Local lumber and millwork suppliers look at what’s ahead.
Last month, we heard from several local builders and developers, who offered their perspective on what lies ahead for 2022. One of the biggest concerns, from each of those professionals, was supply problems—from production issues to shipping delays.
In this issue, we’re visiting with the people stuck in the middle of those concerns—lumber and millwork companies working to bridge the gap between the suppliers and those with work boots on the ground. These days, more than ever before, communication is that bridge.
As 2021 came to a close, engineered products became the most challenging product category to obtain, Beisser Lumber’s Dave Ling says. “It’s really the production-driven products that are struggling to keep up right now. Manufacturers have the combined issues of getting enough raw materials and keeping production moving forward.”
He says labor shortages, along with the sporadic shutdowns due to COVID, have caused many manufacturers to fall behind on their production goals. “Demand hasn’t slowed down despite price increases and delays. Our suppliers are working really hard to meet orders, but it’s a challenge.”
Like everyone else in the construction industry, Ling says the biggest issue is lead times.
“The amount of planning required to keep up with the rapidly changing lead times has dramatically changed how our people approach their jobs. It used to be relatively simple—meet with the customer, take the order, and anticipate the standard lead time. Now we have to be in constant communication on so many levels just to make sure we have the latest information and can help our builders as they monitor their projects.”
With unprecedented lead times, and often delays on top of that, Ling says Beisser is often having to quote weeks, not days, out. For some product lines, it’s even months. “Any single variable creates hiccups in the ordering and inventory process—tariffs, natural disasters, production delays. But we’re dealing with all of those variables at once. It can be managed, but it’s challenging.”
With products such as windows and doors creating the biggest delays, Ling says builders will likely see scheduling challenges through the summer. “Window manufacturers just aren’t able to get all the raw materials and components needed. That’s made lead times significantly longer and scheduling projects extremely difficult.”
Ling anticipates consumer demand and housing starts to continue to rise in 2022 despite these obstacles. “Fortunately, our sales team at Beisser has great relationships with all our vendors. Our team has the expertise to look at all possible alternatives and plan ahead as much as that’s possible.”
The Beisser team has been communicating almost daily with vendors and working even closer with its builder and remodeler customers to understand exactly what they need and how Beisser can best collaborate with them. “We’re coming into the conversation earlier,” Ling says, “often right after lots are purchased so that builders can anticipate delays and schedule projects more accurately.”
He adds, “Communication has always been key, and that’s more true than ever. We have the right team in place, and they’re constantly adjusting to serve their customers.”
Many companies like Gilcrest/Jewett Lumber are wrestling with the same issues as builders and remodelers, but Gilcrest’s Matt Thompson says Gilcrest/Jewett does have one advantage. “We’re fighting the same supply chain and pricing issues as our customers. It’s helped that we’re now part of a larger company, so we can reach out and sometimes get products sourced that way or make new contacts in other parts of the country. Over the past year, we’ve adjusted our inventory levels higher than we normally would like, but that’s the only way to try to reduce the lead times a bit.”
Some products, like windows, just aren’t feasible to build up in inventory because there are so many options available. Unfortunately, windows are also the most difficult product to find right now. “Windows would normally be two- to three-week lead time,” says Thompson. “Most are up to 15 weeks now, some as much as 30 weeks. That’s impossible for builders; they can’t plan construction schedules four and six months in advance.”
He says a series of factors have combined to create this perfect storm in the supply chain.
“The problems really started before COVID even hit. Lumber mills cut production to drive prices up, so they already weren’t staffed for the demand that skyrocketed when everyone was home during the lockdown working on those to-do lists. Then box stores started running out of lumber. Consumers started buying from lumberyards, and COVID had shut down production completely.”
Thompson says the Gilcrest team has had to rethink several of its business approaches, in addition to inventory levels, in order to best serve customers in this ever-changing environment.
“We have a sales meeting every week with all our locations where we go over the market and discuss the problems we’re dealing with and what we anticipate becoming a concern.”
Production issues are improving, aside from COVID pockets that sporadically cause delays, he says. Supply chain concerns are a different story. “I don’t anticipate that easing, really, for the next couple of years. Nationwide, the shortage of over-the-road truck drivers is estimated at 80,000.”
He says transportation is really the clog in the line. Production levels may be close to demand, but manufacturers are unable to get their products to vendors. “Those are issues we’re going to keep dealing with for the foreseeable future. That’s why managing expectations is the most important role we have right now. It may not be our fault, but it’s still our problem as a supplier.”
Despite the unpredictability of the past two years, Leachman Lumber’s Jennifer Leachman says she doesn’t anticipate demand changing in 2022.
“Interest rates are so low that consumers don’t seem to care that material prices are high,” she says. “If interest rates continue to rise like everyone is expecting, that might ease demand some, but probably not significantly.”
She says lumber prices continue to be volatile, currently on the rise as they typically are during the winter months. The most pressing shortages, however, seem to be in OSB and manufactured products. “A lot of the box stores canceled OSB orders before all these delays started, so production slowed down,” she explains. “Then demand shot up, and no one had production scheduled to meet that demand.”
Add to that the struggle to find labor, and solutions are slow in coming. “We’ve had the same problems at Leachman that manufacturers have had—finding enough people willing to work,” she says. “Last summer was one of the hardest summers we’ve ever had as far as labor is concerned.”
Leachman says the company continues to adapt in order to find solutions for the labor shortage, and she sees the same thing occurring with manufacturers. “On top of battling labor shortages, manufacturers and lumber mills are facing supply chain concerns at every level, from holdups at docks in California to massive delays from suppliers in China. It’s such an issue that warehouse space in those areas is nonexistent. We all believe that will work itself out eventually because everyone is working so hard to find solutions, but in the meantime, everyone is just on hold.”
Each of these factors has contributed to steadily—or shockingly—rising prices on both raw materials and finished goods. Leachman doesn’t anticipate that changing any time this year.
“It’s been an issue for a while,” she says, “but I think this is going to make the entry-level home market even harder to fill. It’s just impossible to build a home at that price point with costs where they are.”
Leachman Lumber has been around long enough to have seen just about every type of market possible, from the Great Depression to the housing boom in the 1980s and the housing bust in 2008. The pandemic market rivals those in its volatility.
“Ultimately our job is to get the product to the customer,” Leachman says. “Sometimes that’s more difficult than others, but that’s what we aim to do, no matter what’s going on in the market.”
Moehl Millwork’s parent company, Building Material Distributors, has been able to maintain a strong inventory position because of its national buying power and commitment to carrying stock for its customers. But BMD’s Wade Hickson says it’s still a complex market.
“We are all faced with raw material constraints, plus a challenging labor market, and those forces are bringing complexity to the supply chain,” he says. “Demand remains exceptionally strong. Global and domestic manufacturers have all fallen behind on production despite their best efforts. Shipping and freight constraints are also exceeded. This is the most difficult supply market I have experienced. We have a distinct advantage for employee retention, being an employee-owned company. But even with that, the labor pool is challenging for everyone in our industry. That combination has resulted in unprecedented cost increases and lead time extensions.”
As each of our experts has indicated, the more complex the product, the more likely customers are seeing delays. “Because of holdups throughout the supply chain, the complexity of a product really affects the lead time. A factory could have six of seven parts to complete a product, but that one missing piece can hold up production,” Hickson says.
“We started the year with a healthy order file, and demand is still high. As a company, we’ve been able to maintain a strong inventory position. That’s something we’ll continue to pursue in 2022—investing in the business, both with inventory and with our people,” he says.
With locations across the country, BMD has been able to support its individual companies with national buying programs to alleviate some of those lead times. “As we grow and acquire more companies, that strengthens our supply partnerships,” Hickson says. “In most cases, we’re not really shifting inventory due to logistics and regional product differences. But having a national presence does give help with preferential lead times and supply availability.”
Hickson also anticipates manufacturers will gradually increase production throughout 2022, but even with those increases, supply will be challenging. “Interest rates may eventually increase modestly, but we are still faced with low housing inventory, strong demand, and supply chain challenges. Eventually there will be a balance, but it’s anyone’s guess as to when that will be.”
Ultimately, he says, “We are expecting 2022 to be challenging with supply, much like we have seen in the second half of 2020 and all of 2021.”