee shortage

Employee Shortage and Retention Difficulties

The construction industry as a whole is known for its issues regarding worker shortage and worker retention. Despite the increasing demand for construction projects, the industry still suffers from a lack of new blood that are interested in starting a career in construction.

Employee turnovers also happen all the time in the construction industry. Just when you think you have trained enough valuable people under your wing, they suddenly decide to seek better opportunities at another company or they pursue a different job in a completely different industry.

These labor management issues particularly challenge material suppliers because the materials industry isn’t something that can be learned within just a few months of working. In this field, employees have to have an understanding of the company’s clientele, the internal processes of the company as well as how they adapt to the client’s requirements and even the way the different markets shift.

It is one thing to hire people who are willing to learn the ropes of the industry, but it is an entirely different thing to keep them and have them onboard to help the company grow and adapt to changes.

Traditional sales marketers, for example, may not be willing to adapt to the use of social media as a tool for reaching potential clients. Senior employees may also not be willing to learn the most recent technological tools like, say, a new inventory tracking software.

It is therefore crucial for material suppliers to provide their employees with proper training and mentorship and to encourage career growth.

construction safety for material supplier workers

Worker Safety

There are two ways that worker safety matters a lot to construction material suppliers.

  • First, since they are supplying materials and equipment to the construction site, they face some of the safety hazards and risks that are present in that site.
  • Second, because they are the ones supplying the materials and equipment, they are expected to provide the instructions and safety risks associated with the resources they are bringing into the project.

The first reason is pretty obvious. Safety should always be a topmost priority in any construction site, and material suppliers must ensure that their employees are always wearing proper protective equipment (PPE) if necessary. They must also communicate and cooperate with the client regarding the specific safety procedures that they must follow once they are on-site.

Workers who are delivering lumber, for example, may go to a site and have no idea where to go and where to drop off their materials. Without proper coordination with the construction site manager, they might end up tripping on electric lines, which will pose a health hazard for themselves and also for the other workers on-site.

The second reason is another thing that suppliers must keep in mind. When providing equipment to a site, they must be very clear about the instructions on how to use it and the safety hazards that come with it.

It is best practice for material suppliers always to ensure that safety datasheets (SDS), if applicable, are handed to the proper parties in a project. While SDS are usually readily available from the manufacturer or the distributor, the supplier must also be ready to supply these informative sheets to their clients.

Technology

construction technology for material suppliers

New technology

Being a material supplier means having to adapt to innovations in multiple aspects of the industry. This means that you must be updated with the technologies on inventory tracking, delivery tracking, contract lifecycle management, cash flow management, and many more.

Material suppliers must find and discern which technologies to adapt to their system. Not all technological advances may be helpful to their operations, and not all apps offer the same functionalities. Suppliers must, therefore, know which aspects of their process can be further improved by using better technology.

Not only is it challenging to find the best technology to adapt, but it is also even more difficult to implement them. The transition to using new technologies require hard work, and it may take a long time before these technologies get fully absorbed into the company.

Often material suppliers struggle to integrate the continuously evolving technologies into their day-to-day operations, which is, of course, understandable. It is difficult to disrupt an otherwise functional process, but in most cases, it is highly necessary.

Having an automated inventory tracker, for example, is much better than manually counting your materials and sticking with the traditional pen-and-paper records. Miscounting the number of available supplies could lead to huge problems. You may discover a shortage in supply at the last minute, and this may lead to your failure to honor your side of the contract on a project.

Online marketing

construction online marketing

At this point this should be clear: when it comes to marketing, the world wide web must be maximized. To completely ignore the Internet in your marketing strategies is simply a no-go.

The challenge, however, lies in staying on top of the digital trends and maximizing the various digital marketing tactics. Not all marketing and sales employees are well-versed in new media, so material suppliers are increasingly looking into less traditional sales employees.

Sometimes the best employees to hire are not necessarily those with strong business backgrounds but those that are knowledgeable on the various digital marketing trends. Some of the most common online marketing tactics trends include content marketing, social media advertising, and influencer marketing.

Content marketing is using content to reach your target audience using not just a blog but also audio-visual media such as videos and podcasts. Social media advertising, similar to content marketing, also uses content that appeals to your target audience, albeit with the boost of advertising dollars. Influencer marketing is tapping onto people to provide useful feedback about your services while maximizing their audience to promote your offerings.

Remember to take into consideration the increasingly large audience accessing the web using mobile devices. Websites, for example, must be optimized for mobile use. All the previously mentioned digital marketing tactics must also consider the fact that most clients these days are using smaller screens.

Operations

construction materials procurements

Material Procurement

Having the right materials at the right time can be challenging. Sometimes delivery from the manufacturer may be delayed, sometimes materials may only be procured from specific locations, and sometimes issues in customs may arise.

All of the above are just some of the many concerns that materials suppliers struggle with when it comes to managing their supply chain. Materials shortage isn’t something that only American suppliers face; it is commonly considered to be one of the chief reasons behind construction delays across the world.

There are various reasons as to why having the right supply of materials can be difficult for material suppliers. If there is a so-called “building boom” in an area, for example, construction suppliers may not have enough resources to cater to the needs of the construction projects in that location.

Manufacturer issues may also arise. Sometimes even when a manufacturer is already running at full capacity to produce as many products as they can, they may not always have enough supplies to hand to the construction suppliers, therefore causing the delays.

Importing materials from another country may also pose issues regarding paying the customs fees. Sometimes there can be miscommunication on who shoulders these fees, or sometimes customs may have to hold off the release of the supplies pending regulatory inspections.

construction project management

Project Management

There are three ways project management can be challenging for suppliers.

  • One, they sometimes have to deal with contractors who wrongly estimate the supply requirement.
  • Two, they have to deal with lots of paperwork.
  • And three, their services run on a timed schedule.

Material suppliers have to deal with contractors who may not be the most efficient at running their businesses. Underestimating or overestimating the required amount or number of materials, for example, is an issue that material suppliers often encounter.

When a contractor underestimates the supply requirement, a delay in schedule is for sure going to happen. Lucky if the supplier has the materials in stock, but a longer wait could happen if the materials in question have to be imported from elsewhere.

Overestimating the supply requirement, on the other hand, will incur additional costs for the contractor. Communication issues may arise in this case, which may even result in payment issues if the contractor refuses to pay the extra costs.

Material suppliers also have to process and keep track of a lot of paperwork, from contracts to invoices to payment receipts. Material suppliers must be on top of all their paperwork management game because it allows them to manage their projects smoothly and also to arm themselves should disputes ever come up in the future.

Last but not least, material suppliers are advised to use some sort of project management software to track their deadlines and streamline their processes. Material suppliers are expected to deliver the supplies on time. Failing to do so will delay the projects and may cost the contractors more money.

If the supplier does not deliver the materials by start of day, for example, the laborers may be stuck doing nothing, and they end up getting paid for waiting.

Finance

cash flow management construction

Payment Issues

Payment delays and disputes are, unfortunately, widespread in the construction industry, and material suppliers are not immune to them. Making sure that the materials are delivered on time and at the right location is already a hard job, and nothing is more frustrating than not getting paid the amount you duly earned.

It may often be a big challenge for material suppliers to get paid for the resources that they have furnished. Material suppliers must be many steps ahead to ensure that they have the means to pursue payment should issues like this come up.

Suppliers, for instance, must be familiar with the lien laws and regulations of the state in which they are doing a project. They must find out whether they have lien rights and what are the requirements they have to fulfill in order to protect these rights.

Pre-lien notices have to be filed; so even before a payment issue comes up, material suppliers must make sure that they are aware of the deadlines on serving these notices. They must also know if there are specific delivery methods that they have to adhere to, as well as which parties they have to serve the notices to.

Keeping track of the contracts and invoices will be very important during payment disputes. Pursuing payment from delinquent clients is not the easiest job. It requires thorough research and strict adherence to guidelines, which also implies that it takes not only effort but also time.

construction payment issues

Cash Flow Mismanagement

Material suppliers can also experience cash flow issues, and it is a huge challenge for them when they spend over the budget and they end up not having enough money to spend to fund the next project.

Smaller companies often struggle with cash shortage. A supplier may for instance secure multiple projects only to realize that the project deadlines are too close to each other. This means that they need to find ways to secure enough financial resources. Otherwise, they may not be able to deliver the supplies to all the projects.

Failing to honor your obligations to multiple projects will not be good for your company. You don’t want to be labeled as the “unreliable materials supplier.” It does not only affect your relationship with your current clients but also your potential to reach even more customers.

Suppliers may also incur unexpected costs when, say, a contractor wrongly estimates the required amount for a material. In cases like this, the supplier must order more materials, even if these additional materials have not been part of their initial budgeting plan.

Because invoices may take multiple months before getting settled, suppliers cannot always rely on receivables to relieve cost overruns. They may have to look into securing bank loans or factoring their invoices to obtain more funding.

Market Trends

economic recession

Economic Downturns

The construction industry is susceptible to economic ups and downs, and material suppliers can be one of the most affected parties when the economy does not perform well.

Rising material costs can significantly affect the material suppliers, especially since some construction projects have fixed budgets for supplies. Costs may increase in the middle of an ongoing contract on a project, which means that the suppliers may have to spend more without necessarily earning more.

Political decisions such as the imposition of higher tariffs also affect the material suppliers. Material suppliers are constantly challenged to find different options in which they can find the cheapest alternative, especially when it comes to products that have to be imported such as lumber and steel.

On top of that, suppliers are also challenged to study the trends in the costs of the products they supply. Knowing the costing trends can allow them to use it as leverage when negotiating with clients by encouraging them to take advantage of the current price before it skyrockets in the coming months.

Understanding how the economy works is also an excellent way to get your company in a good position if a major economic downturn occurs. Being prepared for an economic recession, for example, is something that all suppliers have to do if they want to avoid a major financial blow.

construction market changes

Market Changes

Material suppliers not only have to deal with the fluctuating costs of products but also with the other changes in market trends, even about something as basic as paint colors. Suppliers, for instance, cannot just stock up on paint because paint is one of the products that sell depending on what color is popular.

Technology and construction innovations also play a part since suppliers must know the latest state-of-the-art developments in order to understand which products are in demand. Even if suppliers do not always directly deliver to the clients, understanding what the clients want is deeply crucial in keeping afloat in the industry.

There are sales forecast available for construction materials, and suppliers must take advantage of those. Roofing trends, for instance, say that steep-slope asphalt shingles are still the most popular choice for both brand-new and replacement roofs in residential constructions.

Keep in mind that suppliers are not only important for their timely and efficient service, but also for the overall value that they contribute to their clients. You may increase your value as a materials supplier by being able to offer your clients informed advice on how to improve their services to direct customers.

 Further Reading