Dear Friends:
The commercial construction economy continues to defy the critics and is doing better than anyone projected; however, we continue to be very nervous about the future of commercial construction. We are running our business very conservatively as we’re not sure what the future holds.
I was pleased to see the Wall Street Journal recently proclaim in a front-page story that perhaps we are not in a recession after all. Given that GDP was up 0.6% (yes, that is a meager increase but an increase nonetheless) in the first quarter, we clearly do not meet the technical definition of a recession, which is two consecutive quarters of negative GDP growth. If the press would just stop trying to insist we are in a recession when we do not meet the technical definition of one, I think we will be fine. But, if bankers and investors keep reading that we are in a recession, the banks will continue to tighten lending standards, and investors will not want to risk capital on new projects. I hope that we continue to have positive GDP growth and that the “doom and gloom” press will change their tune.
Our business continues to grow despite a lot of inflation-related challenges. Anything made from steel or oil byproducts (such as Styrofoam® and poly) continue to escalate rapidly in price. This is a big challenge for us but an even bigger challenge for you, our customers and suppliers, many of whom have fixed price contracts and are not able to pass on price increases.
For more information about the price increases we see coming, please see below.
Manufacturers of nearly all construction products either increased prices in May, or have announced increases effective in June. Products from lumber to screws have increased in price over the past several weeks due to the rising cost of raw materials and transportation, as well as strong foreign demand and the weak dollar.
Steel prices continue to rise to historic levels as foreign demand remains strong. Scrap steel prices increased another $25.00/ton over the past few weeks and are expected to continue to rise.
Nucor as well as other domestic rebar manufacturers announced an increase of $20.00/ton effective June 1st. Although this increase is relatively small compared to the $147.00/ton increase that took effect in May, the June increase will still cause the cost to the contractor to increase by another 5 to 6%. Also, most domestic rebar mills have put their domestic distributors on allocation. This means that a distributor can only purchase a percentage (less than 100%) of what they purchased for the same period the previous year. Due to strong foreign demand and the weak US currency, domestic rebar manufacturers are now exporting more of their production than in the past, as it is more profitable for them than to sell to their domestic distributors. The result of allocating rebar to domestic distributors may cause shortages in some US markets. As prices are expected to continue to increase through the summer, and supply may be limited, we advise you to buy out any projects which require rebar as soon as possible.
Domestic wire rod manufacturers increased prices yet again in May by approximately 20% and have announced they will increase prices again in June. As with rebar, many are exporting a larger percentage of their production than in the past, so supply is becoming a concern.
Due to the increase in wire rod and transportation costs, masonry reinforcing manufacturers have announced yet another increase of 20% effective the first of June. With wire rod costs expected to increase again in June, expect masonry reinforcing manufacturers to increase prices again in later June or early July. As reported in last month’s newsletter, masonry reinforcing manufacturers are no longer offering job protection for 30 days. Due to these factors, if you have upcoming projects that require masonry reinforcing and ties, you should consider buying out these projects as soon as possible.
Concrete reinforcing mesh manufacturers increased prices twice in May by a combined total of 15%. As wire rod manufacturers have already indicated they will increase prices again in June, most concrete reinforcing manufacturers expect to have to raise prices again by mid to late June by as much as 10%. Please be sure you factor these increases in when you are preparing your bids.
Simpson Strong-Tie, the leader in timber connectors announced a price increase of 13.75% on all connector products effective June 1st. Other manufacturers of timber connectors have also announced like price increases. Simpson Strong-Tie also announced they will increase prices on their mechanical and adhesive anchors by 6.8% on June 1st.
Manufacturers of sheet membrane waterproofing and peel-and stick thru wall flashings increased prices by 10% in May. As the major component in these products is a petroleum derivative, expect further increases in the coming months, as the cost for oil continues to move upward.
Nearly all manufacturers of plastic and PVC construction products increased prices by 8 to 20% in May. As these are made from petroleum and natural gas derivatives, prices will almost assuredly increase in the near future as the price of oil and natural gas continues to increase.
Polyethylene prices rose by approximately 5% in May due to resin price increases. As resin manufacturers have already announced a price increase of $.08/lb effective June 1st, polyethylene manufacturers will be forced to increase prices by mid June by approximately 10%. Also, manufacturers of plastic under slab vapor barriers such as Raven Vapor Block and Stego Wrap have announced they will increase prices by approximately 8% in June, due to their increased cost for resin.
Copper thru wall flashing manufacturers did increase prices in May by approximately 15% as projected in last month’s newsletter. As the price for raw copper continues to increase, most manufacturers expect they will be forced to increase prices again in June by another 8 to 12%.
Many construction chemical manufacturers have already announced they will increase prices in June or July. Most items will increase by 5 to 8% with the exception of solvent based chemicals, which will increase between 12 to 20%, due to the record high price of oil.
The latest PPI tables are also attached.
Click here to view the report.
This month, we’re spotlighting the following three suppliers:
- Simpson Strong-Tie is the undisputed leader in construction anchors and fasteners. They not only have an extremely broad product line but are known for their quality and on-time delivery. For more information about their products, please see below or visit your nearest New South branch.
- Polyguard is one of our favorite suppliers of waterproofing products. They are also innovative and continue to release new products that save you both time and money. For more information on their newest products, please see below.
- PrimeSource is a nationwide distributor of building products and one we have a close relationship with because of their ability to provide us with a wide variety of products on a moment’s notice. This month, we are featuring reinforcing wire mesh we source from them. They are the exclusive sales outlet for two of the newest wire mesh plants in the US so they have a large supply of well priced wire mesh for us to be able to supply all your needs.
This month’s management article is entitled, "Improving Delegation." One of the biggest challenges of management is what to do yourself and what to delegate. Only by effectively delegating can managers be the most effective. I found the below article to be helpful, and I hope you will too.
In closing, let’s hope that the commercial construction economy continues to do as well over the balance of the year as it has so far. As always, thank you for your patronage and support. You sign our paychecks with every PO you give us, and we pledge to never lose sight of that.
Best Regards,
Jim
Jim Sobeck
President
(864) 325-6518
jim.sobeck@newsouthsupply.com
Improving Delegation
When "just do it" just won't do it
by Francie Dalton
Poor delegation can easily be categorized as either inadequate or disabling. Within these two categories are no less that 12 classic and discrete errors in delegation. This article describes each, and provides easy-to-implement tips for how to avoid or correct them.
1. Failing to identify higher purpose served
Caught up in the rush of doing business, it's easy to delegate on the run, without articulating how the assignment enables the organization to achieve its strategic initiatives.
There are three important benefits to taking the extra minute or two required to articulate the linkage between the assignments and their higher purpose.
1) It increases the perceived importance of the assignment.
2) It increases emotional commitment to stellar execution.
3) It equips management with tools to motivate the performance of and increase staff morale.
The technique to easily isolate and identify the higher purpose of an assignment is to ask yourself why the assignment is needed, what other outcome its accomplishment enables, and why that other outcome is needed.
2. Lack of clarity
Have you ever been surprised to discover at performance review time that one of your execs was oblivious to a requirement you thought was implicit? The key to ensuring clear expectations is the establishment of evidence-based performance measures.
Here's how. Start with an outcome you plan to assign. Rephrase it using a FIB (fill-in-the-blank) statement.
For example, if your original goal statement is: "Improve attendance at this year's annual convention," using the FIB technique would rephrase the statement into this question: "Attendance at this year's annual convention will be adequately improved when ________.”
The FIB technique forces you to clarify your expectations embedded in your goal statement by specifying any or all of the following: a certain number of attendees, a certain type of attendee, a certain revenue number, and so forth.
3. Emphasizing outcomes to the exclusion of method
How accomplishments are achieved often matters as much as what is accomplished. Yet this balance between outcome and method isn't reflected in executive goals and objectives.
Unless CEOs impose equal scrutiny on method and outcome when delegating, the impact of managerial behavior on corporate performance will stay under the radar, free to impede business results with impunity.
4. Failing to delegate developmentally
Aside from your fiduciary responsibility to develop your staff consistent with a sound succession plan, you have the additional responsibility of retaining "the best."
Doing so in a competitive marketplace requires that you continually challenge the intellect of your execs. Determine what new or expanded responsibilities will stimulate the growth of each of your direct reports. Assign reasonable stretch goals. If they express doubts about their ability, respond by expressing confidence in them, and then push them off the cliff anyway. Create the opportunity for them to surprise and delight themselves by surpassing your expectations.
5. Failing to anticipate radial impacts
Hard to discern what assignments will bleed into the assignments of others? Are the involved parties coming to you angry and confused? Delegating a project to one department is likely to have implications for other departments. Keep it in mind as you delegate.
6. Abdication
When two or more managers are feuding, you can't step aside in disgust and tell the children to work it out themselves. Resolving disputes is part of your role as CEO. Clarify the outcomes for which each is responsible, crystallize the lines of authority, and establish the ground rules for necessary collaboration. Link compliance to performance reviews/bonuses.
7. Deliberate Redundancy
If you're thinking that assigning the same task to multiple managers inspires healthy competition, you're sadly mistaken. This type of delegation actually inspires conflict. It takes the form of silo behavior: a lack of collaboration and information sharing, which generates additional redundancies and rework.
If your managers are like most, they're already starving for crumbs of recognition and don't want to share what little they get. Exacerbate this feeling of impoverishment at your peril. You'll erode both morale and loyalty.
8. Failing to impose accountability
Part and parcel of effective delegation is setting expectations regarding the consequences of both success and failure. Awareness of these consequences motivates the quality and speed of execution. If your exec doesn't deliver to spec, it's your responsibility to confront that failure.
A surprising number CEOs are so uncomfortable confronting poor performance they sidestep the imposition of negative consequences, feigning competing priorities to justify overlooking poor performance.
Well, guess what? If you're at the top, you don't get to use comfort as a determinant for action. Those who refuse to act lose their right to complain. If you're won't hold your managers accountable for poor performance, acknowledge your contribution to that poor performance and stop complaining about it.
9. Saving their bacon
Much like parents who do a child's homework thinking they're helping, swooping in to rescue an exec from his/her own sloppy performance stunts or prevents growth, generates resentment from peers and erodes the respect of subordinates. Get this: Unless you want to continue managing adolescent behavior, when you delegate responsibility, delegate the earned consequences.
10. Delegating to weakness
In the previous section, I suggested delegating in a way that stretches and develops, but that's not the same as delegating tasks outside the scope of one's competence. Classic examples of this include putting the stereotypical chief financial officer in charge of marketing; putting the stereotypical expert engineer at the podium presenting research findings to an audience of laypersons; moving your star outside sales professional into an inside management function; or staffing a highly regulated function with an entrepreneurial spirit.
11. Assigning responsibility in excess of authority
So pervasive is this error in delegation, and so negative is its impact on morale, it must be avoided at all costs.
12. The big one
Let's admit it. We're all trying to impress someone in our work context. As managers, the most obvious opportunity to do so is to achieve more with less; to consistently execute an overwhelming volume of work, on time and with apparent ease. You must generate priorities and stick to them. Make the hard choices.
