PVC profile extruders of fence, deck and railing are facing a market where PVC price hikes seem to be stuck at 5 cents each month. Meantime, the economy has decimated fence companies that used to be their customers.
Needless to say, market officials are stepping very carefully, according to a panel of industry insiders at Fencetech in Orlando. Consolidation will be a natural consequence of the state of the industry, and officials see material costs and environmental misinformation about vinyl as threats to their livelihood.
We've all been through better times, fueled by new construction and fairly cheap money, said John Polidan, CEO and president of Enduris Extrusions in Jacksonville, Fla. We have a fairly conservative outlook [for the] next couple years. The uptick in window [and] siding business was fueled by government stimulation programs. They don't have Fence for Clunkers or anything like that. The remodel market will probably lead us out of the recession. No new construction boom in the next year or two.
Everyone is fighting every day to get every sale they can, said Paul German, vice president of Nebraska Plastics Inc. in Cozad, Nebraska, and chair of the Vinyl Fence, Deck and Railing Manufacturers Association in Glen Ellyn, Ill.
Managing a company today it seems as if you're not even managing, you're just putting out fires and going forward, German said.
One official said companies still need to focus on profits, in spite of the challenging environment. Despite the streak of PVC price increases and the squeeze from both ends of the supply chain, one official thinks manufacturers can make price increases work to their benefit.
Al Bates, founder of Profit Planning Group in Boulder, Colo., said companies should re-engineer their businesses to have a 20 percent safety net.
He said companies struggle especially in difficult times because they don't get control of prices for what they sell; therefore, companies don't generate enough gross margin to be successful. Also, companies fail to control payroll.
Those happen to be the two most difficult things on the earth for companies to do, he said. Also, companies fail to plan.
A barrier to success is that most of us don't plan. We just walk by stuff, sell stuff and expect it to work out. I want to make sure when things get nasty that I don't panic. In a down market, though, everybody panics, Bates said.
Profits are extremely fragile with regard to sales and margin. That is an economic fact of life. I want you to get control of pricing, particularly when inbound prices are going mad. I have to get control of my business in a brutally competitive world.
That means getting control of the business on the outbound side.
Most people don't think their product is as good as they claim it is. You need to build a quality reputation, Bates said.
He said supplier price increases can be a manufacturer's friend. If managed properly, supplier price increases are your friend. It's just you don't think they're your friends. Supplier price increases actually are an opportunity. It's just we're afraid of it.
Officials in the industry are working to build a quality reputation, they said. One other step officials with the VFDRMA are doing is implementing standards.
The VFDRMA strategy was to create product and installation standards and write them and have them put through the American National Standards Institute, German said. Right now, standards have been written and put out to ballot to members who have a vote on it. It's a very long process. It's very slow, but slow for a reason.
Polidan said there is a threat in terms of product perception in the marketplace. If we allow our products to go to the 'cheesy' side, then the perception of our products could take a beating, to the point where a vinyl fence is not something that you aspire to, but settle for, he said.
During Fencetech, VFDRMA officials also held their first-ever Deck and Railing University, to educate contractors about building safe, code-compliant decks.
There are technological innovations still to be made in the industry, which is constantly evolving, said Deron Manwaring.
In the industry, there will be changes, said the national sales and marketing manager of Royal Outdoor Products in Milford, Ind. This industry is going to move similar to where siding did. It started as mono to coextrusion, embosses ... that will continue.
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