Only those precast concrete product producers that run the fastest to improve overall productivity will win the competitive race and prosper as the economy slowly revives.
In the precast industry, overall productivity growth over the last 24 years has been underwhelming. Best defined as units of output compared to units of asset inputs—labor, capital, managerial skills, and/or better technology—overall productivity has actually declined, according to figures compiled by the Bureau of Labor Statistics of the Department of Commerce.
Overall productivity dropped an average of 0.6% annually from 1987 to 2011, the most recent year for which such statistics are available. According to the BLS, productivity tanked during the 2007-09 period, dropping at an annual rate of 8.1%, reflecting the inability of precast producers to cut costs as quickly as construction activity collapsed during the Great Recession. Precasters cut back operations, went out of business, or were forced into mergers. Although these measures helped productivity improve at an annual rate of 0.8% during the 2009-2011 period, industry sales were down nearly 45% in 2011 from their 2007 peak, according to the National Precast Concrete Association.
As housing improved in 2012, precasters recorded a modest 2.5% increase in sales, followed by an estimated 3% growth 2013. NPCA predicts sales should grow another 6% in 2014, to $16.31 billion. Keep in mind that estimated 2014 sales are still almost 39% below their 2007 peak of $27.5 billion.
Major markets using precast concrete products are reviving; and with their revival precast form orders are growing. But higher overall demand for precast products means even the slower, inefficient precasters have better order books now. And because of this first picture, a second one comes into focus. That is, most precaster executives are focused on bidding for new projects and solving production problems caused by new employees. With business reviving, precast producers spend little time now considering their own long term needs of boosting their own overall productivity or enhancing their own market competitiveness.
Precast executives looking beyond tomorrow know there are four ways to “bet bigger:” Boost worker productivity, increase supervisory efficiency, improve managerial effectiveness, and/or invest in new capital equipment. The first three can be mastered with a modest investment, a relatively small expenditure of time, and a willingness to challenge the status quo. Taken together, they will result in lower
per-unit costs and the ability to compete successfully now and tomorrow as construction continues to climb.
The last way—new investments—depend on the willingness of banks to extend credit. Given the ups-and-downs of the precast industry, only the most optimistic pre-formers are trotting over to the bank asking for funds for, say new high speed mixers to replace old ones with manual controls. Given tight credit conditions, what then are the least expensive ways to reduce per-unit costs? Let’s start at the simplest and fastest, and move to the complex.
EMPLOYEES AND EMPLOYEE PRODUCTIVITY
The simplest way to boost productivity at the worker level is by creating incentive systems to motivate them to work smarter and to increase their output.
Most workers want to be rewarded for their efforts. A short vestibule training program for new hires always helps productivity. And when a reward system like Gainsharing is implemented by an expert with experience in the precast industry, history shows that overall employee productivity will improve from 17% to 22%. (“Productivity Sharing Programs: Can They Contribute to Productivity Improvement?” U.S. General Accounting Office, 1991).
Few of them, especially in smaller operations, devote enough time designing understandable productivity measures that can be communicated to employees, or to developing effective incentives that motivate workers to strive for the continuous productivity improvement needed to please today’s price-conscious customers. A simple measure of productivity is panels produced per man hour worked. That can be measured in terms of direct labor, overall plant labor, or all labor, plant as well as office workers, and is easily understood by all.