Un-Linked-In: Remodelers' Supply Chain Strategies
Remodelers share coping strategies for the ongoing supply chain problems
Supply-chain disruptions were showing signs of easing in early 2022, according to remodelers and replacement contractors interviewed in January. However, these same pros are still experiencing shortages and pricing volatility, which they fear could persist for some products through the summer.
Now, at least, remodelers say they are somewhat better prepared to deal with these fluctuations, having used this period of uncertainty to refine and improve strategies for ordering products, filing permits sooner, and communicating more frequently and candidly with suppliers and homeowners.
Spotty Relief
Breaks in the supply chain seem to have touched every building product at one point or another. “It might be easier to talk about what hasn’t deviated from the norm,” says Bill Millholland, executive vice president with Case Architects & Remodelers in Bethesda, Md.
Case’s biggest issue right now is with cabinetry, whose delivery times have “doubled, and sometimes tripled,” says Millholland. Over the course of the supply-chain debacle, Case has also waited 25 weeks or more to receive appliances, and 16 to 20 weeks for doors and windows, compared to the normal four to eight weeks.
The supply chain remains “spotty” for the full-service remodeler SilverLining, which according to its president Josh Wiener has had to reinstall old appliances on some completed projects because the new ones took several months to arrive. Appliances are also among the products—others include steel studs, lighting, and plumbing fittings and fixtures—whose prices have risen after contracts with customers were signed, which Wiener says is his company’s biggest current pain point.
“IT MIGHT BE EASIER TO TALK ABOUT WHAT HASN’T DEVIATED FROM THE NORM."
On the brighter side, Power Home Remodeling Group hasn’t been immune from supply-chain snags, but “things are getting better,” insists Mick Lynch, senior vice president of installations for this exterior home remodeler that operates in 22 states and the District of Columbia. Lynch points to Power’s backlog, which stood at $275 million last November; by mid-January, without any slowdown in business, the backlog had fallen below $225 million.
Lynch adds that Power—which completed north of 70,000 installs in 2021—has been relying more on technology to forecast its product needs. The company has also increased the frequency of its communications with suppliers “to get ahead of this.” While Power is still seeing delays in deliveries for some products like window parts, “all seven of the verticals we install are moving in the right direction.” When asked hypothetically how long it would take to complete a project for the installation of 15 windows, Lynch answered about six weeks.
'Inexplicable' Scarcities
One challenge for remodelers has been the randomness of supply-chain interruptions. Shortages of bread-and-butter items like door and cabinet hardware have been “inexplicable,” and no less impactful on installation, says Millholland. “You might have to send someone out for an extra day to install 40 cabinet pulls, which may not seem like much but can be incredibly disruptive to scheduling.”
Doug Cornwell, COO of Alure Home Improvements in Commack, N.Y., notes that shortages of products like cabinet hinges or aluminum screens for windows have held up projects for months. Garret Kelly, vice president of production for the Portland, Ore.-based design-build firm Neil Kelly Company, saw the same thing happen when window weatherstripping and exterior paint were suddenly scarce for a while last year. “There’s nothing you can do to prepare for that,” he says.
Pros Expand Their Supplier Networks
Matrix Home Solutions installs basements and baths for homeowners in Illinois and Michigan. Last year, it made a “customer service” decision when it shut down its garage-installation/renovation business—which represented around 5% of Matrix’s pre-pandemic sales—because of problems obtaining cabinets. Supply problems still linger, especially for cabinets and counters, says Matrix’s Vice President Brian Barrick.
Matrix’s purchasing strategy has been to, in Barrick’s words, “pick our battles,” by simplifying product selections. For example, its marketing and discounts now focus on cabinets from suppliers that Matrix knows it can get product.
Barrick says that Matrix has had to go outside of its regular supplier network in virtually every product category it installs to keep up with demand. Concurrently, it has been “very aggressive” in strengthening its purchasing department during the pandemic, which has grown to five people from one, and has added a “high level” purchasing director, says Barrick.
Indeed, their hunting for products when shortages are rampant has made remodelers more open to trying out new suppliers. “We are a national company with a balanced portfolio of vetted suppliers, but that vetting process has been accelerated during the pandemic,” says Lynch. Shortages have also forced remodelers to be creative in their purchasing. “Vendors for dishwasher drawers were all telling us ‘six months, six months’ for delivery. So we tried ordering through Amazon, which was able to deliver the product in three days,” says Millholland.
Delays Undermine Cost Estimating
Wiener of SilverLine says that it’s usually no big deal substituting one vendor’s product for another’s, but such switching gets complicated when substitute products cost more, especially after a project’s pricing has been set contractually.
Neil Kelly Company prides itself on its fixed-price contracts. But as product costs have risen, on average, by 10% to 15% since last September, the company has had to rewrite some contracts for projects with prolonged start delays to account for post-contract inflation. “Transparency is the key,” says Kelly. “Customers are smart, and it’s best to have these discussions upfront.”
Alure Home Improvements also has gone back to customers “when the numbers got crazy,” says Cornwell, but gives them the opportunity to back out of contracts if the price gets too high.
“CUSTOMERS ARE SMART, AND IT’S BEST TO HAVE THESE DISCUSSIONS UPFRONT.”
Reaching Out During Anxious Times
Supply-chain disruptions are always stressful (remember $96 sheets of plywood?), and tend to be unpredictable. Case in point: on February 1, the U.S. Department of Commerce announced plans to scale back tariffs on Canadian softwood lumber to 11.64%, just two months after the department raised tariffs for most Canadian lumber producers to nearly 18%.
Nevertheless, this latest chapter in the global supply-chain saga has taught remodelers and contractors valuable lessons about their companies, partners, and customers.
“Companies that have the best practices and can forecast challenges will benefit from all of this,” says Matrix’s Barrick. Particularly on its design-build projects, Matrix’s goal is to get prospects to commit earlier within the preplanning stage of a project, so it can accelerate planning and permitting.
Neil Kelly Company—whose business rose by 120% from 2020 through the start of 2022—now places greater emphasis on “moving a project forward,” in part by ordering materials earlier, even before contracts are inked, says Kelly.
Case Architects & Remodelers—for which 2021 was one of its best years in sales, profit, and projects completed—has been leveraging its size to manage its supply line, says Millholland. Now, it orders everything for a project at once, and files for permits immediately. Case has centralized its permit tracking, and has someone internally who keeps tabs on and posts delivery lead time updates online. “We’ve become more diligent about job costing and estimated,” says Millholland, which is now conducted biweekly, from monthly in the past.
One of the ways Power Home Remodeling Group manages to abide by its contracts with homeowners, regardless of price gyrations, is by “looking inward to make our business more efficient, so we don’t have to pass along unexpected costs,” explains Lynch.
“Communication, which was always key, became essential” during supply-chain disruptions, says Cornwell of Alure, which has added back-office support for its sales team that coordinates projects with customers.