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May 7, 2021

How Contractors Should Properly Handle Supply Chain Issues

There are several major industries where supply chains play a major role in daily operations, and the contracting and construction realm is a good example. A big chunk of construction is dependent on the materials used, but if there are issues with material availability, often due to problems in a supply chain, the entire ecosystem of a given project can be interrupted.

At Contractor’s School, not only are we here to help with areas like contractor’s licenses and numerous other areas for starting up a contracting business, we’re also here to provide growth support to existing contractors in several ways. These range from specific day-to-day themes like CPA services, liability insurance and payroll services through tips and expertise on common issues or themes that are present in the construction world – including possible concerns with supply lines, such as the recent blockage of the Suez canal and the impact this has had on numerous worldwide supply chains.

What are some themes to keep in mind for how to deal with supply chain issues, including preparing yourself for their inevitable occurrence? Here are several to think about.

Outside Your Control

First and foremost, it’s important to realize that while there are a number of elements of your contracting business that you hold significant control over, supply lines are one possible exception. We’ll get into some themes you can use to cover yourself within the supply chain realm here in just a moment, but the simple reality is that even your very best and most diligent efforts will still be subject to, well, some plain old luck.

For instance, the Suez canal blockage we mentioned above – there was really no controlling that, or the impact it’s had on numerous supply lines. The best you can do, rather, is prepare yourself as well as possible in case of these issues taking place, as they sometimes do within this industry. While you won’t be able to predict supply chain issues, and some might even have a negative impact on your business, you can take some steps to mitigate these risks ahead of time.

Multiple Relationships

One major step that we strongly recommend for quality contractors: Cultivating multiple relationships with material and equipment suppliers in the areas you service. We realize that parts of this may feel a bit icky, particularly if you have a good working relationship with your current suppliers – but even they will understand that this is a competitive industry and contractors have to cover themselves in case of supply chain issues, and the best of them won’t take offense at all.

And in cases where your preferred supplier is being impacted by some kind of supply chain delay or blockage, these additional relationships may come in handy. You’ll have possible alternatives for obtaining supplies within the timeline you require – and there’s no rule saying that once you’ve made an order from a different supplier than your usual one, you can’t go right back to your preferred source once their supply chain concerns have been resolved.

If you haven’t already, the recent Suez canal issue should be a wakeup call to at least consider investigating alternative suppliers in case of issues with your preferred options.

Our next several sections will go over how to react if you’re experiencing unavoidable supply chain delays.

Estimate Updates

Supply chain issues create problems both within your cost and timing considerations. Not only might certain parts become more expensive due to limited supply, the time it takes for parts to arrive will also be impacted heavily in many cases.

For this reason, if you’re in the throes of a supply chain issue of any kind, you will need to update your general cost estimates, both internally and for client consultations. If you’re using material cost numbers from a previous year, for instance, these will no longer be useful during a supply chain disruption – they should be altered or re-done entirely. Do not simply assume costs will be the same, even once the supply chain issue has mostly been resolved, as there are many situations where this will not be the case.

Adding Project Time

While your timelines should already include at least some buffer for unexpected events, a standard approach in the construction world, certain supply line issues might necessitate increasing this buffer or changing your expected timelines. Supply chain problems can turn jobs that would have taken a week or two into jobs that now take a month or two – if you’ve been impacted to the point where you think you will be going significantly past your deadline, and especially if you know this will impact your clients in a negative way, you will need to consult with them about extending the timeline.

Being Realistic With Clients

As a couple of our previous sections have touched on, being upfront and honest with your clients during any kind of supply chain delay is vital. There’s nothing clients in the construction world hate more than being jerked around or misled, and they won’t appreciate excuses or doubletalk – just be up-front with them from the start.

Frankly, while it may sound a bit crass, construction clients enter these situations with an implicit understanding that delays are possible. Of course, as a contractor, you work your absolute hardest to avoid these within reason – but when issues outside your control take place, such as supply line concerns, you simply have to level with clients and work with them on the ideal solutions.

For more on dealing with supply chain issues as a contractor, or to learn about any of our contractor’s license or other contractor support services, speak to the staff at Contractor’s School.

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