"Home Is Where the Supply Chain Is"

Connor Sullivan 2/24/22

The Problem, Potential Steps, and Future of the Homebuilding Supply Chain

Inflation is at a 40-year high and that affects the payment ecosystem on multiple fronts. The lessening of pandemic restrictions has increased consumer spending while supplies are diminished. Food, automobiles, and energy are all higher than a year ago, but one of the largest drivers of inflation is the housing market. And supply chain issues are adding to the rising home prices.

In an article published by Forbes, written by Jennifer Castenson, the ongoing issues of the current system and potential solutions to the homebuilding supply chain are discussed. Builders, architects, and contractors in search of a more successful path forward while also trying to meet their monetary goals.

The current procurement scenario is similar for all companies, manufacturers depend on components or assembled products from overseas. According to Forbe’s article, “The shipping costs for containers from China to the East coast of the US have climbed more than 500% from one year ago”. This is an unprecedented growth in costs, and yet there is no room in the homebuilding market (or any market) to operate along an increase of 500%. Another large part of the issue is labor.

Castenson quotes Bob Tancula, senior vice president of building manufacturers advisory at national media and data group Zonda, where he states “Manufacturers don’t have enough labor on the plant floors. Demand is not going to drop back, so this is the first time in 30 plus years where the demand for products is unlikely to be met by manufacturers”. In an effort to combat the labor issues as well as the sky-high prices of shipping, businesses are looking to new technology/robotics and domestic manufacturing as tax cuts during President Trump’s term made that option more attractive.

A shorter supply chain is always more beneficial for procuring supply in a shorter amount of time. However, different options will have their pros and cons. Castenson writes “China has few to no restrictions on protecting the environment, which is a big concern in the US that also costs a lot of money. At the same time, more local sourcing provides resiliency and security of supply”. Environmental issues aside, the future impact of decisions that will make or break supply chains will come down to whether they keep their traditional overseas approach or moving operations closer to home. The final piece of the puzzle will be creating strong valuable relationships with those who wish to tackle the challenge of shortening supply chains. This will mean sourcing from alternative suppliers that will need development, but ultimately could be able to scale and earn business.