Contractors depend on material suppliers to have the boards, bricks, concrete, and steel on the jobsite when and where it is needed. When the supply chain is disrupted, as is possible now in the coronavirus pandemic, workers, equipment, and whole companies are idle.
Construction is vital in getting us through the next months as hospital and manufacturing capacity must be ramped up to handle the needs of the country. When California ordered all individuals living in the state to stay home or at their place of residence, they exempted those needed to maintain continuity of operation of the federal critical infrastructure sectors, critical government services, schools, childcare, and construction, including housing construction.
With coronavirus, supply chains should be focused on three important areas for their initial crisis management. And according to Gartner, “Supply has been impacted in three primary ways: limited access to employees due to quarantines, factory closures or manufacturing slowdowns, and limited access to logistics to move goods. Most supply-chain organizations are in crisis management, assessing impacts and response on a daily, if not hourly basis.”
A Gartner survey of 800 global HR executives on March 17, 2020 found that 88% of organizations have encouraged or required employees to work from home, regardless of whether or not they showed coronavirus-related symptoms. Nearly all organizations (97%) have canceled work-related travel, more than an 80% increase since March 3.
Gartner recommends a focus on three main areas.
To limit the impact of COVID-19, many employees have been instructed by local governments or their employers to stay at home. Companies have put controls on travel and visitors to jobsites. Employers need to protect the health of workers and support individuals who are ill. Providing clear and consistent communication through human resources and providing security is essential. The risk is that crisis management teams become fatigued and make poor decisions.
COVID-19 has the potential to change the competitive landscape. Suppliers for commoditized products are at risk to lose market share, as clients will look into substitute suppliers when they don’t receive their products on time. If forced to make trade-off decisions, material suppliers will analyze and forecast the impact of the new coronavirus on customer demand and product availability. Providers may experience sharp increases in demand for products or unexpected consequences from the event, such as panic buying for items.
The Home Depot, Lowes, and Menards stores will potentially be overwhelmed by DIY (do-it-yourself) buyers who are now at home all day instead of at work. The sudden extra time might be converted into home repairs long overlooked. While these would be normally be ripe pickings for small contractors, stay-at-home workers from all segments will find time to do the work, or at least attempt it.
A pandemic is one form of crisis and crises often bring out the best—and worse—in the public. Companies that depend on movement of material, like contractors, may find shipping and transportation slowdowns and cost increases. Hopefully, these will be caused by employees in quarantine rather than price gouging (which is illegal in all states).
Even prices that were under contract before the pandemic, and quantities of material offered for that price, might no longer be valid. Supplier could invoke force majeure clauses or otherwise look to pass on additional costs up through the supply chain, notes Gartner. Additional cost related to the coronavirus should be treated as an issue that concerns the whole organization rather than a single job.
Gartner suggests contractors analyze all supplier contracts and when renewal time comes, make sure that the organization is financially protected against similar situations that might occur in the future. Supply chains will not be the same after this event. There will be an increased focus on resilience, risk exposure and business continuity plans going forward.
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