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Construction Special Coverage

A Big Supply of Challenges

Christoper Burger, president of Inglewood Development

Christoper Burger, president of Inglewood Development, on site at a 12-unit apartment-complex project for the Holyoke Housing Authority.

How do you plan a construction project when you don’t know if all the supplies will be available, and even if all the workers will be ready to go — and stay healthy? Very carefully, said contractors who spoke with BusinessWest about the uncertainties of the construction trade these days. Demand and workflow are solid, they say — but the supply-chain and workforce challenges of the pandemic era continue to inject an element of frustration into many projects.

 

By Mark Morris

 

As the national economy continues to improve, local construction managers are telling BusinessWest they have plenty of work and a solid pipeline of projects for the immediate future.

That’s the good news.

The bad news, and there’s a good amount of it, comes in the form of a growing number of challenges, but especially supply-chain issues, inflation, and workforce matters, all of which are seeing varying degrees of improvement but nothing that is dramatic in nature.

Together, these factors make it difficult to make intelligent bids and do what every contractor wants to do — bring in a project on time and on budget.

“Everyone is tired of hearing about issues with the supply chain, but it’s a real thing,” said Christopher Burger, president of Inglewood Development in Longmeadow, noting that these issues stem from a variety of factors, everything from production challenges to problems getting materials shipped and then distributed to suppliers, to growing demand as the economy rebounds from the pandemic.

And they are prompting a wide array of colorful analogies — from hitting a moving target to shopping in a grocery store, COVID-style.

In addition to longer delays in securing needed materials, Burger said, even when materials are available, there are still glitches. As an example, an architectural roofing shingle manufacturer usually offers about a dozen colors of their product. After one of his customers made their selection, Berger had to tell the customer to pick another color from one of the three colors the company currently offers.

Trying to keep up with what’s available and what isn’t is like hitting a moving target, according to Carl Mercieri, vice president of South Hadley-based Marois Construction.

“Lumber is more available than it was six months ago, and while the price is still high, it’s leveled off for now,” he said. “On the other hand, rigid insulation is hard to get right now.”

Kevin Perrier, president of Five Star Building Corp. in Easthampton, said everyone in this sector is feeling the impact of COVID on finding available products. He compared purchasing construction materials to what shoppers are finding at the grocery store.

Kevin Perrier

“You walk in one day, and for some reason there is no pasta on the shelf; the next week, you go in, and maybe the cereal aisle is empty — it’s the same in this business.”

“You walk in one day, and for some reason there is no pasta on the shelf; the next week, you go in, and maybe the cereal aisle is empty — it’s the same in this business,” he said, noting that there is a similar hit-or-miss quality and inability to product availability that only increases the frustration level.

Indeed, Mercieri noted that, while lumber is available right now, that luxury (and, yes, it can be called that) may well be short lived. The recent protests among Canadian truckers over vaccine mandates may soon cause a shortage of lumber coming to the U.S. from Canada, he said.

After running his company for 22 years, Perrier said he could not have imagined the problems he has experienced with building materials over the past two years.

“There have always been long lead times for certain products, but generally most materials were readily available,” he explained. “This is a new experience, where lead times are no longer predictable, and some of the most common building materials are now delayed by weeks and months.”

For this issue and its focus on construction, BusinessWest takes an in-depth look at how several issues, most all of them COVID-related, are making this a good time, but also a very challenging time, for area contractors.

 

‘Lumber’ Curve

As he talked about supply-chain issues — and how the unavailability of needed materials is causing no end of frustration in his sector — Perrier noted that his crew had to install FRP interior wall paneling for a recent project. The adhesive used to secure the panels — easily available everywhere before the pandemic — was nowhere to be found when they needed it.

“We searched the whole country, multiple suppliers. We were told it would be 16 to 20 weeks before we could get the adhesive,” he said, with discernable exasperation in his voice.

Burger said products like overhead garage doors can have wait times of up to 14 months. Mercieri concurred, noting that his company was trying to finish a project for Yankee Candle, but the overhead doors caused a delay. “We had ordered the doors in May, and we just installed them in January.”

Carl Mercieri says hiring remains a challenge

Carl Mercieri says hiring remains a challenge, as few applicants have the experience the job requires.

A market environment of scarcity and price hikes also invites unethical practices. Perrier said he knows of subcontractors who have been approached by suppliers offering to reduce wait times if they are willing to pay more for the product. “If a product had a 40-week wait time, they could get it in 20 weeks if they were willing to pay 20% more for it.”

Situations like this beg the question, how does a contractor bid on a project and see it through completion with so many variables? The contractors who spoke with BusinessWest said they add in extra time for each job and keep a conversation going with their clients, most of whom are understanding of the times everyone is in and the challenges they present.

Open communication is key because it’s a given that timetables and prices will change during the project.

“When we need relief on the cost of material increases, we do what all good contractors do,” Mercieri said. “We open our books and show our client the original price from the vendor against the current price.”

While access to materials can be unpredictable, stockpiling them when available isn’t a feasible option, according to Perrier, because that would require large amounts of storage space that most contractors simply don’t have. Also, a big investment in materials today might become a losing proposition once supply catches up with already-considerable demand and prices move even slightly downward.

“There have always been long lead times for certain products, but generally most materials were readily available. This is a new experience, where lead times are no longer predictable, and some of the most common building materials are now delayed by weeks and months.”

As general contractors, Burger, Mercieri, and Perrier all remarked they are fortunate to have a core group of longtime employees. Problems arise, they said, as new projects get scheduled and they want to add new people, because, here again, there is ample demand but inadequate supply.

“As many ads as we run looking for workers, we don’t get much response,” Mercieri said. “Out of the 50 or 60 applications we receive, maybe one person has the experience we’re looking for.”

Subcontractors who do the plumbing, electrical, and other work on a building project have their own labor shortages that become even more pronounced when COVID strikes. By working as a team, subcontractors can be vulnerable to the easily transmissible virus, and one worker with a positive test can force the whole group into COVID protocols, causing another delay to a project.

“We’ve had jobsites where the subcontractor had COVID issues among their workers,” Burger said. “Out of precaution, they can’t show up for 2 or 3 days, at best, so that certainly hurts your schedule.”

Despite all the challenges, the three contractors have an optimistic outlook for the rest of this year and into 2023. They all have a mix of public and private projects, with some jobs bringing real satisfaction. Mercieri’s company is wrapping up a renovation project for the Mullins Center at UMass, and Burger discussed a building expansion nearing completion for Jewish Family Services in Springfield.

A rendering of the apartment complex

A rendering of the apartment complex Kevin Perrier says will change the facade of downtown Easthampton.

“They’re expanding their facility to accommodate Afghan refugees who will be coming in,” Burger said. “That was a nice project to work on, and we’re glad to be part of it.”

As an Easthampton native whose business is located there, Perrier admitted he has a soft spot for his hometown. One recent project involved his company designing and building a 30-unit apartment complex in downtown Easthampton at the corner of Cottage and Adams streets.

“Anything we can do to improve downtown means a lot to me,” he said. “That building will change the façade for downtown Easthampton.”

When BusinessWest caught up with Burger, his crew was in the early stages of building a 12-unit apartment complex for the Holyoke Housing Authority on South East Street. He said working with familiar clients like the Housing Authority makes it easier to get jobs done during these uncertain times.

“Repeat business is great because we all understand each other,” he said, also pointing to upcoming projects for longtime client Hot Table restaurants. In addition to just opening one in West Hartford, he is excited about working on new Hot Table locations planned for Westfield and Chicopee.

The aviation industry makes up a big part of Perrier’s business, with Delta airlines as a significant client. He is pleased to see things start to improve for the airlines. “From the second quarter of this year into 2023, we will be doing a massive amount of work at Logan and other New England airports for Delta.”

He also appreciates working with clients who understand the current climate and are moving ahead with their projects despite supply and labor challenges.

 

Nailing It Down

Perhaps the most frustrating thing about the current pricing, supply-chain, and workforce issues is the unpredictability surrounding them and an inability to project when or even if matters will improve, said those we spoke with.

In that respect, the construction industry is like every other business sector.

“Product shortages and price hikes are not unique to us or our industry,” Perrier said. “Most folks are experiencing them at the grocery store or just trying to find car parts.”

This shared pain doesn’t make the situation any more tolerable, said Perrier and others, adding that all they can really do is hope the economy continues to improve, the pandemic continues to recede, and the current ‘new norm’ will revert to a pre-pandemic norm.

In the meantime, life for contractors will continue to be like a trip to the grocery store. They just don’t know what will be on the shelves and when.

Manufacturing Special Coverage

Making Changes

 

Steve Graham

Steve Graham stands in front of spools of 3D filament at Toner Plastics.

In manufacturing, as in many industries, the story of the past year has been one of shortages and high costs — shortages of both materials and workers, and rising costs of supplies and wages as a direct result of those trends. As this story and the one on page 39 make clear, the problem isn’t demand for manufactured products, but meeting that demand at a time of global disruption. Yet, for many companies, this may turn out to be a time of innovation, too.

 

By Mark Morris

 

Steven Graham called it a “double whammy.”

Specifically, throughout 2021, manufacturers faced a year full of supply-chain issues and the constant challenge of having enough workers. And when Graham, president and CEO of Toner Plastics in East Longmeadow, could find raw materials, they cost more — lots more.

“You operate at a smaller profit margin because you can’t necessarily pass along the price increases,” he said.

In Graham’s company, raw materials are mostly plastic pellets that are fabricated into diverse types of products ranging from craft items to medical devices. Because plastic is derived from oil, price swings are nothing new to him, but he described the last couple of years as brutal.

On top of normal supply-chain issues, Graham said last winter’s sudden freeze in Texas exacerbated an already-tough situation. There are usually plenty of warnings before hurricanes hit the Gulf of Mexico, which allows oil refineries to shut down days before to ride out the storm. The freeze arrived with no warning, leaving the refineries unprepared.

“The damage was more extensive, which shut them down much longer than we’ve seen after other weather events they’ve endured.”

As a result, Graham has seen persistent cost increases for the last 12 to 18 months. “I’ve been in this business 40 years, and I’ve never seen the size of the increases and the length of time they’ve stuck around.”

OMG Inc. in Agawam uses steel wire and flat stock for its line of screws and fasteners, as well as chemicals for the adhesives it makes for its roofing division. Since the pandemic, purchasing raw materials has been challenging and increasingly expensive.

“We often saw a doubling if not tripling of prices for our raw materials,” said Hubert McGovern, president and CEO of OMG.

While the supply situation has improved in the last couple of months, McGovern said, when materials do arrive, the next challenge is having enough workers to make the products and get them out the door. Between increased competition for workers and COVID-19, it’s difficult to stay fully staffed.

“At the height of the most recent COVID spike, 10% to 15% of our workforce was affected at some level of COVID quarantine,” McGovern said.

The jump in COVID cases also made the last weeks of 2021 difficult for Mestek, the Westfield manufacturer of HVAC equipment. Even though employees will often pitch in when there are staff shortages, delays still occur, said Peter Letendre, plant manager. “Lead times for certain products have been extended because we were lacking raw materials or we didn’t have the right people in place.”

One positive test can affect many employees. As an example, Graham said if one worker in the shipping area tests positive for COVID, the three other workers in that department also need to be tested. Each one who tests positive cannot return to work for five days, even if they have no symptoms.

“It causes the kind of staffing problems where we can’t run a line or drive the forklift trucks if those folks aren’t here,” he explained.

While COVID contributes to labor issues, the larger problem every industry faces involves getting and keeping employees. Kate Keiderling, Human Resources director at OMG, called it a continuous struggle to find the right people.

“We are always looking at pay rates, and we’ve added a sign-on bonus followed by a retention bonus if the person stays six months,” she said. “We’ve also increased the bonus we pay employees who refer others to work with us.”

Back in the fall, Mestek began offering attendance bonuses for workers who put in a full 40-hour week.

“It certainly improved attendance and retention,” Letendre said. “Perhaps more importantly, it has helped us in attracting new employees into manufacturing.”

Kate Keiderling

“We are always looking at pay rates, and we’ve added a sign-on bonus followed by a retention bonus if the person stays six months.”

For many years, Toner Plastics ran three full shifts primarily because plastic fabricating machines are most efficient when they continuously run. Long before concerns about labor shortages, Graham said the third shift was the most difficult to staff and was always the shift with the fewest workers. With the pressures of COVID concerns and worker shortages, he reconfigured the work week at Toner.

“We decided to eliminate the third shift and move to two shifts of 10-hour days, four days a week,” he told BusinessWest. With this schedule, everyone reaches 40 hours by Thursday, and if someone wants to work overtime or make up a day because of an absence, they can do so on Friday.

“This way, there’s no loss of income for missing a day, our production lines continue to run, and we are able to keep orders going out the door.”

 

Challenges to Expansion

In a different labor market, Letendre would have a ‘good’ problem. Last year, Mestek acquired Slant/Fin, a Long Island manufacturer of baseboard heaters and one of Mestek’s main competitors. This year, Slant/Fin’s equipment is being relocated to Westfield, where Mestek will manufacture the company’s radiant heating baseboard products sold at Home Depot stores across the U.S. This opportunity means Letendre needs to hire at least 50 more employees.

“In addition to trying to keep a healthy workforce here, we also have to expand, and that’s a real challenge,” Letendre said.

On top of attendance and retention bonuses, Mestek has expanded a program that encourages employees to increase their wages by developing additional skills.

“Orders for our fasteners continue to stay strong at home centers and retail lumberyards. In the last year, demand has also picked up in our flat-roofing business, so instead of slowing down, both divisions grew in sales.”

“We want to have people with a variety of skills so they can fill in for each other in a pinch,” he said. “Of course, that versatility has become even more important during the pandemic.”

Of course, the pandemic has also generated increased demand for Mestek HVAC products that circulate large amounts of air. Whether it’s for new construction or replacing an existing system, Letendre said this area of the business is booming. “We’re seeing an onslaught of orders for these products, which has been great.”

When the pandemic first hit, McGovern anticipated a slowdown in business for his company, but the exact opposite happened. OMG’s fastener division makes several types of screws used primarily in residential housing and on backyard decks. The first year of the pandemic saw a huge increase in backyard projects and home renovations, which drove demand for all those fasteners.

Peter Letendre

Peter Letendre says lead times for some products have been extended because of a lack of raw materials or people.

“Orders for our fasteners continue to stay strong at home centers and retail lumberyards,” he explained. “In the last year, demand has also picked up in our flat-roofing business, so instead of slowing down, both divisions grew in sales.”

Toner has manufactured the elastic used for N95 masks for years, long before anyone had heard of COVID. Graham explained that his company’s production was for a vendor who supplied the masks to U.S. Navy hospitals around the world. At the beginning of the pandemic, when demand for N95 masks exploded, he ramped up production from one line to three.

“We had already mastered the process and we knew where to get the raw materials to make them,” he said. “As long as we could get enough workers, we would run 24 hours a day to help fill the supply chain.”

By the first quarter of 2021, Graham said the supply chain caught up, and suddenly there was a glut of N95 masks. Toner still makes the elastics, but orders have gone back down to pre-COVID levels.

Looking ahead to this year and beyond, Graham pointed to 3D printing as a promising area for his company. Toner makes the plastic filament commonly used in desktop 3D printers.

“We entered the market when it first started back in 2012, and now we supply a number of the machine manufacturers with filament,” he said. “It’s been a good growth area for us.”

Part of Graham’s job is to look ahead to see who will be in the workforce to make the 3D filament and other Toner products in the future. For years, the industry knew about Baby Boomers reaching retirement age, but the pandemic caused many to leave the workforce sooner and in higher numbers than anyone anticipated — so the pool of available candidates seems to have shrunk.

“I think this labor situation will stay severe and be with us for a while,” he added.

With many long-term employees approaching retirement age, OMG is also paying close attention to who might be leaving and who can be trained to take over in key positions.

“So far, we have been able to fill some of the key roles we have wanted to,” Keiderling said. “However, we’re also expanding, so our need for labor will continue to increase.”

Is more automation the answer to filling the jobs left vacant by the tight labor market? Graham acknowledged the importance of continued automation at his company while also noting its benefits are limited. Right now, when a particular task is automated at Toner, the person who was on that machine will move to another line.

“This allows us to do get a little more done with the same number of people without any layoffs,” he said. “We have good people, and we want to keep them employed for as long as they want to work here; that’s important to us.”

Thus, while automation certainly helps, Graham does not see it replacing large numbers of jobs. McGovern concurred on the limits of automation, saying, “when you’re in a conference room, automation sounds like a great way to replace labor, but it’s not that simple.”

 

Thinking Differently

While the last two years have brought many changes, they have also pushed manufacturers to think differently about ways to run their businesses. While employee safety has always been a priority at Mestek, Letendre said the pandemic spurred a shift in focus to keeping workers healthy and safe in new ways. On-the-job workers are kept at a safe distance from each other, and everyone wears a mask, a requirement in Westfield.

Looking back on this new emphasis, he admitted, “we’ve gotten pretty good at keeping our employees healthy and safe.”

These times have also disrupted the normally rigid nature of the manufacturing environment. For instance, by eliminating the third shift and going to a four-day work week, Graham said, workers now have much more flexibility than in the past.

“It’s actually a good idea, and it makes sense for everyone,” he added. “We’ll probably make that move permanent.”

It’s just one more example of how the pandemic continues to alter the way manufacturers — and so many other industries — get the job done.

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