Dear Friends:
As I write this in late September not much has changed over the last few months. The federal stimulus plan is still not having much impact on the Carolinas. Commercial construction is still declining and many economists expect this to continue into late 2010 or even 2011. On a more positive note, residential housing starts came out last week and the most recent number is 598,000 annualized starts. This is a far cry from the 2.2 million start peak in 2006 but it's double the low point of 325,000 annualized starts as of just six months ago. We continue to run our business very frugally but we have added good salespeople as they become available as I was told many years ago that it's never the wrong time to hire the right person. Especially if they produce revenue!
Despite the economy some suppliers are still trying to get price increases while others have rescinded increases due to lack of demand by customers. For more detailed look at pricing for the products we sell please see below.
Manufacturers' costs for raw materials used in many construction items, especially scrap steel and metal alloys, continued to increase in August and September. The price for scrap steel, as well as most metal alloys, trended upward in early September and prices for these commodities are expected to continue to rise in October. A combination of increased foreign demand, mostly by China, and limited availability are fueling the increases for these commodities. Because of these increased costs, manufacturers of construction items made from these commodities have either increased prices or announced price increases.
Wire Bond, Hohmann & Barnard, and Dayton (Dur-O-Wal) have all announced they will increase prices for masonry reinforcing, anchors, and ties, by a whopping 20 to 25% in September. This industry wide price increase is due to manufacturers' increased costs for wire rod and because the cost of zinc, which is used to galvanize wire rod, has risen by over 20% since July. As the price of scrap steel has risen by $22.00/ton already in September and further increases are expected, manufacturers of masonry reinforcing, anchors, and ties may increase prices again in late October or November. Please be sure that you factor in the anticipated increase when you are preparing your bids.
Nucor announced on September 13th that prices for their October rebar rollings would remain at the same level as their September rollings. Other domestic rebar manufacturers are expected to follow Nucor's lead and hold the line on prices for October rollings. Although scrap steel prices continue to rise (up by over $60.00/ton since July), there is less domestic demand for rebar than availability, so Nucor decided that the market would not support an increase. If scrap prices continue to rise, many industry experts expect domestic rebar mills to increase prices for their November rollings. If you have upcoming projects that require rebar, we advise you to consider buying out these projects now.
The price for raw copper continued to rise in early September and analysts expect the upward trend to continue into October, as world wide demand has increased over the past several months. Because of their increased costs for raw copper, manufacturers of copper thru-wall flashings all increased prices by approximately 15% in September. Most manufacturers expect to increase prices by another 15% in October, due to the rising cost of raw copper. If you have projects that require copper thru-wall flashings, consider buying out these projects now in order to avoid the expected October price increase.
Under slab plastic vapor barrier manufacturers, Raven Industries, Stego, and other plastic vapor barrier manufacturers announced they would increase prices between 5 and 7% effective by the first of October. Resin costs have risen by nearly 25% since June and manufacturers can no longer absorb this increased cost. If you are bidding projects which require under slab plastic vapor barriers, please factor in this increase when you are preparing your bids.
Since July, manufacturers of concrete reinforcing wire mesh have announced they would raise prices every month, however; as with polyethylene construction films, weak demand has not allowed them to increase prices. With wire rod costs continuing to rise and another increase expected in October, wire mesh manufacturers have once again indicated they will raise prices on October 1st by 8 to 9%. Unlike the previous attempts by manufacturers to raise prices since July, most industry analysts expect the October increase to hold in all or in part. Please consider buying any requirements you may have for wire mesh as soon as possible, as the October price increase is expected to "stick".
Like me, you may have read or a lot about Twitter. Some of you may even be using Twitter to promote your business or to
communicate with your friends. Twitter is simply a website which allows you to send messages of up to 140 characters to
your Twitter "followers". You can also attach links to articles, pictures, or anything else you'd like to send out.
Much has been written about Twitter and, while I find that many tweets (as twitter messages are known) are frivolous
I also have found that many are extremely interesting and informative. Therefore, we now have a Twitter site.
If you would like to look at the information we have posted please click on
http://twitter.com/NewSouthSupply and have a look. You can review our site periodically without having a
Twitter account just by clicking on the above link. If you want to create your own personal or business Twitter site
just go to http://twitter.com and follow the directions. It's free.
This month we're profiling the following suppliers:
- Polyguard is one of our favorite suppliers of waterproofing products. They are very innovative and continue to release new products that save you both time and money. For more information on their newest products, please see below.
- Diedrich Technologies is a long-established producer of masonry and concrete cleaners and penetrating sealers. They are now owned by Sandell Manufacturing, another long-time vendor of ours, and Sandell has revitalized this company. The next time you need any masonry or concrete cleaners or penetrating sealers please ask us for a price.
- Sonoco Products is one of the world's largest packaging companies and is always the leader in innovation. Their new Sonotubes with Rain Guard technology allows you to let Sonotubes get wet on a job site without ruining them like old technology. They also have square column forms available that are much less expensive than forming a square column by conventional forming methods. For more information about their newest products, please see below.
This month's management article is entitled "Faster profits in a Slow Economy". I thought this article was timely and I got some good ideas from it. I hope you do too.
Keep on hanging in there. This too shall pass!
Best Regards,
Jim
Jim Sobeck
President
(864) 325-6518
jim.sobeck@newsouthsupply.com
Faster profits in a slow economy
by Don Schmincke
You cut, slashed, and hammered costs till your knuckles bled. Now what?
Is there another, perhaps faster, way to grow profits?
Research of successful companies finds profits grow faster in challenging times with approaches contrarian to typical slash-and-burn methods. Some of these approaches have ancient roots. It's not the first time organizations have encountered threats to their survival. And it won't be the last. But managing through this current episode may require to you to reconsider the typical approaches we so often use.
Analyzing 5,000 years of management history reveals a few insights that prove valuable in helping us thrive. These contrarian methods prove profitable by companies using them even today. Adding them to your arsenal may be the best decision you make. What can you do to learn from these leaders?
Stop retrenching. Strike instead. Historically, economic downturns show winners don't retrench out of fear, but strike early. They accelerate their business by taking advantage of the fact that now their competition is weaker than ever. But striking takes two things: strategy and passion. Do you have a strategy? Are you sure? Studies find that most strategic plans end up being mere tactics. Avoid this mistake by:
1) Calling a meeting with your staff.
2) Laying out your strategic plan.
3) Probing and challenging the assumptions. Does the plan show how you shall outmaneuver the competition? Does it show what position you seek in the competitive landscape? Or how you will exploit competitor weaknesses?
Getting strategy is only half the battle. What about passion? Our brains light up when we see something inspiring. Touchy-feeling mission statements are out. Sagas that inspire perseverance, unselfishness and sacrifice for the strategic win are in. It's not a new idea. It's been used for centuries. But we don't teach the crafting of stories anymore.
1) Have you captured your strategy into a compelling saga?
2) If not, condense your winning strategy into language that inspires passion for the strategic result.
3) Then edit and re-edit. Remember, it's about crafting not analysis.
Hire the brave, not the desperate. Samurai training found that cowardice stops leaders from challenging the status quo, holding others accountable, and exposing weaknesses. Cowardice hinders decisive action by stopping the essential act necessary to accelerate profits and survive a recession - tell the truth.
Cowardice eats truth
Lack of truth eats profits
Telling the truth can upset people, and desperate people don't dare risk it. But organizational cultures that promote bravery, and the speed of execution that comes from it, love it. It drives accountability to new levels. The alternative of keeping the truth at unspeakable levels only produces collateral damage like:
- Accumulating dead-weight of marginally performing employees
- Avoiding the real issues thwarting meaningful change and profitability
- Sticking with doomed projects far too long
Strengthen your organization and enhance competitive advantage by enrolling and inspiring bravery.
Group think is good. We've been trained to feel that if everyone thought like us it would be a bad thing. In some cases that's true. But fast companies train their employees to think alike; they train them to think like a CEO.
Do your employees know how every decision affects the balance sheet? Field experience finds that employees placed in simulations where they have to run a company achieve new levels of understanding. With a balance sheet and a P&L statement in front of them, employees realize how every decision requires movements of cash. New perspectives forge as they have to decide how to go to market. What price? How much volume? Where do we advertise? Choices for growth and expansion become visceral AND real.
Not surprisingly, these employees go back to their jobs with fresh insights on how their actions affect cash flow. They find money. They detect waste and inefficiencies. Opportunities for improvement surface which help companies needing to accelerate profitability.
Say "no" to customers. Ancient battles were often won by knowing where to strike, and where not to. There was an interesting story about Southwest Airlines. Co-founder of Southwest Airlines, Herb Kelleher, received a scathing letter from a passenger criticizing how they made jokes during the safety instructions required by the FAA. Fun is a key value at Southwest, and humor helps us pay attention versus falling asleep during these standard reviews. This particular passenger was not amused. Kelleher wrote back a one-sentence letter: "We're going to miss you."
How many times do you try to do too much for too many? Such mistakes stretch resources, distract strategic focus and decimate morale. Instead:
1) Assess what the Return-on-Energy (ROE) is for your customer segments (how much profit customers bring for the total cost of selling and servicing them).
2) Identify those clients whose ROE is minimum or, gasp, negative.
3) Start writing "We're going to miss you" letters.
Eventually, and hopefully soon, we'll all emerge from the recession. Until then, don't hesitate to act now to accelerate your business. Remember, retrenching and waiting for it all to pass only gives your competition an opportunity to outrun you. Take the lead. Just because times are slow, doesn't mean you have to be.
