The economic recession got a serious grip on the precast concrete industry in 2009, with business decreasing an estimated 20 percent as construction projects stalled, funding disappeared and credit grew increasingly tight. While signs of a recovery are on the horizon, it is expected to be a long, slow climb.
To see how the industry is coping with the downturn, Precast Inc. technical consultant Sue McCraven contacted a cross section of precast concrete manufacturers, who shared four primary strategies for fighting back during tough economic times.
1. Look for new sources of revenue and diversify your product line.
Kirby O’Malley – President, Garden State Precast Inc., Farmingdale, N.J.
Here at Garden State Precast, we have always looked at every opportunity to further develop our existing product line. One example, in particular, shows how we have been able to increase our market share by working proactively with our existing clients.
Over the past few years, we have gone to all of our existing utility contractor customers who use our electrical junction boxes and asked them what other concrete they buy and pour for their installations. Most utility contractors who use precast boxes also install manholes, catch basins and other underground concrete structures, most of which are cast-inplace. In fact, some 90 percent of all concrete placed in the country is cast-in-place. So what we have done is invite these customers to see our NPCA-certified operations at Garden State Precast and work with them to see if we can be competitive in supplying them with manufactured precast products to replace their cast-in-place components. And it has worked.
At the same time, we have been working very diligently with the New Jersey Public Service Gas & Electric Commission to win approval for our engineered designs for underground precast products and utility-related products. As a result of these efforts, we are now the preferred supplier for the state’s electrical power installations. In this ongoing strategy to win
more market share and expand our revenue base, it is very important to get to know the right people, and sit down with them to discover ways that precast concrete can make their operations more efficient and cost-effective.
Eric Barger – President, C.R. Barger & Sons Inc., Lenoir City, Tenn.
As a smaller precast concrete manufacturer, I know as well as anyone that bad economies have bad outcomes if not responded to promptly. Diversifying your product lines and revenue streams by entering new market segments will keep you relevant and in business. The answer could be expanding from a niche manufacturer into a more general market or vice versa.
For my company, we transitioned from a septic tank-only manufacturer to a manhole, box culvert, etc., structure company. This has proven to be a great move in helping us discover new opportunities for recurring business and revenue. NPCA plant certification for my company has always been voluntary. By leveraging our long-term investment in the NPCA Plant Certification Program, we were able to easily step into Department of Transportation work that we had never previously pursued.
Embrace plant certification and advance the philosophy of entering new markets that your company was not involved in previously. If your company chooses not to, you have a high probability of being irrelevant this time next year. Follow us on Twitter @BargerAndSons.
2. Get closer to your customers.
Jamie Walters – Marketing Director, Olson Precast Co., Las Vegas
At Olson Precast Co., we engage our entire organization in the process of getting closer to our customers. Whether it’s building solid, trusting relationships through virtual media, face-to-face meetings or involvement with social and charitable organizations, we constantly search for ways to communicate and better understand the contractors and customers we serve. Our focus at OPC is to become more involved in partnering with our customers and sharing business philosophies to better collaborate on projects.
We have made significant efforts to increase our online visibility and industry awareness. This past year, we launched a new website (www.olsonprecastcompany.com) that allows the user to find information specific to their needs. In addition, we have introduced an e-mail marketing campaign that sends out newsletters to our customers with current happenings in our company as well as across the industry. Customer feedback is becoming increasingly instrumental in developing our relationships and has allowed us to tailor our products and services to meet the specific wants and needs of our customers. We periodically issue surveys to our customers to further gauge our performance. Our staff at OPC makes it a priority to get customers out to lunch daily and to attend a variety of social events. We are implementing a weekly customer appreciation mixer to strengthen our relationships and to keep up to speed with current and future projects.
Whether it is at work, lunch or social gatherings, getting better acquainted with our customers is an effort to get to know them, not just their business. The more we can get to know our customers, the more we can develop long-lasting personal and business relationships. We truly believe that relationships are everything.
Jennifer Burkhart – Arrow Concrete Products Inc., Granby, Conn.
In today’s economic climate, our customers have even higher expectations of us than usual. We must provide top-quality products and exemplary customer service, all at prices lower than any of our competitors – easier said than done, right? Customers today are not so easily WOWed by coffee and donuts or free T-shirts. In order to get closer to your customers, you must truly become their business partner.
The most significant way that we strengthen customer relationships is through trust and honesty. By providing accurate quotes for products that meet project specifications, our customers trust that they can rely on the information we provide. Educating customers as to the true installed cost of different product options, as well as adding features and services, creates opportunities to save your customer money in the field. Providing accurate lead times and on-time delivery is essential. By eliminating needless phone calls and aggravation, customers can focus on their own operations and completing projects as efficiently as possible. At a time where bidding is so competitive, delays can have a significant impact on profitability. Although these strategies are not ground-breaking and have become a basic expectation in today’s market, customers appreciate you looking out for their bottom line now more than ever.
Of course, we still rely on standard customer service practices also. Never underestimate the impact of knowledgeable and friendly staff. We always have a person answering all phone calls instead of relying on an automated answering system. Your customers call you for a reason – they need answers and voice mail does not provide answers. We have also made an increased effort to participate in trade organizations to which our customers belong. By educating ourselves as to challenges our customers face every day, we can further strengthen our business partnerships. Finally, we use referrals extensively – if a customer calls and needs a product that we do not manufacture, we make every effort to provide a referral to a reputable source for that product.
Retaining customers in a price-sensitive market is one of the greatest challenges that we face in business today. While we must stay lean and efficient to remain competitive, honoring core customer service values should not be discounted.
3. Invest in your people – now is a perfect time for training.
Gregory P. Ouimette – President, Frederick Precast Concrete Inc., Greencastle, Pa.
It’s their money! Training is the easiest thing to do away with when times get tough. But what message are we as employers sending by not continually providing quality training to our people? Whether it is administrative, sales, production or engineering, when times get tough economically, we all have to think tough.
We must train our people, indeed ourselves, to react to changing economic conditions – good or bad. When times are good, it’s easy to look the other way. When times are bad, like they are now, managers must train employees to think in dollar signs and the bottom line. Do your employees know what “the bottom line” means? If the answer is no, you have a lot more than a shrinking market to worry about.
Ask your employees to write down what they have done to save the company money. I do. Every Friday afternoon I e-mail the cost-saving measures out to all employees. Why? Everyone’s thought patterns are different, and one good idea in the hands of one person becomes an excellent new and improved idea in the hands of another.
Simple stuff? Maybe. But the process of training people to think “cost savings” is a complex one. Train someone to think of it as their money because, let’s face it, it is.
Vernon Wehrung – President, Modern Precast Concrete, Easton, Pa.
It’s budget time, and all of us have so many fixed expenses that can’t be controlled. So we look at discretionary spending, and there it is: training. Although we may acknowledge that an investment of just 2 percent of an employee’s time produces a huge return, it’s tempting. Kind of like marketing, isn’t it? Cutting either one of these too severely is not a wise decision.
One of my favorite sayings in our company is that we can look at five-cent dollars or dollar-dollars. In other words, increasing sales by $100,000 with a net margin of 5 percent will earn an additional $5,000 profit. But decreasing expenses by $10,000 produces the same in net profit, and without all that extra work.
Investing in training can do both: increase sales and improve efficiency (decrease expenses). NPCA offers a great menu of courses from which to choose. The Precast University provides three levels of training for production and quality. There are educational tracks for Management/Leadership, Production/Safety and Sustainability. Finance and Technical courses are also available for both the novice or more advanced.
My personal development includes reading an average of 12 business books a year, attending two or more seminars and listening to various training CDs. Often I will summarize a book and then e-mail that to our management group and request that they in turn share it with their team. Once a year I will purchase extra copies of what I consider to be an exceptional book and spread it around for others to read. The point to all of this is continuing education, staying fresh and helping us to more easily accept change. If there was ever a time that we need training and change, it’s now.
Improving sales feels good, but cutting expenses improves the bottom line a lot quicker. Most training is focused on improving productivity, and that’s a win-win-win for our customers, employees and the company.
Recently, we had an outside motor company come in to advise us of a procedure our mechanics were not aware of. By releasing the energy from various motors before replacing a specific part, we would have saved over $10,000 over the past two years in multiple replacement of that part, plus significant down time.
Modern’s current training includes webinars, outside consultants (sales, processes, strategic planning), seminars, vendor training and, most recently, we had direct dial-up training for our batch plant operators and mechanics.
NPCA also offers a great menu of varied courses from which to choose, in addition to the three levels of training by The Precast University. Although money is extremely tight for us this year, four of us will attend training at The Precast Show in Phoenix this February. I am confident that the ROI for this will be well worth it. In a recession, it’s more important than ever to cut expenses, and appropriate training is the most sensible way to do that.
4. Know and control your costs, and keep your expenses to a minimum.
Michael L. Tidwell – President, Bartow Precast Inc., Cartersville, Ga.
Ask yourself: Who is watching the cost for my company? If it is the boss or operations manager, it is the wrong person. The person watching the cost shouldn’t wear too many hats. Even though we are a small family-owned company, we have a full-time controller or staff accountant. I realize it is hard to consider adding a position to the company when most are cutting
employees, but we couldn’t afford to be without someone in this position. Management, especially owners, never like to be questioned, but it is great having someone say “you know if we made this change, we could save ‘x’ amount.”
We recently changed the number of cellular phones we have, as well as the provider, and saved over $5,000 per year. That’s big! I hate shopping insurance, and besides our current agent is a friend. Now someone else does it and I’m not in an awkward position, and the company gets the best bang for our buck. We limit the number of employees who are allowed to purchase, and those who do must use a purchase order, which forces the
cost to be reviewed before the purchase is made.
The controller often questions why we are purchasing tools from the supply house down the road instead of a wholesale supplier, or even a pawn shop. Yes, a pawn shop is a great place to pick up wrenches and other tools, which require no warranty.
We work hard to maintain our vendor relationships, and since I’ve had the most history with many of our suppliers, I will often take charge if the controller suggests we shop out a certain product manufactured by a favorite vendor. I’ll give them a call to explain the situation and ask for better pricing. If they can’t adjust, we may consider dropping a whistle or bell to make pricing more competitive. In the end, we may or may not stick with them, but they know we made an effort and the relationship usually remains intact.
Controlling costs also means preventing theft. Let’s face it: People are in tight financial situations at the moment. It’s very easy for an honest employee to “borrow” from the “big company,” even if you are small and family-owned. I sign every check that our company writes and review the bank statement each month. When you hire someone to help manage payables and purchases, you should always have the first glance at bank statements; ours come to my home address, so I’m the first to open them. This keeps me in the loop about the money we are spending and who we are spending it with. It also keeps me in tune to what employees are taking home salary-wise.
Employee theft is something no one wants to think about. By signing all the checks and reviewing bank statements, you reduce the chance of check forgery or inappropriate use of company money.
Consider hiring someone part time, or someone semi-retired, and I definitely recommend someone “old school” who may be more conservative and intolerant to the “it’s only a dollar” mentality. I can’t tell you the number of mistakes we find in other people’s billing. If you presently have loose control over your costs, you can save or earn back a good portion of this person’s salary in a short amount of time.
Daniel Perron, P. Eng. – Plant Engineer, A. E. Concrete Con-Force, Division of Armtec Ltd. Partnership, Surrey, British Columbia
A dollar saved, $10 earned! Looking to make a quick buck? It might already be in your pocket. While owners and business leaders focused on big issues and challenges their businesses are facing, a significant portion of their profits could escape. Here is an example.
Bill works on the production floor and has to deal with production issues every day. One day, he came to the office asking to buy a miter saw and some help to install it. We took the time to listen to his argument: “If I had a saw close to my work area, I could save 30 minutes a day,” he said.
We purchased a saw for about $200, made a wooden bench and installed the saw where it was most convenient for him. The return on investment was immediate. Bill no longer had to walk to the wood shop, wait his turn and return to his area several times a day.
The work bench was designed for the task, located at the right place with both the incoming material and molds close by. This reduced the production cycle time, waste and mistakes while increasing quality. More importantly, Bill knew someone was interested in his work and would support him to help him work more efficiently.
Bill saved half an hour a day, and if you calculate 16 employees each saving a half hour each day, you would need only 15 employees to do the same work. However, this is not what we did. Instead, we reinvested the free time in Bill’s creative thinking. With the extra time, Bill was then able to solve another problem.
He came back a few weeks later asking for a wheel cart, vise, impact gun and a few extra tools to get the job done. This way he could move his workbench where it was needed. Cost of the project: $500. Bill saved another half hour a day, which enabled him to better organize his work area and think of other
A couple of weeks later, Bill came back to ask for additional storage to organize and sort the raw material. This way, he said, he could save another half hour a day, see the material he has on hand, reorder before the last item is used and minimize the distance he has to walk. We found and installed a rack to suit his request.
As production time went down, management saw the opportunities of doing even better. Edgar, the operation manager, came in with a new mold design. Other ideas were also implemented and collaboration among company personnel took place, everyone improving each other idea and taking
ownership of the success.
The production process was optimized to the point where we could get into the existing market with our product as a leader in terms of lead time, quality and price. Originally, Bill was struggling to produce five units a day. Michael is now making 10 units. Bill was promoted to lead the department. The small amount spent on Bill’s ideas pays every day with compound
interest. And the real assets are Bill, Michael, Edgar and everyone else who is participating in the improvement process. Human capital is key to our success.
How many additional sales would you need to generate the same profit? Every dollar saved translates into 10 dollars of sales. Lowering our cost of operation granted us an access to a difficult market. How much would you spend on marketing and solicitation to realize the same profit? Our sales are slowly but surely picking up. Marketing is made by contractors preferring our products over our competition’s and telling other contractors how good we are. Our sales are made by picking up orders over the phone.
Improvement is a journey, not a destination. Armtec’s mission is to consistently deliver innovative, high-quality solutions, exceptional customer service and superior returns for unit holders, by a team of dedicated and talented people.
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