24 February 2022 4 min read

Global Supply Chain after COVID-19:

How Does It Impact Construction Companies in The Middle East?


Even though governments are taking down the restrictions, and all the paused investments and projects have been resumed, we still have to deal with post-coronavirus effects. One of them is rising materials prices and the cost of shipping. How does it impact the companies in the Middle East? And is there anything that companies can do to prepare for this challenge? Find out in the article!

The COVID pandemic started over two years ago. We have since experienced lockdowns, construction sites closures and the challenge of managing work remotely. We feared for our loved ones, our health and changing reality that we could no longer control. Luckily, after these two difficult years, a lot of us returned to our jobs and governments are slowly taking down all the restrictions.

However, the COVID-19 impact on our lives is still vividly strong. We can see that, especially in the construction industry, which now has to deal with delayed deliveries and rising materials prices. How are the companies located in the Middle East managing these challenges? And how the current global market situation affects their financial stability?

COVID-19’s Impact on The Global Supply Chain

Currently, we can observe a significant disruption on the global construction market. When the pandemic started in March 2020, many construction sites suspended their work and new investments were stopped due to future ambiguity. Also, the transportation of materials was more difficult due to quarantine and tests.

When everything started to go back to normal, the global construction market was not ready. New investments and already existing projects caused an enormous demand for construction materials and equipment. Lack of equity between demand and supply sides resulted in a strong increase in materials prices and shipping costs. The situation is still out of economic equilibrium, as the prices are expected to keep growing. According to economic predictions, they might come back to the levels from 2019 until 2023, at the earliest.

Do you want to read more? Find out how the coronavirus pandemic impacted the HVAC sector in our separate piece:
HVAC Industry After COVID.

Construction Supply Chain - The Situation in The ME

The situation in the Middle East is not much different, as we live in a highly globalised world. According to SCFI spot rates (Shanghai Shipping Exchange), the prices of both routes, Far East-Europe and Far East-Middle East, have gone up almost twice from December 2020 to August 2021. The prices started to go up strongly from March 2021, as during that time, certain coronavirus limitations were being lifted and the construction industry started to be more active and in need for more materials and equipment.

Source: https://splash247.com/carriers-bank-nearly-half-of-all-asia-middle-east-sailings/

Higher costs of materials' shipping, along with delays in deliveries, have put construction companies in the Middle East in a difficult financial position. However, there is another reason that complicates this challenge: the rising complexity of construction processes.

Higher Complexity of Construction Processes

Do you remember how the construction processes looked 20 or 30 years ago? At that time, to be a good construction worker, you did not have to be an expert in new technologies or use them in your daily work. Computers were already in use, but companies still based their processes on non-complicated programmes in the office and offline tools on sites.

Let's jump back to nowadays. The way we think and execute projects changed completely, right? More and more companies are starting to feel that they need to digitalise their processes to stay competitive. At the same time, customers require more complex solutions, like smart air conditioners. Higher complexity of offered products means a growing need for more specialised employees who know how to install and operate smart technologies. It all comes down to more sophisticated processes and higher project costs.

Also, on the Middle East construction market, we can observe a high focus on energy savings. Companies are trying to introduce sustainable technologies that would allow them to cut some costs. It positively impacts the company’s budget in the long run but is quite a considerable expense initially compared with traditional technologies.

Middle East Construction Companies Facing The Challenges

  • Delayed supply deliveries

  • Rising cost of construction materials

  • Customers' needs for advanced and intelligent technologies

  • More complex construction processes

  • Lack of cash flow savings

All of these reasons put construction companies in a very challenging position. They should keep modernising to stay competitive and attract new clients, while at the same time, seeking financial stability and possibilities to decrease the costs. The task is not easy as many of them affect the entire industry and cannot be changed only by a single company. So, are there any other ways to protect your company?

How Can You Support Your Company?

As we mentioned before, you cannot control or change the situation on the market. However, you can try to understand what is really happening in your company. Thanks to that, you will be able to react faster to the market changes and navigate your company better to avoid losing your assets. Here are some tips that might help you obtain this goal:

  • Review your current situation in the company and specific projects

  • Create dashboards and reports that will help you monitor the situation daily

  • Match your procurement activities with the project status to avoid delays or too early deliveries

  • Reorganise your cashflow management to make sure you operate with enough level of savings

  • Establish a streamlined way of communication between the office team and the crew on sites to be able to react faster to any changes

In Archdesk, we understand that dealing with all these processes is not a piece of cake. After all, you cannot control the global supply chain. However, good knowledge of your company’s situation already gives you great tools to deal with these challenges.

Do any of these points listed above seem impossible to introduce in your company? Do you feel that some processes are extremely challenging for your employees? Maybe, you are looking for a professional technology to support your financial management? If yes, feel free to contact us! We will be happy to help and show you the best solutions for your company.

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2024-04-16 01:26:13