"The Eyes See What the Brain Believes," an article written and published by Russ Kathrein on LinkedIn, struck a nerve for me. In summary, the statement "believe it when I see it" is more often than not false. As someone who has made a living assisting others for over twenty years in achieving higher performance, I can attest that the human condition is hardwired to see what we believe to be true. The vast majority purposely want to remain blissfully unaware of things that will upset or challenge our understanding of what we know. Having stated that, if you wish to not be blinded to the future challenges of the 2023 build season, then be willing to see what many may be ignoring.
2023 will be the start of progressively challenging times over the coming years as the natural economic build cycle begins the downward process. Many regions are already seeing a steep drop off in housing starts.
Personnel shortages and challenges are not going away and will only worsen. Large and small companies can overcome these challenges, but many will fall short using the same labor practices they have always operated with minor modifications. (For more on that topic, see my November article on Labor Shortages Worse Than Most Understand.) For the next decade, the demographics will continue to have more people leaving than entering the workforce, creating different challenges. These challenges are especially true for larger corporate companies, which will face more pressure from employee regulations. Despite increased investments in offshore design services and manufacturing automation, they may unwittingly position the company, so employees unionize to protect themselves. Both state and federal employment regulations are heading in that direction as part of the political trends. Sadly, most companies fail to understand that the biggest driver of unionization is their employee management practices, not outside influences. The vast majority of HR practices are created to protect the employer, not to improve employee management practices.
To say the building industry, especially the wood truss and wall panel component manufacturing (CM), is expanding its capacity is an understatement. Huge profit margins and record-breaking sales have allowed everyone to expand their operations with new equipment, buildings, and personnel. There was a time when automation, such as auto jigging for wood truss manufacturing, was a huge investment that was not widely adopted by every CM. Not anymore. The competitive advantage of automation has been lost when everyone has the same equipment. Those who believe the investments they made in automation and other capital assets have given them a competitive advantage have a false sense of security. Those investments by themselves will not be enough.
As interest rates continue to rise and economic pressures to tame inflation increase, building starts will fall, and therefore the margins and sales will start falling again, and it will only get much worse. As the sales start to decline, what do you think will happen to the pressure on the sales teams? All the new equipment, buildings, and personnel capacity expansion investments must be met with continued sales regardless of the economics. Everyone can expect renewed interest in new sales initiatives from their existing and new competition. The greater the economic decline, the greater the push to expand to a wider distance to generate new sales. As the competition intensifies, margins and sales will start dropping rapidly.
The arduous task of investing in new processes and practices will now be needed more than ever. It is far easier to throw money into new equipment automation than make fundamental organizational process changes.
Last month's article, “Proof That Even the Largest Wood Truss CMs are Not Immune to Losing Tens of Millions of Dollars with Outdated Reporting,” hit a lot of readers in a troubling way. Companies are willing to continually miss the opportunity to gain millions of dollars because they are unwilling to begin the arduous task of investing in new processes and practices. Do you think I am mistaken?
Example of a proven missed opportunity to improve processes and practices. To improve roof truss scheduling, pricing, and productivity incentive programs, wood truss manufacturers must embrace proper time standards (work minutes) instead of using the industry standard of board foot units. Here is a response from a reader on LinkedIn to this known problem.
Reader quote, “Until the industry goes to Alpine, MiTek, and others to provide a “new way” of tracking in their software, unfortunately everyone will continue using the (board foot) standard...”
Quote translation: This person’s company, like so many others, is willing to lose potentially millions of dollars because the barrier of vendor software capabilities is hindering them, and they are unwilling to use other means. Time and again, I have witnessed companies eagerly spending millions on new equipment and buildings but refusing to change their current practices, which might cost them a fraction of those millions because of existing software vendor limitations.
All the millions spent on capital investments will not be enough to stay competitive as the economic building markets slow and competition increases. Now is the time to invest in process improvement, and not just in manufacturing but in every area.
