Construction materials include everything from aggregate, cement and asphalt products to piping and structural steel, from exterior glass and metal products to the gamut of roofing products to the entire sphere of interior finishes including flooring, wall coverings, furnishings and equipment.
Seasonally material prices can fluctuate due to natural disasters and heightened construction activity. One main reason for the rise includes this year will be because of Covid-19 despite still having an increase in energy and crude oil costs.
Keeping an eye on the rising cost of construction materials is essential in this industry. As the increase in construction demand continues to rise, the supply and demand of materials will follow suit. Yet material costs in construction do not have to force your construction company to sacrifice in quality or design. By implementing technologies and design processes including lean construction, BIM and construction field management software, you can increase the efficiencies of your construction crew.
Solutions
Managing the volatility – towards a greener economy. Business leaders need to formulate a two-pronged strategy to counter what is evidentially a new regime of commodity- and resource-cost volatility and escalations: short-term mitigation of risk, and a longer term sustainability vision. To an extent the short term actions are easier, because they involve working capital protection, cost control, and the bottom line – challenges which companies constantly face. Broad measures should include the following:
Financial modelling of all raw material inputs
This should incorporate detailed cost tracking, projections under various scenarios, and risk analytics. Procurement departments need to become agile and adept within the full gambit of derivative instruments. This will facilitate widest possible hedging opportunities.
In-depth supply chain interrogation
One area of focus should be on the proximity to raw material sources and their value-to-sustainability quotient. Upstream investment should be considered if corporate finances and capital permit, as a means to ongoing access to a crucial raw material input. An imperative, too, is the investment in waste minimization technologies and programs. These will generate compelling cost savings after modest payback periods.
Ensure measurability for the foundations of sustainability, and target immediate improvements
The lexicon of financial reporting is shifting to embrace wider valuation techniques. Issues such as carbon emissions, water and energy efficiency, and chemical waste management are vital for reputation management.