Material Suppliers Adapt to Accommodate Canceled, Delayed Projects

It has been more than three months since COVID-19 appeared in the U.S., and the challenges are never-ending. Many schools are transitioning to online learning, thousands of businesses remain closed, and a lot of the workforce is working from home. Some sectors, such as construction, operate in a gray area as projects are either moving forward, postponed or canceled. This requires material suppliers to stay on their feet to help their customers, while also maintaining their own operations.

Unlike the Great Recession of 2008, recovery from COVID-19 will be quite different for the nonresidential construction industry, said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu in Construction Executive magazine. Although certain businesses, particularly in the medical field, will see increased activity, others, like construction, will see a decline.

"Complete recovery from the recession will likely take years," Basu said in Construction Executive. "One of the reasons for this is that state and local government budgets are now under severe pressure. With retail sales, hotel and income tax revenues declining, many state and local governments are now experiencing the emergence of massive gaps in their budgets; budgets that must be balanced each fiscal year. There will also be many empty storefronts, fewer occupied apartments and office suites, and a diminished tally of employers available to jobseekers once the pandemic has passed."

Bob Majerus, vice president and general counsel for Hensel Phelps, told Construction Dive that even after the pandemic passes, projects will still take longer to complete. Instead, he noted, "there will be a ramp up" as well as "new safety regulations, new [personal protection equipment] and new safety orientations."

In a chain reaction, material suppliers are most likely to see sales decrease and payments trickle in due to project delays and cancelations. Beth Roush, a credit manager in the construction industry, said her company has experienced slower customer sales but has created incentives to get current customers to take material now rather than later—a benefit to both the customer and material supplier.

"Only a few of my customers have asked for extended terms or have tried delaying payment," Roush said. "Each time, we have managed to get them back online within our terms. What I feel will change [post-coronavirus] is maybe not accepting some new customers and not increasing credit limits with current customers."

When asked about any advice she would offer fellow construction credit professionals, Roush summed it up in one word: monitor.

"Try and give your customers notification ahead of time that they will be going past due and on hold," she said. "It's been working here. Make sure if you have multiple divisions that you're all treating past due customers the same way. Show a united front and we will get through this."

—Andrew Michaels, editorial associate