Hike In Price of Raw Materials Procurement in Construction Industry

The pandemic and the lockdown caused by it have affected the economy of the whole country. This dynamic change in the economy and the inflation due to it have raised the prices of almost everything and one of these things that has been severely affected is the cost of raw materials. 

The task of raw materials procurement has always been tiresome for SMEs that are only starting their businesses. To add to that burden, the hike in the price of raw materials in the construction industry caused by the pandemic has brought out some severe challenges. While these enterprises are still learning to cope with these challenges there has been no external support or enough information on how they can deal with them 

According to many reports and data analysts, the prices of almost all types of construction materials including cement, electric cables, steel, PVC pipes, and different types of P and M sand. The prices of all these materials have gone up at least by 20%. In the example of Tiruchi, due to the closure of the sand quarry in their locality, they now largely depend on manufacturing sand and plastering sand from another district. The rate of these transported sand is much higher than that of the one obtained locally. 

Impact on The SMEs:

Problems in starting new ventures
SMEs that have been planning to expand their businesses through increased raw materials procurement are now facing a credit crunch where their plans of expansion have been disturbed. SMEs usually chalk out a very careful plan for increasing their production and profits over the year and to invest a small amount of that profit in their expansion. Although due to the unexpected hike in prices of raw material procurement, they will have to design new strategies to get back on track.

Increased transportation costs
Like in the example of Trichur, in many different areas the source of obtaining raw materials locally has been destroyed. With this shift in the procurement location, the SMEs have to pay an extra cost for transportation of the required materials. This cost is either already added to the final cost by the supplier or has to be paid by the enterprise.

Extra burden on government contractors
Many small and medium enterprises that had undertaken government contracts and had received funding from the government as per their stipulated estimate are facing a crunch of funding. The funding acquired from the government in the initial phases is not proving to be enough and leading these contractors to lower their profits to deliver on the contracts made. 

A better place for these SMEs for raw material procurement is now the online suppliers. With these new online suppliers in the market, the SMEs have an option to find out better ways than resorting to offline suppliers who charge them arbitrarily. Even with the hike in prices of raw material procurement in the construction industry, the online suppliers, like OfBusiness, provide attractive bundling offers that reduce the cost of raw materials substantially for these small and medium enterprises.