Top 3 Challenges for the Building Products Industry (and What to Do About Them)
Like most industries today, the building products industry is faced with a host of challenges. These uncertain economic times aren’t helping matters any. Here are some of the top challenges we’ve identified, and tactics to combat them.
Challenge #1: Post-COVID demand
As the tumultuous start to the decade began to ease back into normalcy, the industry saw an increase in consumer spending and a boom for the construction and building products industries. What was behind it? Potential customers had time to sit and think. A year or more of being involuntarily secluded in their homes put their current infrastructure to the test. Who thought that kitchen countertop was a good idea? Wouldn’t it be nice to open the wall up and put in a breakfast bar? And… while we’re at it, let’s install that screened-in porch to go with it. The projects consumers had been thinking about for months were finally able to be realized and construction started up again with a vengeance.
Great! But building products manufacturers have been struggling to meet this ever-growing demand.
Strategy: Don’t turn down work — extend your lead time
Many of our clients have more work than they can handle right now. While it may seem unrealistic to take on every project in sight, it’s important to shore up your bottom line that took such a hit during the pandemic. Extending your lead time by a few weeks will allow you to accept more jobs and keep business flowing.
Challenge #2: Supply chain bottlenecks
A post-COVID boom is great for business — until you can’t get the materials you need at a price that makes sense. Supply chain disruptions have been commonplace for a few years now and that disruption is touching nearly every industry imaginable.
The pandemic showed just how vulnerable the current state of the supply chain is across the globe. From shipping and transportation delays to factory disruptions and material shortages, it has never been more important to keep a close eye on where and how you are sourcing your materials.
Strategy: Implement SIOP to keep a careful watch on your inventory
Being mindful and proactive about your inventory is the best way to make sure you have the materials you need, when you need them. We are helping many of our clients implement Sales, Inventory and Operations Planning (SIOP) to do just that.
SIOP is a process that facilitates having the right inventory conversations at the right time by integrating customer-focused demand plans with production, sourcing and inventory. Using this method, companies can get a clearer look at their operations and create better-informed strategy decisions.
Read more about SIOP in our eBook, Sales, Inventory & Operations Planning: It’s about Time.
Challenge #3: Rising Costs
We get it. This problem is everyone’s problem these days. Despite the already razor-thin profit margins in the building and construction industry, material prices continue to rise across the board. Your business isn’t operating for free, and finding ways to complete projects under budget and stay profitable is proving to be a harder challenge with each passing quarter.
Strategy: Include an escalation clause in your contracts
There are a few strategies you can employ to combat rising costs, but each has its pros and cons. Should you finance material purchases? Raise your prices? Will these strategies help your bottom line, or will it cause customers to look elsewhere?
Ultimately, the wisest strategy seems to be including an escalation clause in your contracts, stating that if prices increase by a certain percentage or more during the duration of the project, you have the right to adjust your costs accordingly. This provides the most flexibility for your business without risking losing customers to cheaper alternatives.
At USC Consulting Group, we’re here to help you through these uncertain economic times. And the good times, too! If you’d like to learn more about these common industry disruptors and our solutions, download our free eBook, “Constructing the Building Products Industry: An Outlook of Challenges and Solutions.”
