Industry downsizing their cost on FM companies, a serious concern

The facility management industry has undergone significant change as a result of Covid-19. It has had an impact on global trends as more businesses turn to facility management services. As the pandemic has reduced activity at customer sites, there is a growing demand for critical services across industries. However, many facility-providing companies have gone bankrupt. This is because industries/companies in the facility management industry are reducing their costs.

How does Facility Management lead to cost reduction? This question must be hindering everyone’s mind.

Facility management is a multifaceted process, and many businesses are unaware of how much cost-cutting is possible within it. The possibility of task automation, as well as the introduction of newer technologies in this field, has created space for more efficient workplaces and more intelligent budget allocation. Global inflationary pressures are well known to business and financial leaders, who must understand how these factors will impact facility management costs in the coming years.

The cost reductions that have occurred since the outbreak of the pandemic have resulted in labor shortages that have disrupted supply chains in the facility industry. The rise in company liquidation has drastically changed the current prices received by Facility Management suppliers, owing to lower input costs for facility management services.

Wages are the most significant driver of Facility Management costs and will not reset, even in the face of high inflation, implying that costs are unlikely to fall even after labor and logistics issues are resolved. Inflation is not expected to slow until 2023, with manufacturers catching up to demand in late 2022 and supply chains clearing out by late 2023. Wage growth is expected to continue until the end of 2022 and to remain above average in 2023 unless economic growth surprises on the rise next year.

Wages for hard services (such as electrical, plumbing, and HVAC) have risen modestly, but the necessary skills and training pose challenges to the workforce's long-term viability. Wages in soft services (such as security, janitorial, and landscaping) have risen significantly, and they are under pressure from strong growth in competing sectors such as warehousing and retail, which have similarly low entry barriers.

The contributions of facility managers are value-based and are delivered through industry-leading practices. They are responsible for key roles in their organizations and must be proactive in understanding the company's resource requirements and growth plans. Facility management expenses account for about 30 to 35 percent of an organization's annual spending. Although industries are cutting the cost of the Facility Management company after ensuring prudent spending within the budget and meeting the company's vision.

However, it is expected that budgets will increase above average in the coming year.