The Batch Report

Meeting the Challenges Ahead

By E. Max Hoene - ACT Chairman

ECONOMIC FORECAST – ANYBODY’S GUESS

Earlier this year, we contributed to a fairly optimistic forecast for 2020, with the caveat that the continued lack of skilled workers could create a drag on the construction economy. Then came the COVID-19 global pandemic, a human health tragedy, and now everything has changed. In my 40 years in the business, I have never experienced such a stark difference in economic outlook and uncertainty.

Through our association with Wiggert & Co., our Germany-based parent company, we became aware early on about the international impact of the coronavirus and the havoc it is wreaking around the globe. Worldwide markets are unsettled, to say the least, and in the U.S. unprecedented levels of volatility have amplified the anxiety among Americans. To put it mildly, people are freaking out.

In fact, the coronavirus and its impact now makes forecasting the remainder of 2020 impossible. Instead, let’s look at what we know now, what we might expect in the near term, and how we can best prepare to meet the challenges ahead.

While the expectation is that the U.S. economy has entered into recession, non-residential construction typically lags the overall economy by 12 to 18 months, said Anirban Basu, chief economist for the Associated Builders and Contractors. This means that many contractors can expect “far more difficult circumstances” next year.

Despite that dire assessment, my hope is that the House and Senate will soon pass an infrastructure modernization spending bill. There will be much discussion over the summer and into the fall on how big to make it and how to pay for it. In fact, there are indications recently that construction material supplier stocks are recovering on anticipation that this will be an effective approach to putting recently laid off people back to work.

BECOMING MORE COMPETITIVE IN A STRUGGLING ECONOMY

Precasters normally plan for the long-term, and that’s good, because the short-term will be somewhat short on opportunity. That said, firms that are sufficiently tactical can prosper even during difficult economic times.

Looking ahead, we must assume that there will be no return to normal for a while. Most managers are understandably looking to conserve cash and are focused on making smart decisions. So, in addition to that, let’s think about other opportunities as we plan for the future.

Interestingly, before coronavirus, we were being asked by company owners/managers how to reduce labor because of the shortage of skilled workers. Now, in the COVID-19 era, we are being asked for advice on how to reduce labor to create social distancing within a factory.

In times like these, a manager’s objective is to find ways to sharpen their sword, by identifying ways to make their precast business operate more efficiently (less waste, less labor, less cost). This strategy helps them be more competitive and grow their market share, even in a struggling economy. On the business development side, an opportunity where managers should be doubling down is in their sales effort, with the objective to gain market share. In construction, everything comes down to time and money. Ask your customers what you, as their precast supplier, can do to help them complete jobs faster. How can you help lower their costs so they can be more competitive?

I anticipate that public sector and larger civil works projects will be in the political focus for the next two years before private construction projects bounce back to their historically high 2019 levels. As an essential infrastructure building industry, the precast sector is well positioned to play a major role in the comeback.

IMPROVING BUSINESS OPERATION EFFICIENCY

As a company owner or manager, do you find your team is challenged by new coronavirus-related operating issues that impact plant productivity, quality and costs? Let’s have a conversation and see how we can assist you in evaluating the best course of action.

Take it from someone who has gritted through some bad times before: there several things a precast manufacturer can do during this uncertain time. In upcoming blog posts we will continue this discussion with tips for making precast operations more efficient to best position precast companies for the future. Please stay tuned.

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