Have a Look at the Manufacturer’s Crystal Ball
Ulf Wolf / September 2018
Much like the contractor looks to the supplier for his material, so the supplier looks to the manufacturer for the basic building blocks that, along with our people, fuel this amazing engine we call construction.
It is fair to say that the manufacturer does indeed constitute the engine room of our industry. And since he or she is both sensitive to and able to predict and plan for future trends, the manufacturer appears to possess a serviceable crystal ball.
It stands to reason then, that we’ve invited AWCI’s Lifetime Member manufacturers to share what they see (see What’s Inside for more details).
We asked: In the current construction upswing, has demand for material seen you ramp up production to meet it? And if so, how long do you see this trend continuing?
Says Bevan Wulfenstein, marketing director at Grabber, “As a growing organization, we never stop pursuing additional capacity. Looking ahead, we anticipate market growth over the next three to five years, although slower than anticipated over the next two years.”
Steve Farkas, corporate marketing manager at California Expanded Metal Products Co. (CEMCO), observes, “Yes, we have seen increased demand, but mainly due to surge-buying sparked by the president’s tariff announcement. We see a healthy demand for steel building products for the next 12- to 24 months.”
Shares Terry Westerman, vice president of marketing at ClarkDietrich: “With 11 steel processing facilities nationwide, we are able to meet short-term surges in demand.”
Steve Hawkins, vice president of sales at CertainTeed Gypsum tells us: “Yes, we enjoy increased demand for our products due to the health of the industry and favorable market drivers, such as housing starts. We expect this trend to continue into 2019.”
Greg Salah, USG Corporation's senior vice president and president of its gypsum division, says, “We align production with anticipated customer demand and use automation, data and analytics to allow for expanded capacity and improved efficiency. Overall, I am optimistic about the construction industry and expect building activity to remain solid into 2019.”
The obvious follow-up question is this: How do you forecast construction material costs over the next decade?
“As a rule,” says Wulfenstein, “we track our material costs by raw material, labor, freight and overhead. That said, we expect freight to continue to increase faster than raw material. Also, labor will continue to rise, and we forecast an increase (fully loaded cost) in the double digits over the next decade.
Farkas says, “Steel sheet remains the largest-cost component in manufacturing cold-formed steel framing products. Despite several advancements in manufacturing technology, due to factors such as sustainability, transportation and energy costs, we predict that our costs will rise over the next decade and beyond.”
Observes Jay Watt, director of marketing at National Gypsum: “As more coal-burning utilities continue to convert to natural gas, we expect less synthetic gypsum availability nationwide, which in turn may drive up the cost of all gypsum whether synthetic or natural rock.
“Another volatile cost in our industry is paper. Last year, it spiked, though today’s costs have normalized. Who’s to know where the cost of this primary component to our process will head in the future?”
“In the short term,” says Westerman, “uncertainty has put pressure on supply and made it difficult to forecast costs at all levels of the distribution chain.
“Long-term pricing has historically been relatively easy, but we have not had to navigate trade restrictions to the extent we see today. Needless to say, we look forward to some level of calm once the international trade policies stabilize.
“Despite these peaks and valleys, however, steel remains a relatively cost-effective raw material.”
Predicts Hawkins: “While CertainTeed is committed to manage cost efficiencies and eliminate waste, businesses in general experience cost inflation in transportation, raw materials, energy and labor that has driven costs up recently and is likely to continue to do so for the short term.”
“Today,” observes Salah, “the construction industry is experiencing higher levels of inflation compared to the last several years—a sign of strength in the broader U.S. economy.
“I believe it is likely that the industry will continue to experience raw materials inflation, which means it is more important than ever for manufacturers to invest in new processes and products that reduce cost and improve efficiencies.
“That is why a substantial portion of our innovation team’s budget is focused on continuous improvement—product enhancements, new raw materials, new formulations—ways to do what we do even better.”
We then asked: What industry trends, such as sustainability (the preservation of the environment, efficient use of resources, etc.), OSHA regulations and prefabrication, have the biggest impact on your company’s future outlook?
Offers Wulfenstein, “Sustainability. We see innovations and technology that focus on better insulation-techniques for buildings, and we see this trend continuing.
“OSHA regulations regarding dust control and exposure in the work environment have also seen innovations that make for a safer work place. Drywall dust is a big issue, both in hanging and finishing drywall.
Shares Farkas: “These factors will continue to influence how our products are brought to market, especially sustainability and transparency, as they gain more and more traction.
“Also, the current resurgence of panelizing (jobs consisting of prefabricated sections of walls, floors or roofs assembled at the building site) and off-site construction is an interesting aspect of the market. We will watch and see how this might affect our businesses during the uptick in demand for all building products.
“If history repeats itself, this trend will subside in a few years. This time, however, the issue of labor is more of an influence than in years past. With the current shortage of skilled labor as well as the generational gap between current and prospective tradesmen/women, the trend may very well last much longer and force manufacturers to re-evaluate business models moving forward.”
“For us,” says Watt, “it’s sustainability, which has been gaining traction for some time now. It is what building owners and developers want. That said, the gypsum board manufacturing process can recycle only so much, but we certainly do what we can.”
Predicts Westerman, “Sustainable construction will continue to grow in importance until it becomes common methodology throughout the value chain. Panelization, modular construction and other factory-oriented approaches will likely bring about major changes in the industry, while shortages in the freight sector will also drive significant changes. Driverless freight methodologies seem to offer the most obvious solution to the growing shortage of over-the-road truck drivers.”
Observes Hawkins: “Homebuyer demand for high performance, low energy and affordable homes is on the rise, and we address this on several fronts to help our industry customers adapt and adjust to the challenges of material cost, labor shortage and time constraints.
“For instance, we announced our partnership with Unity Homes this April, with the aim of exploring new assemblies and components for prefabricated home design and evolving the open-built CAD platform. Also, sustainability and transparency continue to drive product purchase decisions across the industry.”
Says Salah, “I believe sustainability, jobsite productivity and modular construction will all have significant impact on the future of both USG and the construction industry as a whole over the next decade.
“Much of our innovation is grounded in three key areas: sustainability, speed of construction and holistic-systems solutions that enable contractors to install products faster and easier. The investments we are making in lightweight technology have resulted in a portfolio of other innovative products that improve jobsite productivity and efficiency.”
Then, drilling down a bit, we wanted to know: How does off-site construction figure in your future plans?
Wulfenstein says that “just-in-time delivery and off-site prefabrication are the wave of the future.”
Shares Farkas, “We have ongoing dialogue with panelizers and contractors to look for common ground where we see a fit within their business models. More importantly, as the landscape of off-site construction continues to change and grow, we will analyze our core competencies and do what’s necessary to contribute to this space within our industry.”
Predicts Watt, “We believe off-site construction operations will continue to grow, especially in parts of the country where extreme weather prevents efficient on-site construction for a large part of the year.
“We also see modularization continuing to grow as new enabling technology develops.”
“Of course,” says Westerman, “our product and system development must be compatible with all means and methods of construction. As a result, we continue to work closely with all stakeholders to conduct needs-assessments that drive our product development. Our engineering group, for example, is increasingly incorporating BIM as a digital tool in our offering.”
Hawkins observes that “prefabrication offers a more-controlled construction environment that protects against climate-driven elements at critical stages of construction and improves precision of material application in an environment where skilled labor is in short supply. Therefore, by partnering with organizations like Unity Homes, CertainTeed will continue to offer innovation that supports our customers’ growth and prosperity and adapts to the changing needs of the industry.”
Salah says, “We hear from builders that they increasingly seek alternative construction-solutions like prefabrication and modularization, since these building methods improve productivity and safety on the jobsite. In response, our Performance Materials team has developed high-strength, factory-produced panels that provide a lighter alternative to poured concrete.”
Then we asked: What are your concerns regarding the Trump administration’s tariffs on steel and aluminum products, and how will your company react to tariffs imposed by other countries (Canada, Mexico, China, India) in retaliation?
“As our core products are steel,” says Wulfenstein, “or include a significant amount of steel, this is a challenge. While supply is expected to be stable, the uncertainty of the additional tariff costs is causing market disruption and significant cost/price changes. We will continue to investigate additional sourcing options that will allow our company to be less impacted than our competitors.”
Adds Farkas: “Moving forward, we—like all reputable manufacturers—will play by the rules at hand. Since we have little influence on the tariffs, we will continue to focus on providing the industry our products with the highest level of quality, service and support possible.”
Says Watt: “Since we don’t manufacture metal studs, the tariffs should not affect us too much, although in almost all commercial construction, one needs metal-stud framing to be able to fasten and secure all gypsum board products.”
Observes Westerman: “We navigate the threats we cannot control and actively manage the opportunities that are within our control. We feel the volatility in international trade should be short-lived and that there will be a better, stronger market on the other side of this uncertainty.”
Salah’s view is that “while the effects of the administration’s tariff announcements are still unknown, USG will continue to monitor the situation closely.”
What products, we asked, are you developing to alleviate current and future labor shortage? In other words, what’s on your drawing board or in the pipeline that can make existing crews more productive?
Shares Wulfenstein: “Our panel fabrication machines dramatically increase efficiency and production, especially when complex and duplicated profiles are required. PanelMax fabricated products also require much less finishing time and material.
“Also, Grabber is developing and introducing the next generation of fasteners that reduce drive time by up to 50 percent. Reducing drive time even by a fraction of a second for each screw increases productivity and reduces overall cost.
“We also continue to invest in refining and developing collated fastening technology.”
Says Farkas: “CEMCO has been an innovator since 1974 and will continue to bring to market products and systems that increase safety and productivity and hopefully profitability both for us and our customer base.”
Shares Watt: “We have already developed GridMarx for almost all of our gypsum-board products. This board comes with its own guide marks, printed right on the paper surface, so that contractors can find the fastener line instantly for studs and make accurate cuts without having to draw any lines. This increases productivity (and profitability) every step of the way, and also helps less-skilled journeymen to be more efficient.”
Says Westerman: “Our current labor-saving products and systems can all be found on our iTools page at www.itools.clarkdietrich.com. That said, we were actively developing products during the recession, and these are now being released steadily.
“Also, our ClipExpress line—focusing on numerous fully tested deflection and fixed connectors—has expanded its product offering dramatically over the last 12 months. Ease of installation and the technical data to back this up all figure into reduced time and effort for contractors.”
Says Hawkins: “While we cannot share the specifics of what is in our innovation pipeline, we do remain focused on delivering products and services that are efficient and effective for our customers.”
Observes Salah: “Building materials have a big impact on the productivity of the construction industry. A drive toward lighter-weight, more-flexible materials—such as panelization—helps improve labor efficiency on the job. Also, the growing demand for green construction is driving our development of new building materials.”
Crystal ball time: What future innovations or directions do you predict or foresee that will lessen the need for construction labor?
Predicts Wulfenstein: “New innovations and refinements in existing tools will focus on off-site fabrication, which reduces install time and increases job-site efficiency.”
As for Farkas: “Our crystal ball tells us that the need for construction labor will likely increase over the next several decades. The unknowns here are how it will increase and how it will be defined. The very definition of labor will change. Labor as currently defined is specific to human input. With technology and advanced communication systems and processes, future labor will likely include terms such as “robotic,” “3D printing,” “virtual communications” and other systemic advancements and changes to the idea of what labor is and will be.”
Observes Watt: “Recently, we have seen lightweight drywall take center stage, which reduces shipping costs and ease of installation. Yet, people know that it continues to take two people to put up a 12-foot piece of drywall.
Says Westerman: “I see smarter and more efficient products and systems that offer intuitive advantages to enhance constructability. These new products and systems will be easier to install and require less training for the contractor.”
“Now, more than ever,” says Hawkins, “initiatives that address the skills gap have an added importance. As a manufacturer, it is our responsibility to continue to explore innovative product- and material-solutions for our customers.
“We are also looking beyond the products we manufacture to address the labor shortage and protect our future. For instance, CertainTeed has partnered with SkillsUSA to help #KeepCraftAlive by offering scholarships to train and encourage young adults to enter the trades, with a goal of 10 million new trade workers by 2020.”
Predicts Salah: “Modular and prefabricated building components and offsite construction are already having a significant impact on labor, a trend that I expect will increase. Contractors want materials that install faster, more safely and have a more sustainable lifecycle.”
We then asked: What advice would you give contractors as to efficiency and productivity?
Replied Wulfenstein: “Don’t be afraid to try new technologies and products. The future is changing very quickly, and those companies that research and include these new technologies into their businesses will have an advantage over those that don’t.”
Suggests Farkas, “Explore the many solutions CEMCO makes available to contractors. They can increase safety and productivity on job sites and so increase profitability by reducing costs in both labor and safety.”
“Take the time to find and hire good people,” suggests Watt. “Train them well, pay them well, and treat them well so that they will want to stay for the long haul while providing them a path to grow within the company.
“Also, we should all learn how to listen better. Some very bright ideas might come from very unlikely sources. In other words, be receptive to different ideas, and embrace those with different ways of thinking.”
Westerman says, “Work with trusted advisers—the manufacturers who consistently provide you with cutting-edge innovation. Share with them your specific needs, and count on them to share innovative concepts with you. ClarkDietrich has not only the facilities to support your product needs, but more importantly, we also have the technical personnel to help you navigate an increasingly more-complex construction market.”
Says Hawkins: “Be open minded and embrace new trends, and rely on your manufacturer for support. Our goal is to help you work smarter as we work together to protect the future of our industry. Keep the lines of communication open. We’re here to help. Also, give us feedback. CertainTeed welcomes the opportunity to listen to your needs, to better supply you with innovative solutions for now and in the future.”
Offers Salah: “I think that the trend toward lightweight building materials can help you address productivity challenges.
“For example, USG Sheetrock® Brand EcoSmart Panels are up to 25 percent lighter than standard drywall panels, which means that every board that users lift, carry and install is between 8 to 20 pounds lighter. This makes your installer’s job easier while decreasing the risk of physical harm in the labor-intensive process of hanging drywall.”
Any final thoughts on current and future manufacturing?
Says Watt: “Looking ahead to the near future, a major issue is logistics. We don’t have enough trucks and truck drivers to get product to dealers or job sites. This needs a solution—and sooner rather than later.
“Also, we hope that the current trend of more new trades schools keeps up.”
Muses Salah: “The world’s 7.7 billion population is expected to increase to 10 billion by 2050. That means billions more to accommodate around the world, and manufacturers like us need to figure out the best way for contractors to build faster and smarter, and, of course, in a more sustainable manner.”
California-based Ulf Wolf is the senior writer at Words & Images.