Have you been questioning the cost of materials lately? It’s true that the price of materials for construction, home improvement, and building projects has soared in the past year. For some materials, the cost has increased to the highest levels in years.
The Associated General Contractors of America says the prices for construction materials has experienced the highest monthly and yearly increases in its 35 years of tracking the data. The situation is dire enough that AGC has issued a construction inflation alert.
“The construction industry is currently experiencing an unprecedented mix of steeply rising materials prices, snarled supply chains, and staffing difficulties, combined with slumping demand that is keeping many contractors from passing on their added costs,” says AGC. “This combination threatens to push some firms out of business and add to the industry’s nearly double-digit unemployment rate.”
The increase is notable enough that it’s drastically changing the total cost of any project involving materials. For example, a 2-by-4 that went for $2.25 a year ago, now costs $5 or more. In another example, a home that typically goes for $200,000 will most likely see a 10 percent increase to its construction, which adds a whopping $20,000 to the cost. According to Bill Conerly’s article in Forbes, the prices will not return to pre-pandemic levels until 2023.
What’s Driving up the Cost of Materials?
The biggest factor is the pandemic has forced companies including mills, lumber yards, construction, and others to scale back on the number of workers they have on the site. Even if they have a need for workers, many ended up not having enough.
Online schooling is one reason for the lack of available workers. Those who are parents have to stay home with their underaged children. Unfortunately, some workers caught COVID-19 or had to care for a loved one who became ill. These, too, reduced the availability of workers. Additionally, companies had to restructure their processes to ensure their employees stay healthy.
With fewer employees available, it caused a domino effect and created a shortage of truck drivers to transport material. This alters the supply chain. The same goes for the notorious Suez Canal blockage that caused the cargo ship MV Ever Given to get stuck for six days. It has created another domino effect as the blockage delayed more than 100 shipping vessels. Every day the cargo ship would not budge cost $9.6 billion in global trade.
Even the snowstorm in Texas hurt the supply chain. Trucks and other means of transportation couldn’t travel through Texas. Factories had to shut down. It was not safe for anyone to drive into work.
Moreover, governments have promised to boost the use of electric vehicles and renewable energies. As a result, copper is on a roll. The material is also used to build out electricity networks. The power grid problem in Texas reveals the need to expand the network. Thus, the price of red metal soared by more than 90 percent as reported in Strange Sounds.
While many people stayed home, they started taking on do-it-yourself projects and new hobbies. These have created a demand no one could have predicted. This demand did not shrink once the states started lifting stay-at-home orders. Construction and housing demand also climbed per the National Association of Home Builders.
A good example to explain the cause-and-effect of the mounting cost of materials is the toilet paper crisis of 2020. With many people making a toilet paper run in a short time, it led to a backlog. It took manufacturers a long time to catch up. Remember, manufacturers had a shortage of workers to contend with on top of everything. Building and other materials are going through the same thing. Recall basic economics that states scarcity propels prices.
How the Rising Cost of Materials Affects Different Industries
Clearly, the rising costs of materials will disrupt many businesses and projects. So, what does this mean for you and your business?
Many jobs and industries have been hit by skyrocketing material prices according to data from ServiceChannel.
- General repairs: Lumber costs and time on site have increased invoices by 11 percent.
Invoices have increased by 12 percent due to increasing labor time on a project.
Material prices and labor time pushes up costs by 4 percent.
- Kitchen equipment: The cost of material and labor raises the total invoice by 12 percent.
- Lumber yards: While they’re selling materials at a higher cost, most building contractors expect the price to be higher while DIY customers won’t be prepared for this.
Why would labor go up? Part of it is the projects have grown more complex. Because of the pandemic, many businesses and residents put off repairs or maintenance. The problems causing the need for repairs or maintenance grew worse. As a result, the repair job or maintenance has become more involved.
What all of this means for lumber yards, construction companies, electric supply houses, plumbing wholesalers, metal suppliers, and equipment rental yards is they need to protect their assets. These cost far more than they used to. Imagine a lumber yard with thousands of 2-by-4s. Last year, 1,000 2-by-4s cost around $2,500. They have now more than doubled their costs, so that same lumber yard has $5,000 worth of inventory on hand.
What Can Companies Do About the Rising Cost of Materials?
“Now is the time to avoid using historical averages or ‘peanut butter spreading’ to account for your budget,” Bill Connerly writes. “Use your detailed historical cost data to inform granular budgets by trade, region, and project that emphasize your strategic priorities. The strongest lever for reducing costs is finding more cost-effective providers that complete work with fewer labor hours. While it’s impossible to completely avoid rising material and labor costs, you can minimize the negative impact by ensuring you have the best network of providers possible.”
The biggest concern is protecting your assets. Associated General Contractors of America’s inflation alert advises adding security to protect your assets from theft and damage. The domino effect of costs and projects has generated shortages hitting industries in different ways. When you take everything into consideration, it forces companies to watch their budgets and spending more than they have in years.
Along with the escalating prices of materials comes a jump in materials theft. A detective in Canada tells CTV News there has been a rise in lumber thefts since 2018. It’s also drastically increasing the number of catalytic converter thefts because they contain precious metal that can be resold for good money according to The New York Times.
So, the mushrooming cost of materials touches any business with vehicles. Apartment buildings have many vehicles in their parking lot, commercial properties with workers, businesses with employees driving into work, automotive dealerships, and more.
When theft hits any company, the cost is more than the price of the stolen good. In construction, stolen materials will delay the project. The new lead times on materials are staggering to the point that it can delay a project by months instead of days or weeks. Project delays can be expensive.
Not to mention, the client will not be happy, which hurts your company’s reputation. If visitors and customers learn about theft at your business, they may not feel safe.
The easiest solution is to implement remote video surveillance with advanced technology and monitoring. The difference in the cost of material can easily pay for security solutions that protect your company’s assets.
Video Surveillance Helps Protect Your Expensive Materials
The type of video surveillance system matters. Not all security cameras work well or provide proactive security. What you want to look for is video surveillance that integrates high-quality security cameras with video analytics and human monitoring operators. The technology helps humans be far more effective in watching the cameras and catching something suspicious before it happens.
Imagine watching video cameras for hours on end. It’s tedious and it’ll be easy to miss a potential problem. The analytics fills in the gap that comes with doing mind-numbing activities. It puts a computer’s eyes on the entire business property. Technology does not get tired, sleepy, hungry, or anything.
If the video analytics spots something fishy, it alerts the trained monitoring operator. The person acts by reviewing what the analytics found and determines the next steps based on the scenario. If an intruder is on the property, then the operator can send a warning through an on-site speaker. By the way, the operator is in a remote location away from the property. They don’t fear for their lives. This puts them in the best position to solve the problem.
If the audio warning doesn’t deter the suspect, then the operator can call the police and keep them informed of the trespasser’s movements. On top of all this, video surveillance records and saves everything. This will provide evidence of what transpired on the property.
The right video surveillance system can deliver a fast return on your security investment. You’ll help protect your expensive assets and your employees. The high costs of materials more than justify the need for security.
To learn more about video surveillance and how it’s possible to do more than deter theft of expensive materials, check out the guide to Remote Video Surveillance: More Than Just Catching Criminals. For a customized security plan that fits your requirements and can maximize your ROI, contact us.