Turning the Page on Supply Chain Issues

by Katie Sloan

The supply chain. That phrase alone had the power to send shudders down the spines of student housing operators during the past few years, especially as turn approached. Materials were scarce. Ships were stuck at sea. Inventory was sold out. Workers threatened to strike. 

Many operators took what they could get, when they could get it, fearing there may not be another chance to stock up on goods, parts or supplies. 

“At the height of the supply chain interruption, we were putting our hands on whatever was available from whomever could make it,” says Trey Caudle, senior director of construction management for Campus Life & Style. “This meant a Frigidaire refrigerator, GE stove, Whirlpool dishwasher or variations thereof.”

And now? 

“Now most kits are able to be completed from one manufacturer,” Caudle continues. 

Student housing operators are happy to report the majority of kinks in the supply chain have been worked out. Ships are moving through the sea and ports. Materials and workers aren’t as hard to come by. Prices have come down. 

Cost Considerations

Chris Prisk, director of facilities for Asset Living, believes pricing is one positive aspect to come out of the current supply chain. 

“Various suppliers in the maintenance, repair and operations (MRO) sector are showing keen interest in recovering from the setbacks of the past couple of years,” he explains. “This increased competition among suppliers has resulted in attractive pricing for buyers.”

It’s not just the existing players that are creating this competition, either, Caudle notes. 

“One unique factor that came out of the supply chain interruptions is all the new players to the market,” he adds. “As previous supply chains became skinny, it prompted many operators to go outside of normal supply retailers. This allowed smaller companies an opportunity to grow and make an impact in our markets. The post-COVID supply chain is full of many strong companies with the ability to compete at scale with our previous ‘default’ suppliers.”

Chase Minnifield, CEO and president of EZ Turn, a software provider for commercial and residential property managers, notes the supply chain challenges of the past few years — paired with a pandemic — also forced operators to focus on a localized approach. This sometimes allowed them to establish new relationships or vendor partners that could assist when national or global suppliers couldn’t be counted on leading up to turn.

“In response to the challenges posed by COVID, many companies established collaborations with local businesses to ensure timely supply delivery,” he says. “These partnerships have proven beneficial, and it is expected that they will continue to be reinforced.”

On the matter of pricing, James Jannetides Jr., business development representative at contract furniture provider University Loft Company, has seen dramatic price cuts in raw materials and much lower factory utilization, which has resulted in more competitive pricing that’s passed onto his customers. 

But Matt Nebel, national accounts manager at MRO product provider Chadwell Supply, notes inflation is still in play. 

“A top issue for operators is certainly inflation,” he says. “Manufacturers are increasing prices on a regular basis. In the past, price increases would be annual. Now, they can be monthly or even biweekly dependent on the product. Distributors are working hard to hold pricing, but with the volatility in the market, operators could see increased prices over the turn process.”

Nebel notes deflation — when the cost of goods and services decreases — is another problem manufacturers who service student housing are experiencing today.

“We are all concerned with inflation, but deflation is also an issue,” he continues. “The spike in certain product requests over the pandemic caused an increase in order requests. The orders are fulfilled but the demand is not depleting the inventory as anticipated. This is causing a strain on warehousing and logistics. Manufacturers and distributors are faced with either holding onto the product or selling it at a discount.”

Another twist when it comes to pricing and logistics is logistics partners who seek to lock in manufacturers. Rob Shier, CEO of turn-key furniture, cabinets and countertops provider D12 Commercial Interiors, believes some of these partners are looking to cash in on fears that resulted from the pandemic. Fears that prices may once again rise, or that materials won’t be available. 

“At the end of the pandemic, logistics partners wanted to lock customers into multi-year agreements at inflated rates,” Shier explains. “Now, customers like D12 want multi-year agreements from vendors to lock in lower rates, but logistics partners are reluctant to provide them. Furthermore, the logistics industry doesn’t want to see some currently unjustified pandemic fees and surcharges disappear. For example, we continue to experience ‘port congestion fees’ on imported containers even though there is no current port congestion.”  

The State of Supplies

The fear that materials may not be available isn’t an irrational one. At least not yet. At least in terms of certain items. 

“Smart chips are still an issue in the manufacturing process,” Nebel says. “The chips are utilized in products like smoke detectors, GFCI (ground-fault circuit interrupter) switches and LED lighting. The limitations on chip availability have stressed the supply of the chip-dependent products.”

Jerod Bottolfson, national facilities manager at PeakMade, adds the pandemic has had another unintended consequence on student housing as manufacturers re-evaluate their operations. 

“The biggest hurdle we are facing is a ripple effect of previous supply chain issues, which is the discontinuing of products,” he says. “Major manufacturers have reduced their number of skus to focus on core products to be able to fulfill orders and meet the demand for the majority of purchasers. This has made finding direct replacements for those products and parts that were not previously top sellers harder to source.”

Bottolfson further notes that overseas products, including LVT (luxury vinyl tile) flooring, furniture and appliance parts, are still showing longer lead times and higher pricing. This has reinforced the idea of diversifying and buying local for some student housing operators.

“The real hurdle for operators is recognizing the need to pivot from a single supplier,” he continues. “They should understand that in order to meet their needs they need to be flexible in sourcing products. We are seeing an increase in the use of local suppliers and new vendors to accomplish that. In doing so, this now requires our operators to spend more of their time vetting out vendors, shopping around for best price and monitoring current availability.”   

The continued scarcity of some products has also placed a premium on relationships. 

“Establish and maintain direct contact with your suppliers,” Minnifield advises. “Building a strong relationship can help you stay informed about potential delays, obtain accurate information, and explore possible solutions or accommodations.”

Additionally, it can help an operator determine just where they fall in the pecking order when supplies are available. Bottolfson has experienced this firsthand.

“For instance, paint manufacturers are limiting the quantity of core products being delivered to brick-and-mortar locations,” he says. “The best clients are getting the first chance to purchase those materials. For our sector in student housing, we typically purchase paint once per year. Thus, we tend to find ourselves near the middle of that client list when local reps and store managers evaluate our purchasing. Looping in our national representative when these situations arise has helped us greatly in that regard, but it still comes with slightly longer lead times and additional hurdles to jump through for our teams.”

Tackling some of these challenges has taught Bottolfson to move away from products that have limited long-term sustainability. He now tries to avoid purchasing products that may have future issues directly related to replacement and/or availability. 

Unfortunately, certain supplies aren’t the only things the industry is short on. Labor remains a challenge, though one that’s not as bad as it was when threats of a strike loomed. 

“Labor has been a continuous struggle as time goes on,” Caudle says. “It seems each year, finding skilled temporary labor or turn vendors is challenging. Usually the skilled labor costs a premium, so you continually try to find those vendors that are highly skilled and economically priced. However, they don’t remain secret for long. Then their prices start to reflect their demand, and the cycle continues.”

A Planned Approach

Caudle combats this labor shortage by scouting early and using his facilities team and leadership to “plan, plan, plan, then execute.”

A proactive plan is always a good idea — particularly when you’re up against a deadline like turn — but the type of plan put in place varies by market. During the worst of the supply chain challenges, it was all about ordering early, maintaining a stable of backup options and reusing what you had until it fell apart. 

Today, it’s not quite that dire, but that doesn’t mean advanced planning should fall by the wayside. Instead, this planning simply takes a different form. 

“Don’t have a ‘boilerplate’ turn strategy,” Caudle advises. “Each property is very specific in what is required at turn. Things that should be considered are property vintage, location, staff, vendors, materials, leadership and oversight. You can expand to other considerations almost endlessly, but the key is to evaluate the needs based on each individual property.”

Caudle clarifies that he isn’t saying it’s bad to have a turn outline. Rather, he feels this outline should help guide operators as they make their property-specific outline. 

Mat Windsor, president of the Turn Company, a project management company focused on turn, believes you’ll never go wrong in any environment if you over-prepare for a major event like turn. 

“As a former community manager, I’d be focused on the items that are 100 percent within my control — my team, my organization, my communication,” he says. “My best turns and move-ins were a result of my preparation and collaboration with my vendors. Having the confidence that I was organized and had prepared my team accordingly allowed me to engage with my vendors during the turn process and troubleshoot the outliers while the rest of the turn moved along as planned.  I learned over the years that I had fewer vendors walk off or dispute billings when I was over-prepared and communicated the plan to all parties early and often.”

Ordering early is a no-brainer nowadays, but Minnifield believes it’s what you do after those items arrive that really dictates your success. 

“Create a comprehensive plan for when your supplies arrive,” he says. “This includes having appropriate storage space, organizing efficient distribution processes, and ensuring staff members are adequately trained to handle and distribute the supplies effectively.”

A plan like this is even more crucial nowadays as supply chain timelines can still be a gamble. Most prudent operators are ordering early to ensure they can overcome any delays, but what if the item(s) arrives early? That’s when Minnifield’s strategy pays off. 

Lisa Dillon, executive vice president of global furniture design and manufacturing firm University Furnishings, notes operators aren’t the only ones taking a proactive approach to turn as the supply chain evolves to a new normal. 

“We’ve enhanced our processes and systems leverage, increased raw material inventory levels to mitigate availability concerns, moved order deadlines forward, added top-tier supply chain talent to the team and increased expectations of transparency for our upstream partners,” she says. 

Even with all this effort, Dillon has some advice for operators when it comes to working with their vendors.

“Hold your partners accountable — but understand some things are beyond their influence,” she says. “To positively influence those that aren’t, demand forethought and an enhanced level of sales and operations planning — but accept that they can’t predict the future. Ask for increased visibility into the supply chain — but understand the data will be imperfect.”

Windsor also champions a proactive approach, though he believes it needs to go a step beyond simply making your buying decisions early. It should involve implementing those decisions, which likely involves outside parties.

“Oftentimes, turn service contract approval isn’t granted until June or even July, with the objective of securing the best pricing,” he explains. “What actually happens is the vendors have less time to secure and train the best labor and collaborate with the on-site teams, and the community suffers the downstream impacts of overtime — surge resource expenses, reputation, etcetera — which can far exceed the small savings to the turn contract rates.”

Prisk is remaining proactive by opening a third RMO option for the season to ensure Asset Living is prepared for unforeseen circumstances, while Nebel remains a fan of early collaboration. 

“Collaborating early is the key rather than ordering early,” he argues. “It is imperative that the student housing operators collaborate with their vendor partners on anticipated needs so the vendor can communicate with the manufacturers.”

Though many aspects of the supply chain have evened out for the time being, Shier doesn’t think his industry is out of the woods. At least not when you factor in current economic conditions.

“High interest rates are deferring and killing deals for our customers,” he says. “The industry has had a tremendous run over the last few years as multifamily construction is at record highs at the moment. However, that is a function of the market 18 to 24 months ago when the deals were being underwritten. We see a ton of clients hitting pause, and this will have a great impact on our book of business for 2024 and 2025.”

The outcome of this for student housing operators remains uncertain. Will it mean lower prices? Even fewer skus? Or something entirely unpredictable? No one knows, but for now, the industry is uttering a small sigh of relief – and trying to absorb a few lessons to stave off the effects of future disruptions. 

“The last few years have been brutal for anyone touching the supply chain,” Dillon says. “Heading into turn season a year ago, there were a lot of sleepless nights and bloodshot eyes. This year, it finally feels like we’ve turned the corner. The bags under our eyes are fewer and farther between, we can all breathe a little easier, and the smiles and jovial banter that make our work lives rewarding have returned.  For now, that feels like a pretty big win.” 

Nellie Day

This article was originally published in the May/June issue of Student Housing Business magazine.

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