How the Lumber Industry Can Overcome Supply Chain Issues
By Corey Bounds, Director of Risk Assessment
Supply chain issues are a constant topic of conversation in the forest products industry right now. Every time I meet with a customer, we’re talking about delays in receiving parts and equipment they need.
Supply chain problems are hitting us on the demand side too. Demand is predicted to be strong for domestic hardwood and softwood lumber in 2022. Interest rates are low, the construction industry continues to play catchup, and less Canadian lumber is coming across the border.
Everybody is seeking alternative solutions and contingency plans, doing anything and everything they can to keep on moving. Here are a few key things to know:
♦ Timelines for equipment repair and replacement have changed dramatically.
Our insureds are telling us that bandsaw blades are getting harder to find. The lead time to get a new one may be six months or more. On a larger scale, it’s taking six to 12 months to get new equipment up and running, counting the order time, delays in delivery and installation.
Whether the items that a sawmill needs come from down the road, across the country or across the ocean, supply chain problems might persist for a while. Our customers are planning ahead: If they need one of something, they’re buying two or three and putting what they don’t need on the shelf. Or they’re just making do with what they have, and rebuilding what they can.
♦ If you’re planning to expand your facility or construct a new one, the time to begin the process is now.
One of our insureds was building a brand-new sawmill, and they couldn’t put the roof on the building. The problem wasn’t obtaining roofing material, but rather getting the insulation that had to be installed first. An insulation shortage was the last thing anyone expected — but there was nothing to be done. The builders left the roof off the building, covered critical equipment and just kept on doing what they could.
Many of our customers are expanding and building right now. Three years ago, they could have drawn up a pretty accurate timeline for this kind of work. Lead times varied, but were manageable. Now, all that’s been thrown out the window. If you’re going to plan a project, it might take 12-24 months for that project to begin. Construction timelines have stretched to be two to three times longer than they were before.
If you’ve been thinking about improving or expanding your facilities, it might be wise to sign with a contractor to lock in your rates now versus paying whatever the prices may be down the road.
♦ It’s time to rethink your contingency plans.
I tell our insureds all the time: What worked yesterday no longer works today. And I ask them what they’re doing to adapt.
Fortunately, our forest products industry is made up of creative, hardworking, problem-solving people. It’s never been an easy industry to work in, and so for our insureds, this is just another part of doing business. They know how to figure out what they’ve got to do, find a workaround and keep on going.
Remember your end goal: to get the lumber on the trucks. In case of a crisis, how will you achieve that?
- Stock up on spare parts.
- Find new partners to assist with equipment repair and replacement.
- Work out an agreement with a friendly local competitor. If something crucial fails at your facility, can they step in to help? And will you do the same for them?
♦ Maintenance and risk reduction is more important than ever.
If a piece of equipment breaks, a quick replacement’s not coming. So you might have to maintain equipment a little bit longer than in the past.
Companies’ current hiring struggles make this more difficult. A sawmill might not have enough employees — or enough highly trained employees — to keep up with maintenance. The consequences might not be noticed right away, but they’ll show up in time.
Think about your personal vehicle. Because of supply chain shortages and high demand, it’s harder (and more expensive) to buy a car now. So you want to make sure you’re maintaining the vehicle you have: changing the oil, rotating the tires, checking the brakes. If you skip these preventive routines, you’re increasing the chances that something will go wrong.
Take a hard look at your operations. Is everything being maintained today as it would have been in the past? What are you doing to take care of your equipment? Are you changing out bearings, greasing bearings and adhering to hot work standards? Are you training new employees to do all these things?
♦ Continental Underwriters is here to support you.
We pride ourselves in being a customer-first company that does things the right way. We do business with the top forest products companies in the United States. As a result, we’ve identified best business practices and the positive impact they have in avoiding losses.
We’re here to share advice and guidance on the specifics of property conservation programs. In most cases, we find our insureds can make minor modifications to significantly improve their risk profile.
For me, it’s personal. I grew up in the farm supply business, and we lost our feed mill to a fire when I was in my early 20s. Knowing what I know now, I understand that we didn’t have the best practices in place to prevent that catastrophic loss from happening. It’s my mission now to help other businesses avoid such losses.
We’re not typical insurance people at Continental Underwriters. And we don’t want to be typical insurance people. We’re partners in your business, here to help to keep your operations running and reduce your risks.
Contact Corey at email@example.com if you’d like a personalized assessment of your risk management plan.