Editor's Message: The Weakest Link in the Chain
Last March, a 1,300-ft cargo ship got blown slightly off course and ended up wedging both its bow and stern into the banks of the Suez Canal, blocking all international shipping through one of the world’s busiest trade routes for six days. Almost one-third of the world’s seaborne freight passes through that waterway and experts estimated it took several weeks for the maritime industry to recover.
In that same month, a small fire in a single piece of equipment at one Japanese microchip processor plant set the world’s auto industry on its ear because it produces most of the chips used in today’s cars and trucks. It’s estimated the microchip shortage will continue to be felt through most of 2022.
Last February, a rare ice storm swept across Texas, causing massive power outages. It halted 75 percent of polyethylene and 57 percent of PVC domestic production for a week. Almost two months after the storm, 60 percent of the PVC production remained offline. When you add in a reported massive absenteeism in manufacturing related to COVID, it is no surprise that at the end of the year home builders reported the shortage of windows and doors as their number one constraint.
Indeed, in 2021 component manufacturers (CMs) experienced significant shortages in lumber in the first half of the year, only to experience a connector plate shortage shortly thereafter thanks to a perfect storm in the global steel market.
All of this is to make the point that supply chains have become very complex processes that rely on a whole range of things to go just right. One regional natural disaster can quite easily create a national or global disaster.
What does this mean for you? It means that while running a successful business was tough in 2021, by all accounts it’s only going to get tougher in the months and years ahead. Especially in an industry like ours that produces custom-made products for just-in-time delivery, supply chain disruptions and raw material volatility are acutely painful. This is a good time to take a deep dive and review all your processes surrounding material purchasing, inventory management, and scheduling. It’s also a good idea to take a hard look at your customer contracts and remind yourself the risk you take on with each job, as well as your performance obligation in the event your raw material supply chain is severely disrupted.
If you plan on doing the same thing you did in the past, chances are good you are going to find yourself with a massive headache at some point this year.
One small step you can take is arming yourself with better data with which to make decisions. In 2022, SBCA is partnering with John Burns Real Estate Consulting (JBREC) on a survey tailored to component manufacturers. JBREC has established a solid reputation for gathering accurate and meaningful data from home builders, real estate developers and LBMs to paint a much clearer picture on what is going on in metro and regional housing markets. By participating in this survey (use the QR code on page 10 to sign up), SBCA and JBREC will provide you a wealth of market-specific information you can use to gauge where and when demand will grow in your area.
Beyond the JBREC survey, participating in SBCA’s Financial Performance Survey (FPS) and Wage & Benefit Survey (WBS) is the only way to access CM-specific operational metrics. Want to know a good benchmark for your cost of goods sold? You can find it in the FPS. Want to know what your market is paying for entry-level truss designers? The WBS is the only reliable and non-biased place to find it. These surveys are being revamped for 2022 to make participation even easier, and there has never been more vital to have this information in your hands.
So make a resolution this year to arm yourself with better data. This year will hold many supply chain disruptions, and the more you know, the better prepared you will be to weather them successfully.
Author: Sean D. Shields, Managing Editor