A sluggish economy has companies that make products for the building and construction market watching oil and resin prices, reducing manufacturing expenses, and paying close attention to costs for distribution and logistics.
One of our biggest challenges is raw material costs, said Michael Gori, product management director for Azek Building Products Inc. in Scranton, Pa., which makes trim, decking, rail and fencing out of PVC. The cost has gone way up, so you constantly have to keep a pulse on logistics and distribution. We think we do that well, but we are always looking at ways to refine it.
Roger Murphy, president of U S Block Windows Co., in Pensacola, Fla., agreed. The firm, which does business as Hy-Lite, a U.S. Block Windows Co., makes acrylic and glass block windows.
Our challenges on the cost side are to try to keep resin prices down and to find ways to reduce the amount of material [in our products] and still maintain structural strength, Murphy said in an interview at the International Builders Show in Orlando, from Jan. 12-15. To help lower costs, Hy-Lite has also standardized some window component parts, he said.
Stu Kemper, president of composite and PVC decking company TimberTech of Wilmington, Ohio, also keeps a watchful eye on resin prices. One of our biggest challenges right now is energy costs and the price of oil, which is a leading indicator of resin costs, Kemper said. We need to stay close to the market. We are looking to increase the use of lower-cost materials and looking to increase the amount of recycled polymers while maintaining quality and strength.
While fuel prices are a concern for Advanced Environmental Recycling Technologies Inc. in Springdale, Ark., resin prices are not. AERT opened a recycling plant in Watts, Okla., a year ago.
We are starting to see the value of Watts, said Brent Gwatney, vice president of sales and marketing for AERT's MoistureShield-brand decking. Watts gives us the ability to not have to buy raw material on the open market and can help us lower our cost structure.
Still, in today's market, trying to keep prices down will be a challenge, Gwatney said. If fuel prices keep rising, we will have to look for the best opportunities to cut freight costs.
The other challenge for building material makers is trimming operating costs, which sometimes results in plant closings.
We are driving out costs without reducing quality or efficiency, said Gary Pember, vice president of marketing for window maker Simonton Building Products Inc. in Parkersburg, W.Va. The firm does its own extrusion, which helps it control costs.
My first year, we closed or consolidated four plants, added Mark Orcutt, who became executive vice president of building products at Royal Group Inc. in Woodbridge, Ontario, in 2008.
You have to take manufacturing costs out to offset inflation because it is tough to get pricing increases in a downturn. Utilities are our third-largest cost, he said.
We have right-sized our manufacturing footprint and invested in technology to extrude PVC resin. Our goal is to have the right people and processes in place and be able to take advantages of our investments when the market picks up.
That approach is much like the one Dave Randich used when he became CEO of Therma-Tru Doors in Maumee, Ohio, three years ago. We consolidated our manufacturing footprint in North America from five plants to two, and have focused on operational excellence, he said.
Among other things, Therma-Tru has invested in training for plant floor workers, put into place modern quality management processes and made its remaining plants more energy-efficient. We have done a complete turnaround, Randich said.