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A ‘notable’ rise in prices puts pressure on the FM industry

As if the coronavirus pandemic hasn’t dumped enough bad news in our laps, here’s another bitter pill to swallow: Everything costs more now.

And it’s unclear when we might get some relief.

Prices jumped 5.4% in July compared to a year ago, according to the Bureau of Labor Statistics. Compared to June of this year, prices were up 0.5%.

The increase is “notable,” and prices will likely remain elevated in the coming months before moderating, said Fed Chair Jerome H. Powell. Target inflation is around 2% annually, so this is much higher than the norm.

“The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic,” Powell said. “As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect.”

A 'spiral effect'

In the facility maintenance industry, the effects are widespread. Bill Volz is Divisions Maintenance Group’s senior vice president of field operations, meaning his team is responsible for executing services at the ground level. Volz has been with DMG for 15 years, so he’s seen economic highs and lows before, including the Great Recession. But he’s never seen anything quite like this.

Normally, facility maintenance is a fairly insulated industry, Volz said. If a toilet is clogged, it needs to be unclogged – no matter whether the economy is humming along or taking a dive.

But this time, as the pandemic took hold of the world, Volz started to notice deeper changes.

First, gas prices are the highest they’ve been in seven years.

Second, there’s a labor shortage. Companies are simply having a difficult time finding workers to fill jobs. They’re having to pay higher wages, which leads to higher rates for customers, too.

And third, materials just cost more. There are backlogs after manufacturing plants were temporarily shuttered, and it’s overall more expensive and time-consuming to get parts.

This has all led to “substantial” cost increases within the facility maintenance industry, Volz said.

“I’ve had more providers calling this year actually turning down work than ever before,” he said. They tell him, “’Hey, we want to do this for you, we just don’t have the people to do it. We don’t have the laborers or the technicians to take on this work.’

“It’s a spiral effect. When everything is stacking up together, it creates an almost unwinnable situation.”

Doing what we promised

The one upside, perhaps, is that there’s a low barrier of entry for new providers who want to get into the game. There’s plenty of work to go around.

And DMG is doing everything it can to leverage its wide network of providers to secure lower costs for customers. In 2020, despite lockdowns that prevented many customers from even visiting their own sites, DMG field team members performed 37,000 inspections and 47,000 site visits.

“When people couldn’t get out or go see things during the pandemic, we were still there,” Volz said. “We were still doing what we promised, which is fantastic.

“If copper-per-ounce is this cost, it is what it is and there’s not much we can do about it. But we can definitely do our best to create a higher competitive environment, and that is one of the major competitive advantages for our customers.”

About DMG: Divisions Maintenance Group is a technology company that provides facility maintenance to tens of thousands of customers around the country. For more information – or to check out our career opportunities – visit divisionsmg.com.

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