Michael DeBlasio had completed construction of the Kahuna Burger in Long Branch four months later than originally planned, and as he considered his prospects for the fall, he was preparing his customers for further delays.
Window prices are rising. The prices of glazing and aluminum frames are increasing. Price of ceiling tiles, roofing and siding, all pointing upwards. Assuming he can find the items in the first place.
“I feel like my job every day is to find the thing to buy before I even get the price,” said DeBlasio, project manager for Structural Concepts Inc. in Ocean Township and DeBo Construction in Belmar. . “I became a finder rather than a buyer. It’s crazy.”
Construction companies and riverside retailers are facing a shortage of materials, forcing them to pay higher prices, seek new suppliers and ask their customers for patience.
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The rush has created a puzzle for an industry that is expected to thrive. Businesses and homebuyers took advantage of record interest rates, boosting the economy.
But demand is straining a supply chain that is trying to restart after being nearly shut down at the start of the pandemic.
“It’s not just one thing,” said Rudi Leuschner, professor of supply chain management at Rutgers Business School in Newark.
“When you think of a product that will end up in a retail store or a contractor, that product until it gets there changes between many hands,” he said. “And every step of the way in that process, there’s a chance it’s getting delayed, or there’s a chance it gets stuck somewhere. And then all those little things add up to bigger delays and more. larger breakdowns, etc. “
PVC pipe research
The backlog is keenly felt on the Shore.
Sebastian Vaccaro has owned the Asbury Park hardware store for 38 years, with some 60,000 items.
Before the pandemic, he said, his supplier could fill 98% of his orders. Now it’s about 60%. And he added two more suppliers to try to find the products he needs.
Sometimes he is unlucky; Swiffer wet jets have been out of stock for four months. Other times he has to pay a premium, passing the cost on to his customers.
“PVC pipes have more than doubled since the first of the year,” Vaccaro said. “It’s something plumbers use all the time. In fact at a time when we order PVC pipe we were limited to how much we can buy. I know one supplier, you can only buy one. 10 at a time where I normally buy 50. “
The disruption of building materials is the latest jolt in what supply chain experts call the spike effect, which occurs when supply and demand go out of order, causing a jolt down the line.
It emerged when the pandemic struck in the spring of 2020, causing a shortage of toilet paper, disinfectant and personal protective equipment. And while these elements corrected themselves, other shortcomings appeared, of semiconductor chips used to make cars To material used to make surfboards.
The imbalance caused inflation.
The Consumer Price Index, measuring the prices of 80,000 items each month, is expected to rise 4.8% this year, according to the Federal Reserve Bank of Minneapolis, the largest increase since 1990, when inflation rose 5.4%.
Some items are more expensive than others. PVC pipes increased 78% from August 2020 to August 2021; televisions are up 13.3%; Living room, kitchen and dining room furniture grew 12%, according to the US Bureau of Labor Statistics.
“Almost all of our industries have problems on the supply side,” said John Fitzgerald, president and CEO of New Brunswick-based Magyar Bank.
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Manufacturers are going through a particularly difficult period. They saw some objects like wood soar before retreating and others continue to climb.
Sanchoy Das, author of “Fast Fulfillment: The Machine That Changed Retailing,” said the more complex the material and the greater the distance to be traveled, the better the chance of the supply chain becoming tangled.
For example: Basic materials like wood, steel, and concrete, mostly made in the United States, saw their prices drop after soaring earlier this year. But products such as roofing, insulation and PVC pipes depend on raw materials from abroad, which creates delays, he said.
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Meanwhile, assembled products such as devices shipped from Asia or Mexico face a backlog and operators are trying to expand to meet customer demand, Das said.
And they are all subject to the shortage of longtime truckers or increasingly severe weather conditions like the frost in Texas last February that shut down chemical plants.
“When the pandemic started, a lot of these sources kind of shut down and went to a lower capacity mode, and they’re coming back cautiously,” said Das, a professor at the New Jersey Institute of Technology in Newark. “The shipping lines went almost nil for a while and now they’re suddenly booming. The number of ships is kind of fixed. You can’t build a ship overnight.”
Builders are trying to adapt. Old Bridge-based Hovnanian Enterprises Inc. has reduced the number of homes it is putting up for sale in a development to ensure it can complete the home on time, said Brad O’Connor, chief accounting officer.
Prices are rising, but the housing market is strong enough that customers are willing to pay for it, he said.
“What that means is if we made all the lots available for sale, we could maybe sell six or eight a week,” O’Connor said. “And instead, we only post two or three a week to make sure we can actually start them up and build them on a proper schedule. We don’t want to sell a lot of houses that we can’t start.”
Supply chain experts said they expect inflationary pressures to be temporary with other products following the path of lumber, which has fallen 49% since May, according to the Bureau of Labor Statistics .
But not quite yet. Das said manufacturers don’t want to ramp up production, only to end up with a glut when the supply chain fixes issues.
“It’s not that (the price increases) are perpetual, but it could take some time, until the first half of next year,” he said.
Michael DeBlasio said he learned his lesson early in the pandemic when he absorbed the price hikes. So he started adding “pandemic clauses” to his contracts, recalling the gasoline surcharges that transport companies add when gas prices rise.
The clause allows it to pass higher costs on to its customers if the price of materials increases after the start of the project.
And it could be part of the business for a bit longer.
“No, none of that is getting better,” DeBlasio said this week. “And I think things are taking longer now than they were six months ago.”
Michael L. Diamond is an economics reporter who has written about the New Jersey economy and the health care industry for over 20 years. He can be contacted at [email protected]