by Therese Dunphy, Editor-in-Chief
We’re currently at the outset of the busiest time of the year for most aggregates producers. However, this year, indications are that many production facilities will operate at around 60 to 70 percent capacity. That means that this year’s busy season may be on par with a normal spring warm-up or fall cool down.
Regardless of the size of the operation — or company — many aggregates businesses are feeling the impact of reduced production and taking steps to offset it. The nation’s largest aggregates producer, Vulcan Materials Co., reported a $32.8-million first-quarter 2009 loss, despite an overall 2-percent price increase. At the heart of the downturn? Lower demand. “The sharp decline in demand for construction materials is unprecedented,” Vulcan Chairman and CEO Don James told the Birmingham Business Journal, noting, “We remain highly focused on cash generation and improving our liquidity during this period of weak demand for our products.”
But it’s not just the nation’s top producers who feel the economic impact. Regional companies, such as Rochester, N.Y.-based Dolomite Group Inc., are also looking for ways to lower their cost structures. “Every company has to look as quickly as possible at ways to regulate production costs,” Pat DiLucia, vice president of the Dolomite Group, told the Rochester Business Journal. “Our biggest impact is the day-to-day operating cost.”
As producers around the nation deal with similar challenges, there are a number of steps that can be taken.
- Reduce capital expenditures. Many aggregate producers have already taken this step, but it’s important to maintain existing equipment to prevent unplanned, and potentially disastrous, downtime. Don’t let short-term market conditions have an adverse long-term impact on your business.
- Cut production hours. By eliminating overtime and extending seasonal layoffs, fewer permanent layoffs may be necessary.
- Lower personnel costs, carefully. Vulcan reported that its employment levels across the company are down 14 percent compared to a year ago. Eliminating staff is tricky, because as experienced operators know, good help can be hard to find. Prioritize skill sets and think about the long-term impact on your business before letting go skilled staff members.
- Analyze business practices. Take time to step back and review production processes. Determine where your inefficiencies are and identify bottlenecks so that you’ll be prepared to take strategic steps as business improves.
- Build relationships. Make any lull in your schedule pay long-term dividends by spending time with your customers and improving your understanding of their needs. Anything that you can do to help them with their business makes you their partner, not their supplier.
As aggregate producers react nimbly to changing market conditions, they can not only mitigate some of the impacts of current market conditions, but also position themselves to thrive as the economy improves.