The Double-Edged Sword for Construction Companies & Subcontractors: Low Housing Inventory
Last week we explored the new revenue opportunities gained by construction companies, many as a result of the low housing inventory. However there is a double-edged sword for this advantageous shift in the market for construction companies and subcontractors.
On one end this is good, right?
A rise in demand for new construction means a rise in revenue. But does it mean a rise in profit?
Let’s explore…
Demand for new construction services also means demand for the materials and tools necessary to carry out the projects. This proposes an issue when the supply for this hike does not align.
Companies are producing material as fast as possible, but the demand is so high that it’s challenging to keep up. And we know the basic principle of economics state that limited supply drives an increase in price.
So what do you do about this?
There are several actionable steps you can take to offset rising costs in the construction industry, but one key strategy that can impact your construction team years to come is building interpersonal long-term relationships with suppliers.
Building a long term healthy relationship between you and your supplier allows for ideas and feedback to be passed between you two. This aids improvement of operations; streamlining the supply chain with of technology, reducing costs, enabling tools for more accurate forecasting and estimates and more.
Source: Statista Research Department
