Gilbane exec: COVID-19 will lead to lower material prices | Dump Trucks Charlotte NC

Here, Construction Dive talks with Piro about the impact COVID-19 has had on materials, pricing and the construction supply chain as a whole. 

The following has been edited for brevity and clarity.

CONSTRUCTION DIVE: How has the coronavirus affected the construction supply chain? 

JOE PIRO: PPE notwithstanding, and speaking in terms of material, price and availability only, I think the short answer is less than expected as far as impact. As the criticality of the coronavirus situation started to unfold, there was certainly some unfounded speculation and it was kind of a perfect storm of variables that had challenged the models, and the supply chain we've been perfecting for the last 20 years. 

As we became a global economy, we all started to perfect the “just in time” model throughout each industry. Now it's different and obviously there was some panic buying in response early in the crisis. But generally speaking, and domestically, I think the manufacturers, the distributors did an excellent job of getting in front of these unknowns and restocking inventories to levels that would, at least in the short term, sustain some of these unknowns.

We've gone from a "just in time" model — where each link in the chain and all the business partners understand how it works — to almost a "just in case" model. I think as the dust starts to settle, and now that we're into Q2, the industry is starting to think about how best to recalibrate availability, lead times, production. They're starting to recalibrate some of this math for the remainder of the year. 

Where has the biggest impact been felt?

PIRO: Certainly imports were impacted, in some cases significantly. Specifically some of the materials that we'd be monitoring before imports would include flooring. Tile in Italy has been a problem. Lighting ballasts, furniture and then some of the HVAC equipment.

But curiously, the key factor, there wasn't a production issue. It wasn't a manufacturing issue. Yes, that was a contributor. But the key factor, believe it or not, was the shortage of shipping containers that needed to return to the port of origin. Manufacturers in China were back online, I think quicker than most people realized, and they were creating materials but had no containers to store them and ship them. Those returned containers really were a key contributor to the slow down. I think limitations certainly still exist, but again, it's primarily due to logistics and not manufacturing.

We use a green, yellow, red dashboard. And during the crisis it was predominantly green. There was some yellow, certainly with imports. But materials were coming in, ports were closing sporadically and then reopening both at destination and origin. The increases in those lead times we thought would maybe go into months. They really didn't. They went into weeks.

What about prices of materials, supplies and products?

PIRO: I think a lot of people within our industry did think that there would be a shortage of materials and that would necessitate higher prices. But I think what's ultimately going to happen is actually the opposite. 

We've been communicating regularly with peer groups in our industry and I think we can all agree that we're not going to see a price increase. In fact, we're going to see prices likely go down into Q3 and likely into Q4. I'll go back to steel, speaking domestically: a lot of these steel companies or some of these steel companies are actually increasing production.

I think some projects now may be delayed a little bit. It's still too early to say how quickly this industry is going to flip back on but from the conversations I've had, I think the sentiment is more slowly than we'd like. Therefore you're going to have some softening demand. You're going to have some higher levels of inventory. These wholesale distributors do a very good job of raising inventory levels, so you've got a lower demand, you've got possibly a glut in some of these inventories and I think that's going to push some pricing down. What I expect to see is lower prices, through the rest of Q2 and probably throughout the rest of 2020.

What should columbus oh dump truck company do to protect their supply chains?

PIRO: First, financial recovery and stability and contingency planning for our subcontractors and the rest of our business partners, whether it's distributors or manufacturers and so forth, is crucial. Because who knows? There's a chance of a second wave. There's a chance that this can all happen again in some other form. So, I think contingency planning needs to be elevated.

Second, I think columbus oh dump truck company need to partner and have visibility into the strategies of their providers. You need to be sourcing as a subcontractor from that distributor or that manufacturer who's got robust strategies in place. Whether it's virus related or whether it's tariff related. I would hope that these subs are starting to partner more closely with the companies who are sophisticated and have the better forecasting models in place. 

And then third, I think subcontractors should concentrate on diversifying their supplier base. Single sourcing materials is never a good idea. Obviously that's been magnified as this whole scenario starts to unfold further. 

How should columbus oh dump truck company weigh choosing domestic or international manufacturers and distributors after this?

PIRO: With respect to imported materials, I think we might see the spec of material, maybe shift a little bit. Italian tile is a really good example right now. You can't get it, or you're in line. And maybe if that was a specification for a project, maybe that Italian tile becomes North American specifications instead, something that's readily available. 

I think, should columbus oh dump truck company go with that imported spec, they really need to elevate visibility into the supply chain. It's very unfortunate that it took these circumstances to elevate the importance of supply chain in our industry. But it did. And here we are. I think now we all have a responsibility to make sure we have visibility into what each link is doing.