Construction Sector Threatened By Broken Supply Chain

New Zealand has been dropped off the global supply chain by many construction material suppliers in the wake of COVID-19, threatening to stall the building sector here.

New Zealand Building Industry Federation chief executive Julien Leys said post-pandemic business model reviews by global shipping and building supply companies has meant New Zealand is no longer included on their supply routes, with supplies getting only as far as Australia.

That puts additional costs on building supply companies here, to try to get what they need into the country, and Leys said he has spoken to one NZ company spending as much as $65,000 per week on shipping costs.

The broken supply chain is just one of several unique challenges facing the construction sector, threatening its ability to capitalise on a pipeline of projects, including the Government’s shovel-ready infrastructure projects and affordable housing targets.

Other hurdles include a skilled labour shortage, rising prices of materials, and reduced margins.

A Statistics NZ report in September 2020 estimated the average delays to commercial building projects caused by Alert Level 4 lockdown was about 30 working days (33 for residential), or six to seven weeks.

Leys estimated some projects may now be facing delays as long as eight months.

“Before COVID the supply chain appeared to be fine, but the pandemic exposed the fact it was a lot more fragile than anybody realised. We have to find a way to manufacture things ourselves and fill those supply gaps,” he said.

Trina Farr, business manager for New Zealand construction market intelligence company Pacifecon said the sector is seeing flow-on effects of supply issues.

“Businesses that manufacture in New Zealand have seen increased demand where otherwise there might have been more overseas competitors supplying.”

Farr said supply chain disruption has forced many businesses to adapt their processes to ensure they can meet project timeframes.

“Some are ordering stock as soon as they’ve won a job, despite the project not commencing for some time. Some businesses have completely reviewed their purchasing and project management systems,” she said.

Leys said the labour supply issue must also be addressed, with closed borders compounding a pre-COVID skills shortage.

“With Australia announcing its own programme of infrastructure across multiple states, companies here are starting to worry the few staff they do have will be drawn across the Tasman,” he said.

The Government opened the doors to 300 migrant construction workers earlier in the year, but Leys estimated the labour shortfall is about 60,000. A 2019 report by quantity survey company Rider Levett Bucknall forecast a construction labour shortage of 57,600 by 2026.

Waikato construction business owner Wafaey Swelim said fresh thinking is required to address the labour shortage.

“We’re in a country that struggles to find enough human resources. Getting more people in isn’t the answer. More people means you need more infrastructure, more housing and more services. Automation is the answer.”

Swelim said his 3D printed concrete company QOROX is helping to address issues around speed and could revolutionise building in this country, making it a key solution to New Zealand’s housing issues.

A key efficiency is staff training. “You are training machine operators instead of builders. It’s much faster,” he said.

Swelim believed a side-effect of the tight margins most construction businesses are working to has made many risk averse. “They can’t afford to try something new in case it doesn’t work,” he said.

2019’s Construction Sector Accord established a joint vision between Government and industry to establish a high performing construction sector.

Accord transformation director, Dean Kimpton says a steering group is considering a report into supply issues in the construction sector and how government can best assist in resolving them.

Leys said the full impact of the pandemic on New Zealand’s construction supply chain is yet to be realised.

“We are in a new phase now. The immediate impact of COVID has passed and we’re starting to see some of the bigger disruptions. The situation we have right now is really complex to solve; it’s nothing the industry has seen before,” he said.

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