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How to Diversify: Part 1

By Sue McCraven

Editor’s Note: This article begins a three-part series for precast concrete producers who are thinking about diversifying their product line and modernizing production. Part 1 shares 10 steps to help precasters plan for future growth. In the January-February 2014 issue, Part 2 will discuss new equipment, processes, materials, formwork, software and integrated systems to maximize production efficiencies. Part 3 (March-April) will highlight small- to medium-sized producers who made the hard decisions and investments that led to expanded markets and a brighter future.

Thinking About DiversificationYou’re thinking of growing your precast concrete company by adding a new product and expanding your market niche. But where do you start? What’s the first order of business? According to industry experts, investing in a new formwork system or overhead crane is not the first step to upgrading your plant or diversifying into a new market. It doesn’t start when you see an ad for the latest mixer and think, “Hey! This would be a great fit for our operation.” And the decision to expand your business certainly won’t be born of management complacency or a doom-and-gloom attitude about our current economy.

NPCA asked leading precast plant designers, system engineers and equipment suppliers for the most important points to get across to precasters who want to branch out. Industry experts agree on the No. 1 message: If you want to diversify your company – whether or not it requires a new tool or an integrated batching/mixing/control system – a wise investment decision can only spring from your current mindset, or your outlook, as a businessperson in today’s world.

Here are nine steps to consider that will help you prepare for future growth:

1. Take a hard look at your business mindset 

Plant Modernization Western Precast ConcreteComplacency is not a good business investment, as we have seen from our past. History is packed with the do’s and don’ts of business decisions and the consequences of management malaise. Here are a couple of examples:

Sloshing knee-deep in profits in the ’70s, America’s auto executives were well aware that Japan’s small-car production was in overdrive, but they believed Americans would always be big-car aficionados. But the Big Three never anticipated politics, the OPEC oil embargo and the resulting oil crisis that started a continual escalation of gas prices, ushering in the thundering market invasion that would all but pull the rug out from under them.

Likewise, Kodak, another “company stuck in time,” (i) didn’t consider the tremendous market potential for digital cameras, even though Kodak made the first one (ii). Narrowly focused on its robust film market, it didn’t see the digital stampede over the horizon until it was too late. Kodak was brutally overrun in the ’90s by its ingenious Japanese competitors. Stunned, Kodak could only watch as Canon, Sony and Fuji left them in the dust.

Will North American precast concrete manufacturers cling to a complacent market approach? Or will they continue to innovate in an ongoing quest to manufacture the highest-quality products at the lowest price by seeking out and investing in the world’s best technologies and production efficiencies?

2. Develop a worldview

No company is regional anymore. In today’s world, major precast concrete companies and large manufacturers know that they are part of the global marketplace. But some small- to medium-sized precasters hold on to a mindset that their companies are “regional” operations.

“We’re no longer a regional industry. A producer can realize huge benefits in new product offerings, process efficiency and product quality simply by researching best practices in other precast markets outside North America,” said E. Max Hoene, president of Advanced Concrete Technologies Inc. and a major plant equipment supplier with European roots. “The high costs of shipping still dictates that most precast products still be manufactured locally, and that provides opportunity for producers. With cost-effective upgrades, any precaster can achieve dramatic improvements in quality, lower labor and material production costs, and greater product strength. Precasters who choose value-added products are positioning themselves for growth.”

Many North American precasters today are adopting and benefitting from the phenomenal production efficiencies that have been status quo in European plants for the last 20 years. “Europe has embraced high-quality precast, mass produced, 24/7, with very low labor costs,” said Robert Ober, president of Plant Architects & Plant Outfitters.

Larry Ebert of Elk River Machine Co. agrees: “The truth is, we’ve got products and relationships everywhere in the world. No one is regional anymore.”

3. Find a growing market segment

Plant Modernization Leesburg ConcreteHoene advises to look at other parts of the world. “Learn about new products and processes that have been perfected and could translate to a new product offering in a local market. You will discover your market edge by delivering the highest quality precast concrete at the lowest production cost,” he said.

“Narrow in on a growing concrete product or market, one that is expanding today and will grow in the future,” said Ober.

For example, big block is “the fastest growing segment of the retaining wall market,” said Ebert. “Ten or 12 years ago, small block was the majority of the retaining wall market, but now proprietary big-block systems are utilized in greater volumes in commercial and infrastructure projects.”

Wayne Faulkner, products plant specialist for Command Alkon, put it this way: “The only way to stay in this business in the long run is for producers to explore new markets and adapt their operations so that they are versatile enough to offer a range of precast products.”

4. Assess your plant and staff

If you are contemplating expansion, Ober recommends that producers ask, “What will it take?” If a new product or production system looks promising to you, ask:

    • How many sq ft do I have under a roof?
    • What will my existing (covered) square footage accommodate?
    • Do I need new formwork?
    • How many plant personnel/staff are needed for a new product or process?
    • Do I have sufficient storage/yard space?
    • Will I need to be ISO or FEMA approved? AIA certified?
    • Is my resident staff qualified, or will they need training or certification?
    • What is the capital cost for required plant upgrades, tools and equipment?
    • Will my staff have to travel to learn a new system?

5. Enhance your product line by staying close to your customers

The most important thing that Hoene observes about successful producers is that they have a close relationship with their customers and work to anticipate market demands. “There are precasters who were booming during the recession and remain successful today,” he said. “Why? Because they’ve stayed close to their customers. They’ve asked customers what they need and what product improvements would help. Ask your customers, ‘What can I do to help serve you better?’”

Staying abreast of precast market needs will guide your plant-update decisions.

6. Outcompete CIP and other traditional solutions

Plant Modernization Dalmaray Concrete ProductsFind out about any upcoming cast-in-place projects and see if you can offer a better, faster precast solution. “If traditional concrete is specified, determine what can be delivered precast,” said Hoene. “Convince the contractor or developer that you can deliver ready-to-install precast concrete for a faster project completion than CIP. Save the contractor time, and he makes more money on the job.”

Use precast concrete’s advantages of higher quality, energy efficiency and the cost savings of a rapid installation to convince contractors to convert from CIP to precast. “The cost savings will justify the contractor’s switch to precast, and by winning more work, the precaster can justify an investment in new equipment or a plant upgrade,” said Hoene.

7. Seek out balanced, objective product information

Plant Modernization Shea Concrete Products

If you are looking at a plant update or expansion, be careful to seek out technical advice from a wide range of sources, both independent design consultants and product vendors. “You want to have the advantage of seeing all the equipment/process options on the table, on a spreadsheet,” said Ober. “You want to weigh the pros and cons of all the brands of equipment/machinery available and decide what’s right for you.”

Making an informed decision to branch out means reaching out to all the sources of information available. It means knowing the current demands of the marketplace. “Most of the plant owners and operations managers we deal with have been to multiple trade shows, spoken to other producers in their area or elsewhere, solicited quotes from vendors, read magazines, searched the web, discussed plans with customers, and sought out trade association guidance,” said Hoene.

8. Invest in the future!

Historically, North America has been the world’s industrial powerhouse and technological leader, and is blessed with an abundance of natural resources, innovative thinkers, scientists and engineers – a land built by fearless adventurers and entrepreneurs.

Technology has shrunk the world and made the North American precast concrete industry part of a global marketplace. But that doesn’t mean static management and business complacency are justified by a lingering, lackluster economy. Industry experts agree that many small- to medium-sized precast concrete producers cannot keep doing things the way they have in the past if they expect to succeed in the future. Waiting until the economy improves won’t work, because only business leaders who aren’t afraid to invest in the future can generate economic growth and prosperity.

9. Take a new approach and act on it

“Precasters need to identify and expand into new products,” explained Ebert. “They need to take a fresh look at new products with a much different approach than anything they’ve done in the past. The old way of doing business won’t work, because our world has changed. Producers need to recognize emerging market forces that make their companies and their products vulnerable. Then they need to have a plan to branch out – or to minimize damage if their worst fears become reality.”

Sue McCraven, NPCA technical consultant and Precast Inc. technical editor, is a civil and environmental engineer.

Notes

(i) Quote from Robert Burley, professor at Toronto’s Ryerson University, who has photographed shuttered Kodak facilities in the United States, Canada and France since 2005.
(ii) In 1991, Kodak came out with the first digital camera, the Nikon F3.

Photos courtesy of E. Max Hoene.


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