Frequent Product Price Changes are Creating Extra Risk for MEP Contractors
It’s a well-known fact within the construction industry that building materials pricing and availability can be—and currently is—unpredictable, with ongoing international trade negotiations, shortage of raw materials and increased demand all leading to sharply rising prices.
According to this Construction Dive article, one contractor was forced to pay a 20% increase on rebar from one month to the next, and that was in February of this year. Average price increases on MEP products as captured by our pricing services are following this trend and haven’t slowed down as of May 2021, indicating that, unfortunately, this problem isn’t likely to go away any time soon…
In four popular MEP commodities noted below, we’re seeing a 31% increase on average in price overall as of May 2021 since the beginning of the year with PVC Schedule 40 Conduit showing the sharpest increase of the four.
We’re also seeing a staggering increase in the frequency of MEP manufacturer price changes compared to the same time period last year. For the month of May 2021 vs May 2020, we saw a 76% increase in velocity of price changes and an even more drastic increase of 84% in the last week of May 2021 compared to the year prior from our data through Trimble Trade Service.
Navigating this unstable landscape can be challenging for MEP contractors, due to the rising prices, deleted product lines and ever-changing product ranges. With every price change comes the possibility that an item price will be incorrect, potentially causing contractors to under or over bid on a construction project and putting profitability targets at risk. It becomes even more imperative for contractors to have access to more frequent updates in product prices AND that wholesalers are providing this correct product pricing information to their customers with speed and precision.
This is where a pricing data service can help connect stakeholders in the supply chain and enable contractors to more safely navigate the ever-changing market landscape. But, how? Such technology can enable wholesaler data to be synced with contractor estimates, providing them with access to a huge library of manufacturer-specific products and product data. However, it’s not enough for a supplier or wholesaler to simply provide their product information - it also has to be kept consistently up-to-date with reliable frequency.
Learn more about how Trimble’s manufacturer and distributor partners are helping MEP contractors do their best work. Watch the video >>
So, how does a pricing data service create a more frequent and reliable channel of communication for critical price changes between contractors and their supply chain partners?
For wholesalers, both large and small, managed pricing services that sync with estimating software are the most reliable and efficient way to get up-to-date information to your customers when they need it most. Contractors using Trimble’s estimating and procurement solutions can similarly benefit. As soon as price changes are released, the system will automatically prompt the user to apply the update. For the increasing number of customers opting for Trimble’s cloud-based solutions, these updates can be automatically carried out seamlessly in the background, with no disruption to the working day.
Whichever method is used, the end result is the same: efficient synchronization of trade prices used by our MEP wholesaler partners, bringing update information directly to contractor bids and aiding efficient construction project management. With access to a large library of building product data syncing automatically from the manufacturer listing database, available right at their fingertips, contractors can more confidently mitigate the issues relating to incorrect pricing and better navigate the turbulence within the construction and MEP market.
While Trimble pricing services provide contractors with access to the most recently updated price provided by supply chain partners, the frequency of change shown in the figures above is much more drastic than in recent history. This is strong evidence that contractors might even want to consider double checking the pricing in their bids before and after submittal directly with wholesalers to make sure they have the most up-to-date pricing before starting on projects.
Our prediction is that contractors who leverage pricing services as part of their toolkit and are extra diligent about confirming pricing with suppliers will be more equipped to mitigate risk to their profitability. And supply chain partners who prioritize efficient and timely communication of critical updates to their contractor customers will be the heroines of this story for years to come.
Want to learn more about pricing services? Check out this ebook, Why Every Estimator Needs to Use Managed Pricing Services, or get your questions answered directly by a Trimble pricing service expert by getting in touch.