Find out how you can maintain efficiency and cash flow, despite shortages of materials and skills that threaten construction project management.
It's been a long time coming, but there's no doubting the strength of the construction industry's recovery, or its driving force - a countrywide house-building boom.
The sector's most influential survey of sentiment, the Chartered Institute of Purchasing & Supply's (CIPS) index, reported in August that house construction was rising at its sharpest since November 2003.
CIPS research sets nerves jangling
However, the survey also highlighted a rapid lengthening of suppliers' delivery times and subcontractor rates increasing at near-record rate. Such concerns inevitably ramped up the pressure on the ability of construction project management teams to manage their supply chains more effectively and keep project costs in check.
The CIPS research attracted much media attention, although similar warnings had come earlier in the year from other observers of the construction sector. In April 2014, the Federation of Master Builders revealed that rising building costs and material shortages had caused “serious concern” to its members during the first quarter.
FMB fears spike in prices and costs
Its chief executive, Brian Berry, said 80% of its SME members expected the problems to worsen during the second and third quarters.
“Although this is the fourth successive quarter showing positive results for workloads, employment and enquiries, this could be undermined by a spike in prices and costs.”
Berry focused especially on supplies of bricks, saying small house-builders were being asked to wait until the start of 2015 for orders.
Shortages of bricks and labour worsen
Continue the shortage certainly did, as Steve Morgan, founder and chairman of the FTSE 250 index builder Redrow, highlighted in September with his company's year-end results.
“Bricks is an industry that takes a longer time to wind up. Firms are reluctant to do it, until they think it will be worthwhile”, he warned. Inevitably, shortages of materials and labour are driving up costs, especially in the private sector, as the Department of Business, Innovation & Skills' second-quarter analysis revealed.
Its most concerning data, especially for SMEs in the building industry and their hard-pressed construction project management teams, was output prices running way ahead of inflation for the private housing sector (7.2%) and the private commercial sector (9.0%).
Monitoring cash flow remains crucial
In a market of rising material and subcontractor costs couples with potential delays in deliveries, e.g. bricks, then once again cash flow becomes critical. Clearly not a problem that can be ignored, the most cost-efficient solution for SMEs must be to use specialist construction software to more effectively manage the supply chain and the cash flows, in and out. This software must be from a reputable and established supplier, increase transparency and highlight potential issues throughout supply chains, both material and subcontractor, and the construction projects.
Efficiency, cash flow and mitigating risk were the watchwords of the construction industry for five long years. Strong construction project management is crucial now as the sector moves forward at pace, especially as the government's Help-To-Buy initiative stimulates demand for new homes.
