• The construction industry has learned how to adapt to constant market fluctuations.
  • With 2021 already seeing a huge uptick in demand for new construction, companies throughout the industry face the twin challenges of a strained supply chain and a shallow labor pool.
    In this blog, we take a look at a few strategies for managing these fluctuations and the challenges that accompany them.
  • Even for an industry accustomed to adapting to change—the past 12 months have been unusually tumultuous for the construction workforce. COVID-19 disrupted daily work life in ways never before experienced, including the introduction of new health and safety precautions (that have been constantly changing), spending cuts, and a need to adjust and pull back on deadlines for project plans.

Almost every aspect of the construction business has been affected—the supply chain, OSHA workplace safety and health compliance, insurance and risk assessment, and worker attendance. Needless to say, 2020 was a year when prime contractors and subcontractors had to reevaluate their strategies for growth.

 

Construction Companies Have Learned to Adapt

Companies within the industry have learned to adapt to change as market fluctuations have become part of everyday life. Without warning, demand can fall—like in 2008, when we witnessed a 30% reduction in construction jobs. And demand can just as easily rise—forcing companies to confront an entirely different issue: a shortage of skilled workers. Current studies predict a 30% increase in the demand for skilled labor in construction over the next 10 years.

In 2020, we saw losses in commercial construction—hospitality in particular—as hotels, conference centers, and other large projects were shuttered across the country. At the same time, there were a number of bright spots, such as a spike in demand for warehouse and data centers due to the rise in ecommerce. Public Works projects spending rose 20% in three years.

Going into 2021, with a renewed federal focus on infrastructure, it seems likely the strong uptick in demand for new construction will continue. As economist Dariana Tani points out, a proposed $2 trillion federal fund for infrastructure and clean energy—as well as increased spending on housing, education, and healthcare—would provide a boost to the construction industry in the coming years. Even so, it’s still hard to predict which sectors will retract and which will drive up the demand for labor.

Construction workers

Impacts of Market Fluctuations

When market fluctuations occur, construction companies face two big challenges. The first is the disruption to the supply chain for construction materials, an issue that affects job sites across every region in the country. With the bulk of materials being sourced from other countries—such as Canada and China—the availability and cost of materials are dependent on a number of factors, including energy costs as well as factors such as trade relations and tariffs. Reduced material availability can result in aggressive buying patterns, which drives up the cost of high-demand goods—like what we’re witnessing right now with lumber prices at an all-time high.

The second big challenge is labor. Without an available workforce with the skills needed to get the job done, project plans and deadlines for construction projects are on shaky ground. And plenty of factors can affect labor availability. Even in cities and states where construction activities were classified as ‘essential’ in 2020—allowing workers to come to job sites in spite of COVID-19—the restrictions in public transportation and the closure of schools and child care facilities impacted workers’ attendance rates. Any drop in attendance impacted deadlines, hurting the bottom line.

 

Flexibility Pays Off

Top construction firms spend considerable time benchmarking and adjusting their workflows to ensure that minor issues don’t escalate into schedule delays and projects exceeding budget. The best way for companies to get ahead of the inevitable fluctuations is to have a plan for labor that can flex up when things get busy and scale back when demand slows. There are a few common strategies for this.

Leaving aside the most extreme and least desirable option—layoffs, which harm company-worker relationships and drive up the cost of unemployment insurance—one response to labor demand fluctuations is to make adjustments to project plans. This involves reallocating labor to higher-priority projects and pulling them off projects with more risk or certainty.

A third option is for companies to bring in flexible labor—an on-demand workforce. One way a company can do this is to keep its own people, but to make them employees of an agency. In this type of arrangement, the company keeps its workforce, but the agency helps offset the costs of having permanent employees on the payroll.

Flexible labor offers a number of advantages to employers. The first is the lower cost incurred by eliminating the need to pay for unemployment insurance and benefits such as medical insurance, paid holidays, and 401k retirement plans. Another advantage is the broader access to talent, both local and out-of-state. A third advantage is the ongoing support with staffing: activities such as recruiting, onboarding, and training. And lastly, there is the benefit of the employers only paying for what they need, when they need it.

Flexible labor also benefits the workforce, allowing employees to keep working and giving them access to other opportunities.

No matter how you adjust your workforce plan amidst market fluctuations, it pays to have a staffing partnership in place. With so many different tasks to coordinate and schedule, construction project managers can benefit from a partner like Workrise, who can analyze project-specific requirements, match the right talent through a bench of 268k+ workers, and even create a pool of backup candidates to handle a spike in demand. Leveraging 20 years of staffing expertise, Workrise can also streamline the paperwork, payments, and transactions.

Let’s face it. Ups and downs will continue to affect the economy. Construction companies can benefit from partnering with staffing experts like Workrise who can help weather the storms of change—and find the right people with the right expertise to get the job done.

Talk to us: Workrise can help with staffing, technology, training, and professional services – so you can get back to focusing on what you do best. Visit our website at www.workrise.com.