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The Unfolding 2022 Supply Chain, and Six Tips to Minimize Impact

March 15, 2022
Osman Dadi
As 2021 closed we experienced a huge demand for construction & renovation projects, while the core causes of supply chain issues continue to amplify into 2023. We discuss six ways to minimize impact. Today we’re going to talk about the supply chain issues of 2021 – how it’s been affecting projects this last year, how […]

As 2021 closed we experienced a huge demand for construction & renovation projects, while the core causes of supply chain issues continue to amplify into 2023. We discuss six ways to minimize impact.

Today we’re going to talk about the supply chain issues of 2021 – how it’s been affecting projects this last year, how we see the pattern continue to develop in 2022, and what you can do about minimizing the effects on your projects and holdings.

Supply chains issues were all over the news in the latter half of 2021, and personally touched every single project I partook in, sometimes in the most unexpected ways and at the most unexpected times. Some products become comically extreme with their supply chain delays – for instance, for the last three months I heard lead times for Sub-zero refrigerators in the 10-12 month range, on multitudes of different projects. Many other trades have seen their lead times double or triple in length, with costs also inflating in unison.

So far, the most affected areas I’ve seen are:

  • Appliances
  • Furniture, especially certain brands manufactured in Asia, Italy, and abroad.
  • AV Tech
  • IT Technology
  • Lighting Control Systems (similar to AV)
  • Carpet
  • Tile and Stone (counters, floor and wall) sourced abroad, including high end Italian finishes
  • High-end Plumbing Fixtures, especially if sourced abroad.

The causes of the supply chain issues we are experiencing are many, and as we turn the year I do hate to break the news, but it also appears to be getting worse (or at best, not improving). As we closed 2021 we are experiencing a huge boom in demand for construction and renovation projects, while the core causes of the supply chain problems are also amplifying. In my opinion, this setup does not bode well for improvements in 2022 – in fact, we’ll have to assume that the supply chain will continue to affect us on our projects through the remainder of 2022, and we’ll be sure to track how this develops in every quarter through the year.

So what is an Owner or Manager, to do about this?

This only means that we should put all our efforts on managing what we know, and work with our team to mitigate any impacts on our projects. Fortunately for us, there are still many steps that we can take proactively, to assure the best chance of our own projects staying on track.

Here are Six Steps You Can Take to Assure Minimal Supply Chain Impact on Your Project:

Tip #1: Place your orders quickly.

One of the key lessons in the Design and Construction business is that nothing formally happens until orders are placed and deposits are formally made. Thus, your lead times actually start once the deposit payment hits the end supplier, and finishes moving through the process between the mid-vendor and you, the customer.

With this in mind, it’s important to coordinate design and product decisions expeditiously. Once receiving proposals, move through the review and order process quickly. If revisions need to be made, make them quickly. Additionally, once proposals are approved, when you receive deposits from your vendor to place, you should always move quickly to process them.

Some vendors will require a Quote sign-off, and then subsequently a Deposit invoice based on the Quote sign-off – furniture vendors being a notorious example of this. In such situations, be sure to approve (if correct) the Quote AND also place the deposit invoice, as fast as possible.

Our next tip follows on a similar note…

Tip #2: If You’re Certain You Want It, Go For It

If you already know that you want something on your project, go ahead and order it right away if there’s any worry of a long lead time. For example, as I mentioned we have specified Subzero refrigerators on many of my recent projects – for good reasons, this brand of appliances is immensely popular on high end Architecture projects and Owner’s will order them despite a long lead time, simply because they’re great to have.

With certainty on a product, we can assure lead times are followed through simply by placing the item in queue, which lessens the chance of any delay. I strongly recommend going forward with an item quickly, if there’s worry of long lead times, but you already know that’s the one you want in your new space.

Tip #3: Source Local and In-Stock Items

For very basic required items for a renovation project (for instance, a basic carpet for a storage room, or a basic wall tile for a maintenance closet), source items which are already available locally and regionally, and are in stock, working with your subcontractors to confirm availability.

As you move into higher end projects, it’s also better to source intra-national items as opposed to items sourced overseas and shipped, both manufactured and assembled, to ensure lead times are maintained.

On high end, high finish architecture projects, supplies are limited and made to order, so it’s better to have the mindset in tips 1 and 2, coordinating what you already need and placing orders quickly. It’s difficult to source high end or custom finish items in stock – often these are made to order, have custom finishes, or are sourced in difficult places to work with for procurement (Italy and Italian stones being a great example that comes to mind).

Tip #4: Track Shipping Origin Points, and Track Vessel Loading and Unloading

In a new 2021 development, it’s now become important to identify where your shipment is coming from, especially if an international destination, and to make sure that they actually were loaded onto the ship in the first place.

One of the core patterns in the 2021 supply chain problems are ships sitting at sea being unable to berth, thereby delaying both the cargo unloading to its final destination, as well as containers returning to the origin for re-loading. This means that ultimately, shipping from abroad can be unreliable at two key points:

o Shipping out on time, and
o Docking and unloading on time.

We saw numerous issues in 2021 – the worst I personally experienced was a defective window panel installed on a very end Residential new-build in New York City, a penthouse in Midtown, that took about 9 months to replace due to a poor supply chain. The pane was sourced in Italy, but due to shipping delays it did not actually leave on it’s original ship until 2 weeks later, and upon arrival was discovered that the panel was ordered incorrectly. We repeated the process three months later.

Recently, I had another similar experience – an Italian stone floor that was supposed to be shipped out in December, and this was “confirmed” as shipped by the vendor. However, we followed up a few weeks later with the vendor, then received an email in the middle of January, that it didn’t ship at all! Instead, the vendor had completely dropped the ball, and it had been sitting in their stone yard “waiting to ship” for six weeks!

For shipping, be sure to ask for Vessel information, and confirmation that the shipment has actually loaded and unloaded – as you can see from the above examples, an email is not enough. Be sure to request and verify a tracking number and confirmation of loading/unloading on the vessel.

Tip #5: Press your vendors for confirmed delivery dates.

Right in line with the last tip, you should also confirm the delivery dates with your vendors, on all items. Many vendors will only give you ship dates to start, but this means nothing and has no face value – what actually matters is when a product is set to arrive at your project.

Many vendors will try to push back and say they require a deposit placed, before they can provide this. You might be better off choosing a vendor whom you know is reliable, who can make this guarantee. This brings us to our final tip…

Tip #6: Pick The Right Vendors

I’m a huge proponent of building the right team for the job. Whether you’re doing an Architecture and Construction renovation or new build, or refurnishing your property, or are simply seeking the best Property Maintenance, having the A-team under your wing ensures a high-standard outcome. Working with people who care about their relationship with you goes a long way to ensuring the process happens smoothly.

Just about the worst kind of company and vendors you can work with is one that does nothing to go an extra step to ensure a great product and a satisfied client. Unfortunately it is getting much harder to find vendors like these, but nevertheless they do exist, and we work with many of them. Be wary of vendors who only pay lip service, but do not deliver on their word.

Soon in the future, I’ll be doing a webinar covering how you can spot the right vendors and the right professionals for your project, how to spot the ones to avoid, and how to build the best team for your property build out and management.

Updates into 2022

We’ll be sure to keep you updated and appraised in the next couple of months, as the Supply Chain situation develops into 2022. I’ll be closely watching this on my own projects, and will provide a new update next quarter.

Be sure to follow us here on Arcobee, and check out our website for our full program and tools for your Properties and Projects. We’ll see you again next week, on Arcobee.

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