Use Proactive Measures To Manage Materials And Labor Costs

High inflation and rising interest rates are still affecting many businesses. For construction company owners, this means you’ll need to continue paying close attention to materials and labor costs. Keeping these dollar amounts in line calls for ongoing proactive measures.

Be prepared for supply fluctuations

When it comes to materials, manufacturing delays are often unpredictable. Short-staffing at facilities, labor disputes and natural disasters — just to name a few issues — can slow or even stop production in certain plants or regions.

The same goes for shipping. Think back to 2021 when we saw container ships get stuck in canals and blocked from entering ports. Generally, supply chains have improved since but there’s no telling when the next bottleneck will appear. Be proactive and flexible when considering different materials, systems or manufacturers, so you can pivot if a supplier fails to deliver.

Build a catalog of vetted providers you can turn to as emergency supply sources. The first step is to evaluate vendors you already work with. Some may have expanded their offerings to include new products and services. Ensure your list includes local suppliers because they typically offer the fastest delivery times.

Build contingencies into contracts

When bidding a project, include a backup plan of two or more alternative supply sources. Then while negotiating the contract, ask for a deposit to buy and store materials (if you’re able to) before the job gets underway. Procuring materials in advance helps mitigate the risks of escalating prices and poor availability when work starts.

Also, determine whether the owner would agree to a price escalation provision in the contract. It would allow you to adjust the contract price to reflect actual costs if market prices increase over the course of the project.

Monitor skill sets

As you’re no doubt aware, labor is an even trickier resource to procure and manage. Having the right people in the right positions can lessen the strain on supplies and reduce waste, but that’s easier said than done during a skilled labor shortage.

Hold regular meetings with project managers to stay apprised of employees’ evolving skill sets and to determine how you can best deploy workers. For example, if a team lead is excellent at electrical work but is instead supervising a lesser-skilled crew, your company may be wasting labor resources and payroll.

To reduce downtime, consider cross-training workers to handle multiple aspects of a job. For instance, if crew members are skilled in both framing and concrete work, they can move to one crew or the other while waiting on a lumber truck or a load of concrete.

Retain good employees

With the aforementioned skilled labor shortage still in mind, it’s as important to keep experienced workers as it is to recruit new ones. Make sure you’re offering competitive compensation and benefits, too.

In addition, provide ample training to help employees expand and improve their skills, as well as map out a career path. Set up a mentoring program to help transfer knowledge from seasoned veterans to newer hires. Open lines of communication between job sites and the executive leadership team so employees feel heard and connected. Having a tech-savvy company culture can also help attract and retain younger workers.

Take nothing for granted

Construction companies can’t take anything for granted in today’s competitive, evolving environment. You’ll need to continue to proactively strategize your way through ongoing materials and labor challenges. Our firm can help you identify, track and analyze cost data to make better business decisions.