The good news: U.S. construction activity increased in 2014, and with it, a greater need for concrete. Overall construction spending was the highest it’s been since 2008, reaching $961 billion, up 5.6% from 2013. “For the first time in nearly a decade there was growth in all three major construction segments: public, private nonresidential, and residential,” says Ken Simonson, chief economist for The Associated General Contractors of America (AGC).
The U.S. economy improved at a moderate pace in 2014, with real gross domestic product (GDP) increasing 2.2%, compared to 1.9% in 2013. Although the mid-year outlook was strong, the trend slowed in the fourth quarter, impacted by lower government spending and higher imports.
The fastest growing states were North Dakota, Texas, Wyoming, West Virginia, and Colorado, with mining as a major contributor. The Great Lakes region, New England, and the Southeast grew most slowly.
Private nonresidential spending improved the most, with double-digit growth in many areas, including warehouses, offices, manufacturing, oil and gas pipelines, and commercial-retail. Single-family home construction was slower than expected, although multifamily growth was strong. And for another year, the construction industry waited for the government to approve more public infrastructure spending. (See Sector Spotlights.)
Concrete producers in Canada benefited from an improving economy in 2014, led by commercial growth and increased exports. “After two fairly flat years of revenue growth, local market conditions have resulted in significant upswing in sales across all product lines,” says Mark Omelaniec of the Langley Concrete Group, a precast producer in Langley, British Columbia. (For more precast survey results, see Casting Trends.)
In Mexico, manufacturing and exports combined with growing investment in residential and infrastructure construction to fuel an economic rebound. A boost in public spending followed the April announcement of a four-year National Infrastructure Investment Plan to invest $590 billion in infrastructure.
People need more concrete…now what?
The not-so-good news: The North American concrete industry is facing a proverbial “be careful what you wish for” scenario. After years of reducing staff and capital expenditures, producers are seeking new strategies to meet higher production demands.
This February, Pierre Villere, president and managing partner of Allen-Villere Partners and a TCP columnist, presented an economic outlook with Edward Sullivan, chief economist for the PCA, at World of Concrete in Las Vegas. While both speakers confirmed ready mixed concrete production turned a corner in 2014, Villere expressed a concern he began voicing a year ago.
“Being able to respond to increased demand with the manpower, equipment, and materials needed will be a major issue in our industry,” said Villere. “Financing for (capital expenditures) will be producers’ biggest challenge over the next two to three years.” Producers should also expect equipment and personnel shortages to be limiting factors, he said, especially in the fastest growing markets. TCP readers echoed Villere’s concerns in this year’s survey.
With 295,000 construction positions created in 40 U.S. states last year, finding qualified workers is harder. Ninety percent of TCP Survey respondents plan to hire new workers, and concrete producers from Molalla Redi-Mix & Rock Products in Molalla, Ore., to Essex Concrete Corp. in Tappahannock, Va., expect the shortage of qualified ready-mix drivers to have the greatest impact on their business. “The availability of drivers is probably the most important, even as we expect to finally start to see some increase in available work,” says Mike Ruddy Jr., of Allied Concrete & Supply Co. in Modesto, Calif. NRMCA says the driver vacancy rate was 9% at the end of 2014.
“Efficiently scaling up to the increased demand for concrete, materials, and transportation will be a big challenge in the year to come,” says Tim Ozinga, co-owner & marketing communications director of Mokena, Ill.-based Ozinga Bros. Inc. Ozinga plans to meet this challenge with the help of new technology, including “mobile tools for jobsite management and account management for customers.” And the Midwest producer is not alone.
Finding the right tools
“Over the past 12 to 24 months, we’ve been positioning for an uptick in the economy,” says John Holliday, CEO of Holliday Rock in Upland, Calif. “It’s finally here, and we’re focused on the basics.” The producer is upgrading to a Jonel Archer batch control system and investing in Catavolt enterprise mobility software.
“We’ve been using Catavolt since last August to improve communication between departments and make our daily tasks more efficient,” says sales manager Tom Maher. The producer can track projects and customers throughout the sales cycle, document employee performance and vehicle maintenance, and generate real-time batch plant and field service reports. Employees access the data from their desktop computers or mobile devices.
Irving Materials Inc. (IMI), a concrete and aggregate producer in the Midwest and owner of E & B Paving contractors, takes a customer-centered approach to technology. “We want customers to have a good experience with us from the time we quote the first project until we process the last bill,” says Jeff McPherson, vice president of sales and marketing.
Communication is key, he says, so IMI has invested in new tools such as mobile devices, customer relationship management systems, and truck-tracking software. When IMI staff and customers can access real-time data on orders and delivery status, it increases transparency on both sides.
It also raises expectations. “Things move so quickly now,” says McPherson. “Back when we all had pagers, a 24-hour response time was acceptable. Now, if you don’t reply to a call, text, or e-mail within 30 minutes, you’re in trouble.” One customer recently asked if he could enter his orders online to avoid waiting for a dispatcher on the phone. IMI is still investigating a web-based ordering system.
Evening the odds
With access to more information at their fingertips, technology is leveling the playing field for small and mid-size producers who are regaining market share. Atlanta-based SiteMix launched its volumetric concrete business this summer, filling a niche for small jobs in the Atlanta area.
SiteMix uses IWI Group’s Cgard time-saving silo management devices to check inventory levels, and dispatches drivers to jobsites by text. “We’re looking at dispatching and accounting software, GPS systems, and anything that will make us more efficient,” says Dale Henderson, general manager. “There is no doubt that technology is making the startup process much easier. It might cost more upfront but down the road it will pay off in time savings.”
Although SiteMix isn’t trying to compete with larger producers for volume, Henderson says small operations have an advantage when it comes to adopting new technology. “Leaner operations are more nimble and can make decisions and implement technology more quickly,” he says. “Big companies have more resources, but it also takes them longer to retrain employees to use new systems.”
Regardless of size, producers say educating employees and issues with software compatibility are their biggest challenges in implementing new technology. “It’s critical to choose the right tools that will work for your internal (employees) and external customers,” says McPherson.
He regularly conducts customer focus groups to confirm their specific needs before IMI invests in new software or equipment. “You have to satisfy many different needs — some customers want to do everything online, but some still want documents faxed.” Internally, IMI employees from different departments evaluate new systems to decide what works best for the company and its operations.
But, he cautions, automation isn’t everything. “You have to use technology as a tool, not hide behind it. Nothing replaces a handshake and a smile.”
Customers are (still) king
Most TCP survey respondents say they have prioritized customer service and expanding their customer bases over the past one to two years, fostering relationships intead of strictly negotiating prices.
More than half of respondents are offering, or will soon offer, value-added products or new product lines to satisfy their customers, and to add revenue. In State College, Pa., Centre Concrete has added a building products division, selling tools and concrete-related products, and is developing an e-commerce feature for its online catalog.
Producers are selling a range of specialty products, including admixtures, integral color, fiber, heated sand, insulating concrete forms, crushed concrete, and roller-compacted concrete. Educating customers is their greatest challenge, followed by educating internal staff and integrating new products into their current supply or production processes.
Preparing for growth
Although producers continue to make internal improvements, TCP survey respondents expect external forces such as the economy, U.S. politics, the 2016 presidential election, infrastructure spending, the labor shortage, and materials prices to impact their business most significantly.
That said, the future looks bright. “We will see 8% growth for concrete and cement in 2015, and we’re expecting it to grow by another 8% in 2016,” says PCA's Sullivan. “There is potential to hit a new record for cement production by 2019-2020… pushing ready mix production up to the 450 million cubic yard range.”
Drastically declining oil prices have boosted the economy in some states this year, although the opposite is true in energy-producing regions. Sullivan predicts lower oil prices will boost the national economy by $8 billion and add 220,000 new jobs in 2015, even accounting for areas where jobs will be lost. But it takes a long time for lower oil prices to translate to new construction so we won’t see its impact for several years, he says.
Shelby O. Mitchell is a Berwyn, Ill.-based writer and the former editor of TCP. E-mail firstname.lastname@example.org.
Methodology: Data sources include the U.S. Census Bureau, U.S. Bureau of Economic Analysis, and corporate financial reports and websites.