Nationwide, contractors are sweating out supply chain and inflation pressures.
Business might be booming for most companies, but that doesn’t mean green industry companies aren’t contending several challenges that are impacting their bottom lines. One common issue is supply chain disruptions.
Since early on in the COVID-19 pandemic, it seems like materials and equipment for all segments of the industry have been in short supply.
“There’s been a labor and material shortage, which for us has been a big important thing — especially materials,” says Ken Coggins, manager of Garden Design Landscaping in Farmers Branch, Texas. “It’s carried on into 2022 but I think we’re going to see some let up in 2023.”
Hank Parker, president of Bay Landscaping of Mobile, Alabama, says these supply chain issues coupled with fuel costs and other increases has made it harder to stay under budget.
“Most of the supply chain stuff we’ve dealt with is trying to get trucks and mowers,” Parker says. “We’re starting to feel a pinch in our fleet.”
Fortunately for Bay Landscaping, Parker says the company upgraded its mower fleet last season. But they are still short on spare mowers in case of breakdowns.
“Right now, I think all four of our backups are all broke and waiting on parts. If nothing else breaks until those parts come in, we’ll be good. We’re getting by,” he says.
Parker adds that just like the mowers themselves, replacement parts for repairs are taking significantly longer to get in as well.
“We can’t seem to get parts in that have always been readily available. They might take two or three weeks where it used to only take a day,” he says.
Matt Singer, owner of John’s Home and Yard Service, based in Billings, Montana, says he’s happy that supply chain issues aren’t as bad this year compared to last.
“Sometimes we’ve had some supply chain issues still whether it’s landscaping or sprinkler supplies, but for the most part this year has been far better than last year,” he says.
“Last year PVC pipe for sprinklers was impossible to get,” Singer recalls. “So, when the pipe ran out here in Billings, I sent three trucks out to Wyoming and bought every piece of pipe I could and brought it back.”
Parker, too, is relieved that irrigation supplies are more readily available this year, but notes the price is still way up for it.
“The supply is there for now, but the cost is in some instances double what it was two years ago,” he says. “Any of that stuff is just through the roof.”
Machine delays have been the biggest headache for Singer.
“If I want a new lawn mower or mini loader, it’s months, or some will say even a year out, on a lot of things,” he says. “It’s the same with trucks as well.”
Coggins, who notes Garden Design works on a lot of new construction projects, says a shortage of plant materials has made things difficult.
“We had a crash several years ago and a lot of nurseries went out of business. And it takes a long time to build up a family nursery. I think we’re seeing a little of that still, but a lot of the bigger nurseries have expanded. And some other people have started to get into it,” he says.
“But the lead time on growing stuff is pretty long — especially for trees. So, we have seen a shortage of trees and bigger ornamentals. We expect to continue to see that in some areas.”
But all of these supply chain disruptions haven’t put a damper on business.
“Things have stayed fairly steady in our markets, though we’ve topped out in what we can do,” Coggins says. “But there’s still plenty of work out there we could get but we’re limited on supplies, labor and what not.”
With machines and parts taking longer to get in, companies are making sure they have plenty of inventory reserved for the unexpected.
“We keep a stockpile of everything now,” Parker says. “We never really did that before. But we’re trying to order enough. If we need two of something, we’ll order four. And then when we use the third one, we’ll already be ordering a few more.”
Singer notes keeping an ear to the ground and communicating with fellow businesses is the best way to see potential supply chain disruptions coming.
“I’m stocking a larger inventory on different things we’re worried about than I have in the past,” he says. “If I hear any sort of rumor on a supply that might be running low, then I fill up and make sure I have enough for the rest of the year or even part of next year on it.”
These holdups are also causing mechanics to be at the top of their game and get repairs done faster than ever before.
“This year we’ve been repairing stuff way faster than normal and trying to keep the machines up and running,” Singer says, “just because the timeline for machines is out so far that it doesn’t even make sense to buy them. By the time I buy them, the summer is over. I have to be buying things now and thinking of next year.”
Singer adds he is already looking ahead to next year and just purchased four new aerators for the springtime because suppliers told him they’d be at least six months out.
When it comes to some supplies, like stone or plant material, Singer says they’ve been trying to replace out of stock items with different options.
“We’re trying to find alternatives and substitutes for some supplies, but sometimes you just can’t do that,” he says.
Coggins says the company has made it a priority in recent years to foster relationships with the nurseries they receive their materials from.
“Several years ago, we started building plant pipelines, so we have a pretty good depth of vendors and they’ve helped sustain us through this period,” he says. “We’re looking for a good quality plant at a decent price. It doesn’t have to be the lowest; we understand they’ve got to make money.”
Coggins adds his favorite vendors to work with are the ones where Garden Design is their sole client, or at least one of very few.
“In Louisiana there’s a vendor we work with, and they grow primarily all we need to use. They may ship a truck a day to us, and they pick up a check every week. They don’t have to worry about a big overhead then; they just have to worry about growing plants and shipping them,” he says.
“So, we worked with them to develop that pipeline and it works well for them and works well for us… they can sell everything that they grow to us, and it just works well that way.”
Securing these loyal relationships with vendors has paid off for the company.
“It’s not about going out and shopping for plants; it’s about going out and developing a relationship with a vendor that would be able to supply you long-term even in the event of a shortage or a downturn or even high demand,” Coggins says. “And that’s proven true for us. We haven’t had the shortages like we’ve had in the past.”
Despite all of the disruptions in the supply chain, Parker says it hasn’t impacted customers yet as things have stayed on schedule and no routes have had to change due to less equipment being readily available.
“We’ll find a way to do it,” he says of the work. “Up to this point, we’ve found ways around it, but if it continues, I don’t think we’ll be so lucky.”
Coggins says he hasn’t had any problems with customers yet either because they are experiencing the same troubles.
“Our customers are in the construction business, so they understand prices are volatile, labor is short, and a lot of the projects we’re on are being delayed,” he says. “People are off six, eight months or even a year from the start of their schedule.”
Singer says he feels it comes down to the individual — but most have been empathetic.
“Most customers are pretty understanding because it’s affecting all their lives in some fashion or another,” he says. “When we run into a hiccup, or something gets back out a month, most are OK with it.”
Singer adds that customers have also been more accommodating to change as these supply chain issues continue.
“Some are willing to wait until next year when it’s in stock because that’s what they want, but other people will just swap a type of rock or pick a different size or color of something,” he says. “It really is up to each individual’s expectations. But overall, I think people are more willing to listen to a different option than before.”
As prices for materials and labor balloon with inflation, contractors nationwide are largely solving the issue by passing the costs on to the customer.
For Jed Sherman, a newcomer to the green industry at First Landing Lawn & Landscape in Cincinnati, Ohio, that cost increase hasn’t yet received lots of pushback. Sherman started his commercial landscaping company in 2019 and used COVID-19 as a way of experimenting with how to operate. They did the work largely on their own to sort out any pain points and learn more about what manhours it cost to do jobs, mostly at HOAs. Now, he’s up to five employees and 30 clients, but many of his relationships with clients are still relatively new – the company is just a few years old.
But Sherman says he also understands what his clients want. He owns a portfolio of hotels in Cincinnati and nearby Kentucky, and before entering the green industry, he noticed an annual challenge was earning a landscaping bid. “I was sitting down with one of our board members one day and I was telling him this gripe, and he says, ‘You could probably solve that problem,’” Sherman says.
So, as he’s upping the costs on renewals with his fledgling accounts, Sherman says he’s shooting for a 15% increase but settling somewhere closer to 10%. He may not have the problem of negotiating landscaping bids as a hotel manager, but now Sherman’s on the other side of the table, justifying raising costs by showing clients the higher prices he’s paying on materials, fuel and labor. A yard of mulch that recently cost him $18 now costs $35, and he’s passing those higher costs down to the client.
“Look, you’re going to lose some to pricing, but this really comes down to the problem that I said we were trying to solve: For most business owners, we just want the headache to go away,” Sherman says. “We just want to know that somebody’s going to show up each week and take care of the stuff that we want done. If you can provide that with some communication, you’re not going to lose customers on price, as long as you’re not the highest price.”
That’s not been the case for John Fitzgerald, the founder and president of Landesign Construction and Maintenance in the Bay Area of California. They’ve been in business for over 30 years, offering commercial maintenance and service to high-end residential accounts, plus some work at the many nearby wineries. Fitzgerald’s got roughly 125 employees and they earned $11 million in revenue last year.
Even still, explaining the cost to customers has been a hassle – Fitzgerald estimates half of his clients push back on increased cost proposals. Some have even just paid previous invoices and tried to pass it off like they’re not paying the increased costs. He adds that he hasn’t lost any longtime clients; it’s largely conglomerate customers running apartment complexes who are trying to squeak by with lower costs.
“Everything has gone up and we’re trying to get our customers to understand that we have to go up 8 to 10%,” Fitzgerald says, adding that a normal cost increase each year is closer to 3%. “It’s really hard to get through to the customers what we’re going through.”
Out in rural Wyoming, Kolby Nebeker of Cowboy Curbing & Landscape is putting clients on a time crunch. In the past, he’s given prospects 30 days to accept a bid before the terms of the contract could change. Now, with how fast material costs are ebbing and flowing, he’s resorted to giving them just seven days before he tells them he may need to reevaluate the costs and send over a new bid.
Nebeker, who primarily does design/build work, has also offered more job installments in phases than in the past. So, clients can order one part of the whole project, and if they like the progress that’s being made, they can continue to double down on it with another job later.
“We haven’t been able to meet everybody’s budget, but I don’t think it’s been a shock,” Nebeker says. “Most people are dealing with the inflation so they’re understanding that material costs are going up, but it does make it harder to get certain jobs.”
Nebeker says he’s seen some materials double or nearly triple in cost over the last year, which means he’s been bulk ordering to try and lock in one price point and save the amount of trips he’s taking to his closest supplier.
Out in Western Wyoming, Nebeker says it takes roughly an hour to commute just about anywhere. Fuel has been a major pain point, one that’s called for careful attention to routing details. Now, when he goes to pick up plant materials for example, he’ll line up two or three jobs on the route there, even when the day’s schedule is already tight.
“We’ve had to group some stuff together so we can do less trips,” Nebeker says.
In Cincinnati, fuel prices also jumped this summer, but Sherman says his company didn’t add any fuel surcharges, even when gas hovered around $5 a gallon. He’s been fortunate as a bootstrap startup to operate without much overhead, so he leaned on employees he already had from other jobs to absorb extra work for the company. His net profit margin in 2021 was around 30%, and this year, it’ll still be closer to 20%.
Still, Sherman says he’s seen the pinch elsewhere – wage inflation. Last year alone, starting pay jumped from $13 an hour to $17, and that was hard to absorb. Sherman says he’s used to pivoting quickly like he does in the hotel industry, where the price of rooms can change several times a week or even a day without a problem.
And even at bigger companies in his area, Sherman says he’s noticed the labor pinch. In his own HOA where he lives, a landscaping company takes care of the property. Now, instead of four of their own employees, Sherman says they’re subcontracting two other employees to do the jobs.
“I know that they’re feeling it somewhere,” Sherman says. “You can just kind of feel it in the service delivery.”
Fitzgerald has of course dealt with high gas prices out in California, though he’s managed that by adding $20-$30 in increased gas charges on most accounts during renewal season.
Plenty of materials like PVC pipes and fittings cost more now than they did before, Fitzgerald says, but one major cost his company will need to swallow in the coming years is on battery-powered equipment. California recently passed a bill that would phase out sales for gas-powered equipment by 2024, meaning Fitzgerald – who already equips 15% of his company with electric equipment – will need to adjust quickly to the new mandate.
Of course, that equipment’s not cheap. Fitzgerald says he’s already noticed prices balloon for that equipment as 2024 inches closer.
That’s putting a huge burden on us to figure out what to buy in the next two years,” Fitzgerald says. “It’s going to be really hard to recoup that.”