Supply-chain issues continue to haunt the industry, while the cost of materials is an ever-growing concern.
By Robert Isler
No sense in sugar-coating it. K&B’s healthy pipelines have a dark side that the industry can’t shake — the not-so-healthy challenges that seem to loom larger over time.
This was readily apparent based on member feedback received from the Q1 2021 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report. The two most persistent and concerning challenges are supply-chain disruptions and cost of materials. They are tied with a score of 8 out of 10, a very significant level of concern. Both are higher than they were last quarter as well, when supply issues registered a 7.6 and material costs a 7.2. Rounding out the top three is availability of skilled labor, which members pegged at a 7.5. That, too, is above its Q4 score of 7.1. In fact, the only fourth-quarter concern that has shown a noticeable drop in the latest study is the one surrounding COVID-19, which fell from 7.1 to 5.4.
Member anxiety about skyrocketing prices is palpable. “A $35,000 set of cabinets is now $50,000 and it’ll be higher than that next month, at the rate lumber is increasing,” said one. Another lamented, “Pricing is out of control. I’ve started using U.S. suppliers with the lowest prices. That’s all that matters now.” Still another observed, “Suppliers are doubling what they are charging for raw materials. That affects our margins significantly.”
Pricing is out of control. I’ve started using U.S. suppliers with the lowest prices. That’s all that matters now.
As alluded to in the last comment, it leaves members with a difficult decision: Have clients foot at least some of the bill for higher material and product costs, or take a big hit on project profitability. Ideally, clients should be told up front that prices for many project elements are steadily rising, so that ground rules or guaranteed prices are established in advance. So far, according to data shared at the recent Harvard Joint Center for Housing Studies spring conference, project cost increases as high as 10% to 20% have not dampened homeowner enthusiasm to move forward. There are limits, though. As one survey respondent noted, “The primary reason for postponing and cancelling projects is the actual construction costs being too high.”
Supply-chain delays were compounded during the quarter by the Suez Canal fiasco in March, when a huge ship became lodged within the canal, leaving 400 ships stranded on either side. Although that issue is resolved now, frustration levels caused by ongoing supply-chain issues remain. Some of these can and have affected client decisions to move forward. For instance, “My clients aren’t interested in waiting 22 weeks for cabinet deliveries” said one. “Lead times are unpredictable. “We had a client expecting their first child and they couldn’t justify starting a large project knowing appliances and cabinetry were delayed six months,” said another.