In 2024 the Construction sector battled tough market conditions, driven by high interest rates, rising construction costs, and weakening economies that hampered investment. It also faced two key challenges in its supply chains: long lead times and stock aging out, which look set to continue into 2025.
In this blog, DLL examines the impact of these two challenges, recommends solutions and provides valuable insights into key construction industry trends to help mitigate the negative effects of ongoing market volatility.
Long lead times create pressure on the construction supply chain
The construction equipment supply chain is under significant pressure due to the gap in the supply and demand of construction equipment. The Linesight report highlights this construction industry trend and projects this gap to persist in 2025. The report identifies the lead time for various equipment such as transformers estimated to be at over 60-65 weeks, generators at 50-55 weeks, uninterrupted power supply (UPS) at 30-35 weeks, low voltage (LV) switch gears at 50-60 weeks and more.
Construction industry trends further indicate that supply chain relationships will continue to be a focus in the coming months. As the construction supply chain grapples with over 12-month lead times for some equipment, strategic partnerships with vendors will be important to de-risk procurement and delivery dates.
The sector will continue to be impacted by regional conflicts, the lingering effects of the pandemic, and climate change. Additional challenges are expected from the automotive industry's rising need for lithium-ion battery technologies, which compete for the same rare earth elements used in construction equipment.
Drop in market demand leads to risk of construction equipment inventory aging
While lead times for some equipment are over 12 months, the declining demand for equipment is causing issues with inventory aging, as original equipment manufacturers (OEMs) and dealerships struggle to manage stock.
As discussed earlier, construction industry trends indicate that the slowdown in construction activities means equipment is not being sold as quickly as anticipated, resulting in overstocking and the risk of aged inventory.
Building a secure and reliable supply chain for equipment is crucial, and many construction companies are turning to floorplan financing to manage future demand more effectively. One such structure is DLL’s Pay as Sold financing, a short-term credit arrangement that allows retailers to purchase large-ticket items, such as construction equipment, and display them on showroom floors or outdoor plots. The balance is repaid as the items are sold.
Bartosz Tomaszewski, New Business Development Manager at DLL, notes, "There is a lot of interest in floorplan financing for construction equipment. This may at times imply overstocking and eventually stock aging out. With the European construction market slowing down, construction industry trends suggest businesses need the right expertise and solutions to make sure their stock keeps moving down the supply chain and there is no risk of machinery becoming outdated due to low demand."
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The outlook for 2025
The short-term outlook in the construction industry may be challenging but strategic investment in key sectors and technologies provides a foundation for optimism. Despite high interest rates, rising costs, and weak economic conditions, there are promising signs of resilience and growth in specific sectors. The industrial, infrastructure, energy, and utilities sectors are primed for moderate growth, fueled by substantial public investments and a surge in funding for emerging technologies and industries. The increasing focus on emerging technologies such as green hydrogen, semiconductors, and battery manufacturing highlights a shift towards more sustainable and future-oriented industries. More companies are exploring renewable energy projects and alternative fuels and supporting the circular economy by using second and third-life machinery to extend equipment lifespan and reduce waste. And finally, the digital transformation is also accelerating, with increased use of AI-driven tools and digital platforms helping to address supply chain challenges.
Turning construction industry trends and challenges into opportunities
While the construction sector has shown remarkable resilience amidst economic fluctuations and pressures, companies need to remain agile and adaptable. The supply chain challenges facing the industry highlight the need for strategic planning and strong partnerships. Working with a financing partner can help to alleviate supply chain challenges, whether to keep stock moving down the supply chain or offset long lead times.
Construction market of the future: trends, challenges, and strategies, explore now!
The key to turning a profit from aging stock is to leverage financing options, such as leasing and loans, which can provide businesses with the flexibility to offer more competitive terms to end-users. This approach helps older equipment remain viable in the market and continue to move down the construction industry supply chain. Flexible financing can therefore transform aging inventory into a profitable opportunity and help businesses efficiently manage inventory turnover and reduce the risk of stock becoming obsolete.
Michael Hart, New Business Development at DLL comments: “Money is tight, but companies cannot afford to stand still. Access to affordable finance removes the burden of large upfront investment, giving companies the necessary latitude to grow, expand, and compete globally. By spreading the cost of these investments over time, companies can manage their finances more strategically, ensuring they have necessary capital to respond to market demands and seize new opportunities.”
Overcome market challenges with DLL
Finding a trusted partner is essential to navigate market trends, understand economic shifts, and overcome industry obstacles. DLL combines experience, expertise, and a global presence to offer unparalleled financial support tailored to your business needs. A partnership with DLL will help you to manage cash flow, mitigate risks, and sustain investments in construction projects, and assist your business in remaining resilient in a volatile economic landscape. With DLL by your side, you can confidently face the future, knowing you have a reliable ally to help you thrive.
