Supply constraint started as a thing, and when the novel coronavirus pandemic hit, it became a crisis. Now, it’s an embedded, urgent business and culture issue.

The Builder’s Daily, and this piece in particular, lean beyond recognizing the challenges, toward solutions. To do that, we have to reframe the challenge as an epic opportunity for the building community to waken to new responses to these new issues. Reflexive ones won’t work, but the good news is there’s a big reward for those companies, cooperatives, and linkages who’ll work to tap cultural

Our TBD Dream Team supply chain and sourcing guru, Kenzai USA owner Ken Pinto did some digging on the enormity of the resin production stress and shock. He looks at two factors at work as a force of imbalance and dislocation.

One is the impact of the freeze, and the other – a reflexive response to a “living-with-Covid” mid-pandemic coping trend, particularly among corporate and commercial workplaces working to restore on-site operations to a new normal level – is the new demand for protective plastic shields.

Ken Pinto estimates that a 2,200-square-foot home uses an average of 1.7 metric tons of acrylic resin-based materials and products. At current housing starts levels of about 1.4 million, for both multifamily and single-family, demand for acrylic resin at the subcomponent level would exceed 2.4 million metric tons of the ingredient.

While normal U.S. capacity for acrylic resins is in the neighborhood of 55 million metric tons annually, the February Texas freeze and the new demand stream for pandemic-related plastic shields is already impacting access to building materials supplies.

Word is, Ken Pinto relates:

“The plants in the Houston, TX area, which control 92% of US production of resins, are operating at 50% capacity and have notified their customers, our construction material manufacturers are on allocation. They can only order 50% of what they ordered last year. None have offered estimates when capacity back will return to full swing. It’s going to be a tough summer ahead for residential construction.”

Here’s a number of anecdotal downstream impacts, not even reflecting the full brunt of the acrylic resin constraints only now coming to light in the system.

  • One multiregional private top-25 ranked homebuilder we know has a current customer backlog that stretches into the first-quarter of 2022, and simply refuses to take new orders at its communities until it secures capability – materials, products, and trade crews – to work through its existing backlog of orders.
  • A couple of other sizable privately-held homebuilding operators have acknowledged having stopped adding names to their interest lists pending greater visibility into start-to-completion cycles and future-forward materials pricing.
  • Word is that one Oklahoma-based homebuilding company is settling with buyers by handing over the keys to a new home with a voucher for customers to go out and try to buy their own appliances at retail or via Ebay or Amazon.
  • It’s also said that one big builder in a mid-Southeast Atlantic coastal market literally voided 120 contracts with customers as volatile materials availability, skyrocketing lumber, plywood, and EWP prices, and a general, red-alert lack of visibility wreaked havoc with per-unit pro formas, and pushed the entire portfolio into a deep-red zone of operating costs versus agreed-upon prices.
  • We’ve heard that a Pennsylvania-Ohio home building operator, downstream of the pandemic-intensified shortage of drivers of concrete trucks, has begun to pencil slab and foundation work-arounds that would essentially circle back-to-the-future of dimensional lumber pilings for new home construction.
  • Some deep-pocketed big builders are doing what they can to corner, stock, and warehouse supplies of materials and products they know are either in short supply or headed there.
  • Lumber yards everywhere report shortages of counter people, and short on warehouse workers, can’t move product in and out of the yards at higher velocities for  sustained periods to keep pace with demand.
  • Container ships – in the Port of Los Angeles and Long Beach – unable to be offloaded and reloaded for voyages back to China, are now sometimes routing back across the Pacific empty of cargo.
  • Due to the spate of West Coast wildfires over the past few years, which burnt out large supplies of younger, smaller log trees, the ready-to-harvest stock in large forests is older, bigger, and – therefore – requires more skilled, experienced, and trained loggers, not to mention more equipment for loading and unloading the larger freight.
  • The list of impacts of these stressed and shocked balances goes on, and on, and on.

Frustrated, angered, anxious, wavering, indignant customers … You know what? Everybody has them right now. These negative emotions can and do become an opportunity, when sellers, construction supervisors, and other customer touchpoints make themselves trusted-advisors, rather than order-takers and transaction managers.

An error now – and one that would play out destructively almost universally among builders – would be to frame this challenge as an ultra-competitive fray, one enterprise against another.  A second error would be to frame what is a worldwide convulsion in sourced material resources as a “we are victims, and there’s nothing we can do about it” issue.

The big opportunity is to view this as a plight your consumers, your customers in the channel, and your partners in community building face together.

We heard tell of an enterprise here or there, working through a company-wide current-market-conditions retraining of all points of customer contact.

Up and down the value stream, trust, whether one wants to acknowledge this factor or not, is the pivotal discovery, learning, and action point for builders and their partners to navigate through want will be a tricky, bumpy, uncertain path through the next several months.

Be like ants.

Harvard Business Review contributor Joerg Esser, PhD, notes:

“What management should do is loosen their hold and give the organization the freedom it needs to work effectively. The idea is that management should stick to defining what they want to achieve and let the organization focus on how to achieve it. This process of loosening your grip — while not letting the company descend into chaos — can be tricky. It needs to be based on a clear set of principles, backed up by science.

“My approach is inspired by complexity theory, which builds on the work of U.S. theoretical physicist and Nobel laureate Philip Warren Anderson. One of the key concepts in complexity theory is “emergence”: The idea that complexity arises from simplicity and that small things form big things with properties different than the sum of their parts when interacting as part of a greater whole. Just a few simple principles allow you to build systems where macrointelligence and adaptability derive from local interactions and knowledge. In other words, the challenges may be great, but the solutions are often small.

“Many examples of this occur in nature. For instance, ants build living bridges when searching for food, construct megacity-like colonies, and protect themselves against threats collectively. If the colony is flooded, for example, some of the ants use their heads to plug holes, while others absorb water with their bodies to drain the floodwater.”

The alternative? Losing customers. And, potentially, losing a multiplier effect customer opportunity that comes with gaining, and retaining trust. That means adaptiveness and collaboration in a time of adversity.

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