Michael DeBlasio completed the construction of Long Branch’s Kahuna Burger four months later than originally planned. When he looked at the prospects for the fall, he prepared for more delays for his customers.
The price of windows is rising.The prices of glass windows and aluminum frames are rising.Ceiling tiles, roofing and siding prices rose across the board.Suppose he can find the item first.
“I think my job every day is to find what I want to buy before I set a price,” said DeBlasio, project manager of Structural Concepts Inc. of Ocean Town and DeBo Construction of Belmar.”I became a discoverer rather than a buyer. This is crazy.”
Construction companies and retailers in coastal areas are facing shortages of materials, forcing them to pay higher prices, find new suppliers and ask customers to wait patiently.
This competition has caused headaches for an industry that is supposed to be prosperous.Businesses and home buyers have been using record low interest rates to stimulate the economy.
But demand is straining the supply chain, which is trying to restart after it was almost closed at the beginning of the pandemic.
“This is more than just one thing,” said Rudi Leuschner, a professor of supply chain management at the Newark Rutgers School of Business.
He said: “When you think of any product that will eventually enter a retail store or contractor, that product will undergo multiple changes before it gets there.” “At every point in the process, there may be delays, or It may just be stuck somewhere. Then all these little things add up to cause greater delays, greater interruptions, and so on.”
Sebastian Vaccaro has owned the Asbury Park hardware store for 38 years and has approximately 60,000 items.
He said that before the pandemic, his suppliers could meet 98% of his orders.Now, it is about 60%.He added two more suppliers, trying to find the products he needed.
Sometimes, he is unlucky; the Swiffer wet jet has been out of stock for four months.At other times, he must pay a premium and pass the cost on to the customer.
“Since the beginning of this year, the number of PVC pipes has more than doubled,” Vaccaro said.”This is something that plumbers have been using. In fact, at certain times, when we order PVC pipes, we are limited in the number of purchases. I know a supplier and you can only buy 10 at a time, and I usually do Buy 50 pieces. ”
The interruption of construction materials is the latest shock to what the supply chain experts call the bullwhip effect, which occurs when supply and demand are out of balance, causing shocks at the end of the production line.
It appeared when the pandemic broke out in the spring of 2020 and caused shortages of toilet paper, disinfectants and personal protective equipment.Although these projects corrected themselves, other shortcomings emerged, from semiconductor chips used to make cars to materials used to make surfboards.
According to data from the Federal Reserve Bank of Minneapolis, the consumer price index, which measures the price of 80,000 items per month, is expected to rise by 4.8% this year, which is the largest increase since the inflation rate rose by 5.4% in 1990.
Some items are more expensive than others.PVC pipes rose 78% from August 2020 to August 2021; televisions increased by 13.3%; according to data from the US Bureau of Labor Statistics, furniture for living rooms, kitchens and dining rooms rose by 12%.
“Almost all of our industries have supply issues,” said John Fitzgerald, president and CEO of Magyar Bank in New Brunswick.
Builders are in a particularly difficult period.They saw some projects before the retreat, such as timber soaring, other projects continued to climb.
Sanchoy Das, author of “Quick Fulfillment: Changing the Retail Industry’s Machines,” said that the more complex the material and the longer the transportation distance, the more likely the supply chain is to get into trouble.
For example, the prices of basic materials such as wood, steel, and concrete, which are mainly manufactured in the United States, have fallen after soaring earlier this year.But he said that products such as roofing, insulation materials and PVC pipes rely on raw materials from overseas, causing delays.
Das said that at the same time, assembly products such as electrical appliances shipped from Asia or Mexico are facing a backlog, and operators are also working hard to increase them to meet customer needs.
And they are all affected by a chronic shortage of truck drivers or increasingly severe weather, such as the closure of chemical plants in Texas in February last year.
Newark New Jersey Institute of Technology professor Das said: “When the pandemic started, many of these sources were shut down and went into low-volume mode, and they were coming back cautiously.” “The shipping line was almost zero for a while, and now they are suddenly in During the boom. The number of ships is fixed. You can’t build a ship overnight.”
Builders are trying to adapt.Chief Accounting Officer Brad O’Connor said that Old Bridge-based Hovnanian Enterprises Inc. has reduced the number of homes it sells in developments to ensure that it can be completed on time.
He said that prices are rising, but the housing market is strong enough that customers are willing to pay for it.
O’Connor said: “This means that if we sell all the lots, we might be able to sell six to eight pieces a week.” Build on an appropriate timetable. We don’t want to sell many houses that we can’t start.”
According to data from the US Bureau of Labor Statistics, supply chain experts said that with the decline in timber prices, inflationary pressures on other products will be temporary. Since May, timber prices have fallen by 49%.
But it’s not complete yet.Das said that manufacturers do not want to increase production, and will only have an oversupply situation when the supply chain solves problems.
“It’s not that (price increases) are permanent, but it may take a while to enter the first half of next year,” he said.
Michael DeBlasio said he learned his lesson early in the pandemic, when he would absorb price increases.So he began to include an “epidemic clause” in his contract, reminiscent of the gasoline surcharges that transportation companies will increase when gasoline prices rise.
If the price rises sharply after the project starts, the clause allows him to pass on the higher cost to the customer.
“No, nothing is getting better,” De Blasio said this week.”And I think the situation now actually takes longer than six months ago.”
Michael L. Diamond is a business reporter who has been writing articles about the economy and healthcare industry in New Jersey for more than 20 years.You can contact him at mdiamond@gannettnj.com.
Post time: Jan-07-2022