Who Needs Alan Greenspan?

Bill Collins, president and chief executive officer of BMCA (Building Materials Corp. of America, which operates under the name of GAF Materials Corp, Wayne, N.J.), expects the U.S. economy to grow at a rate of 3 percent in 2001, with new home starts off “only slightly” from 2000 levels. He joins with others in the homebuilding industry in tracking employment levels as opposed to interest rates as a better indicator of future growth in this sector. Specifically for the industry, in addition to asphalt and petroleum-based polymer costs, Collins believes that steep-slope roofing demand should grow at a nominal rate, while the shift to laminates will continue, driving them to nearly 50 percent of all shingle sales by year end. In addition to this, the upper end of the laminate shingle product line is expected to grow at the strongest pace.

Dick Bus, president of Atas International, Allentown, Pa., agrees that overall the economy will slow down, but it won’t necessarily be a recession. For metal roofing specifically, he sees commercial construction slowing down. On the other hand, renovations, especially on the residential side, will be up dramatically because people are continuing to invest more in their homes. John Worthington, director of sales and marketing for Johns Manville Roofing Systems Group, Denver, cites Dodge numbers predicting a 2 percent increase in construction, but notes that real spending will be down 1-3 percent depending on inflation. “It will be tighter for new construction, but it’s harder to get a handle on reroofing.”

As for insulation, “New construction, both residential and commercial should be off slightly in 2001,” contends Tom Newton, manager of advertising and promotion for CertainTeed Corp.’s Insulation Group, Valley Forge, Pa. “In residential, this should be offset at least partially due to three factors: Houses will continue to grow larger, more insulation will be used for sound control and there is a boom in retrofit sales because of the energy situation.”

The contractors we spoke to have a slightly different take on just what the economic slowdown means. Russ Kaller is president of Russell Roofing Company Inc., Oreland, Pa. His firm is diversified — about half of its business is historical restoration and industrial/commercial, the other 50 percent is residential. Kaller says, “The economy looks like it will slow down, but we’ll flow with the tide. Our business is somewhat weather-related. A lot of harsh, stormy weather translates into work for us. Otherwise, things should pretty much stay the same.”

“We are cautiously optimistic,” says Gregg Wallick, chairman of GeneralRoofing and a member of Roofing Contractor’s editorial advisory board. “Rising costs aren’t affecting us directly, but they could impact a customer’s decision about capital expenditures vs. prolonging the life of a roof.” Either way, there will still be work for contractors.

Bob Lyons, executive vice president of New Millennium Roofing, Indianapolis, Ind., agrees, though he admits that, “If Alan Greenspan does not know [what the economy will do], I certainly would not feel comfortable making a prediction.” Lyons believes that there is a trend toward building owners becoming conscious of budgeting more “expense” dollars vs. “capital” dollars. As a result, “In the new millennium, I would anticipate a significant growth in the roofing maintenance business sector as a larger percentage of the overall roofing budget allocation.”

What’s a New Year Without a Few Challenges?

Newton finds the same labor situation for insulation. “We need to bring new workers into the labor force and improve the skills of those currently employed. Our Certified Contractor program helps, but we need to reach out to community colleges and vo-tech schools for help.” He mentions consolidation and e-commerce as other challenges. “I don’t think anyone has a good idea where these issues will end up.”

The labor situation will get worse before it gets better, according to Collins. He points out that everyone in the roofing industry, especially the contractor, is losing people to other industries. Contractors are expected to spend even more time and money attracting and retaining good workers. GAF does its part by supporting efforts to upgrade the industry’s image and professionalism. Collins advises contractors to pay attention to labor-saving systems and equipment. Equipment formerly thought to be too expensive or “ritzy”’ should be re-evaluated in light of increasing labor costs.

“It will be a tough year with rising prices,” Worthington cautions. “Manufacturers have no choice but to pass along the costs, and contractors will have to make adjustments.” Ken Hendricks, chairman and chief executive officer of ABC Supply Co., Beloit, Wis., agrees. “Most price increases in 2000 did not stick due to oversupply, but as manufacturers close plants and bring supply more in line with demand, moderate price increases will have a greater chance of sticking. Obviously, improving productivity can overcome some of these increases, but at some point, these costs have to be passed on to the customers. Sometimes, that is a very difficult thing to do. If it is not managed properly, it can spell trouble for many contractors, as well as distributors.”

Another distributor, Brad Segal, vice president of Bradco Supply Corp., Avenel, N.J., cites consolidation as a continuing challenge, though it will be slowing down. “Distributors will continue to consolidate. It’s difficult for small distributors to compete and many are facing succession issues, which makes selling the company attractive. At the contractor level, now that the roll-ups have formed, they add new partners as they go along, slowly and selectively.” As for distributors in general, “The biggest challenge is finding qualified labor, especially CDL-licensed drivers. I don’t see relief coming any time soon.”

John F. Miller is chief executive officer of Western Roofing Service, San Francisco, chairman of Tecta America Corp., Golden, Colo., and president of the National Roofing Contractors Association. And yet, he still found time to talk to us. “It’s a great industry,” he remarks. “Though the economy will probably be flat this year, that’s not all bad considering that we’re coming off three great years. I believe there’s still a lot of work out there.” There are challenges, of course. Aside from the labor issue, he sees price increases as a concern for contractors, as well as a tightening in the insurance and bonding markets. When asked how his company deals with the labor issue, he responded, “We strive to make our employees feel like they are part of a family. They have a voice in how the company operates. We also have a profit sharing program extended to the entire crew – we are a union shop and one of the few who include them in the program.”

Russell Roofing has implemented a mentoring program to help map out a career path for its employees. It also offers the best medical insurance and equal if not competitive wages. “It’s still hard to attract new people, but our current employees are rooted and committed,” says Kaller.

Lyons mentions other challenges in addition to recruiting, training and retaining skilled labor and management teams. The first is selling value and not low price to customers. “It is important to know who you want to target as your customer base and what specific vertical markets you want to pursue,” Lyons explains. “It is then very important to educate customers on the fact that the lowest initial cost of the roof is rarely ever the lowest life-cycle cost of the roof. All roofing systems reach an age where it becomes economically impractical to restore and maintain them.” He goes on to advise, “Don’t be tempted to ‘yes’ your client to death; rather, tell them what they need to know, not what you think they want to hear. If they have an unreasonable expectation and will not listen to reason, perhaps you ought to think about whether or not your company will be able to satisfy their expectations.”

Another constant challenge, according to Lyons, is maintaining a safe but productive workplace, thus being able to control general liability and workers’ comp costs to remain competitive in the marketplace. “Our company thinks of safety as a profit center rather than as a cost center. One of our slogans is ‘Safety Always’ vs. the more rhetorical ‘Safety First.’ With increased exposure and escalating insurance costs, this element will play a significant role in determining the future leaders in our industry.”

New and Improved

“We’re not necessarily doing anything new at Atas,” says Bus. “We are continuing to expand our contractor base. This is done through seminars and additional training. It is an educational process.”

On the other hand, CertainTeed Commercial Roofing is launching a major initiative in contractor programs that will be unveiled this month. “Contractor programs are a work in progress, and the newest phase begins in January,” says Smith. “This initiative came as the result of almost 50 different meetings with small groups of contractors. It was not a sales pitch: They told us what we needed to do, what they were looking for and what kinds of products they needed. We don’t construct our offerings, either products or programs, from the top down; rather it is done from the contractor up. This way might take longer, but in the end, it helps the contractor to be more successful.” Continues Smith, “CertainTeed has recently re-entered the commercial market, and this approach of using ‘focus groups’ (Professional Roofer Advisory Councils) was used on the residential side with great success.” He concludes, “Our philosophy is that we don’t just want to sell a product; we want to sell a roof that lasts. The important thing is value for our customers and the end users, and that again, is in the contractor’s best interest.”

CertainTeed’s Insulation Group will continue to promote its Certified Contractor Program. “This third-party certification program should see the number of certified contractors double in 2001 supported by the drive for quality control,” explains Newton. “Also, we will continue to rollout our Certified Plus Home program, which offers homebuyers energy and comfort warrantees.”

GAF started 2000 with aggressive expansion plans and completed the year making adjustments to production by consolidating some manufacturing. In 2001, according to Collins, GAF will be completing and operating all the new facilities begun in 2000, including the TPO plant in Mt. Vernon, Ind. For low-slope roofing contractors, GAF will roll out new contractor support initiatives in 2001 that will include some elements of their “Master Elite” program designed for steep-slope roofing contractors. GAF intends to continue to enhance its commitment to the roofing contractor by developing and managing programs to help the contractor succeed.

GAF intends to focus on leads, since helping the roofing contractor get business is seen as crucial for success. GAF’s local territory managers are one of the keys to the manufacturer-contractor relationship. The GAF TMs have a marketing plan that includes getting on the roof, clearly visible to all people in the roofing organization. The TMs will work to provide leads to the estimators, and offer training to the contractors, estimators and foremen.

At Johns Manville, in addition to offering programs that reward distributors, the company will emphasize single-ply. “Usually people think of us as BUR and hot roofing, but single-ply has come of age,” says Worthington. “We are taking a more aggressive approach in marketing our TPO and PVC, which have a great performance history.” Worthington himself is a new addition to JM’s Roofing Systems Group, as his is position. “It’s my job to make sure marketing and sales work together so that the company gets the biggest bang for the buck when we take products to market. We are also integrating our acquisitions, old and new.” The bottom line? “Johns Manville is a customer-friendly business. Our goal is to make it as easy as possible for the contractor to do business with us.”

On the distribution side, “ABC is continuing our focus of improving our operations and training and upgrading our people,” says Hendricks. “We will continue our efforts to improve delivery times, have the right products in stock, and make sure that our people are trained properly to serve our customers. In addition, we will continue to expand our network of locations in a controlled and responsible manner.”

And what are the contractors planning on doing this year? “We plan to be consistent,” says Kaller. “We focus on our current customers because 80 percent of our business is referral-based. We take care of our clients. We are also looking to strengthen our relationship with manufacturers in order to be competitive with roll-ups and big boxes. The association with manufacturers is important: With a third party standing behind us, it helps separate us out in the eyes of the consumer.”

As for the consolidators, “We are deep into integrating all of our companies,” says Wallick. “This is the process of developing a good, strong brand. We are sharing/implementing best practices in all companies. We are now not actively buying, rather, we are focused on growing internally.” According to Wallick, this is the third stage of consolidation (stage one is buying and stage two means base integration). “We are now developing a common operating model and program to allow customers to be happy no matter which office they deal with. This is base, fundamental business. The better we are, the more customers will want to do business with us. We want to do a good job at a competitive price. So, we’re rolling up our sleeves and working on basic issues to make GeneralRoofing a better company.”

“The focus of Western Roofing, and all of Tecta’s companies this year is that we are trying hard to increase our maintenance divisions,” says Miller. “They help to make a business recession-proof, so it will be our emphasis.” As for the National Roofing Contractors Association, the emphasis will be on training. The association got a safety grant from OSHA for a training program and is doing a fall study with the National Safety Council. “The 5th Edition of our Roofing and Waterproofing Manual is coming out,” Miller continues. “And we’re halfway through our 31 training programs; nine more videos/books are due out this year. We’re also working hard on a workforce program with the YMCA in Florida and Connecticut.”

New Millennium Roofing tried something new in 2000 that it plans to continue in 2001. “We just finished an eight-city tour of one-day roofing management seminars for building owners,” explains Lyons. “Topics included what makes up a commercial roof, material, how roofs fail, a business model for roof management (proactive vs. crisis management), and how to evaluate good manufacturers, systems and contractors. We got an average of 50 people per program, and thus reached about 400 in five weeks. This is unique so far in the industry, and we plan to continue doing it.”

E-Commerce and The Internet

GAF will continue to upgrade its Web page, and is presently doing electronic data interchange with around a dozen or so customers. Collins predicts continuing growth in business-to-business e-commerce, with 2001 continuing the shakeout of competing initiative. But it will not produce monumental changes in the roofing industry. For the homebuilding sector, however, Collins sees changes coming more rapidly. Consolidation will continue among homebuilders, and the large ones will become larger as they are able to take real-world advantage of e-commerce initiatives that have been coming along for several years now. In addition, it is possible that “big box” retailers, such as Home Depot, will make a play for the large homebuilder, seeking to leverage their own sophisticated systems to compete more aggressively with local lumberyards.

At Atas, “We are not seeing much happening in the way of e-commerce. We’re just watching,” says Bus. On the other hand, “CertainTeed has a host of initiatives that are larger than roofing, and encompass the whole company as well as its parent company, St. Gobain,” explains Smith. “A whole department has been created for this reason. However, we do understand that not all contractors are online, nor are they interested in being online. We intend to strike a balance: The traditional means of business are not going away, nor are the personal relationships.” Johns Manville is also launching substantial initiatives for e-business. A site is currently in beta testing for the company’s guaranteed services unit. The site will eventually have a brand name. According to Worthington, “We are fine tuning our products and making it easier for the contractor to do business with us.”

As for distribution, Hendricks says, “We’re excited about some of the things we’re seeing out there with the Internet and e-commerce. In fact, we are doing a number of pilot projects with our suppliers and customers to see how we can use these technologies to improve service and reduce cost for our customers. Companies have spent a lot of money trying to figure it out, and we’re watching their progress very closely. It’s still a little too early to predict what the ultimate outcome will be or which models will be successful.”

Segal believes, “In time, the Internet will have a significant impact on the way we do business with our customers, but we are probably a few years away from seeing that take shape. Certainly one positive aspect of that will be an improvement in efficiency, but it will be a gradual progression over time. And the Internet can’t deliver material to a job site.”

Contractors agree. “E-commerce is not affecting us in terms of buying and selling materials,” says Miller. “We notice the Internet more at NRCA where we use our Website as a form of communication. Roofing is a hard thing to do over the Internet.”

Lyons has a similar view. “E-commerce is a maturing industry that has applications for us. At this stage, though, it is used more for information access.” On New Millennium’s Website, “We feature ‘The Roofing Answer Man,’ where people can post questions and get a private, comprehensive response.” Generally speaking, though, roofing is “a gritty, labor-intensive business that does not lend itself to e-commerce. Many people in the industry aren’t even on the Internet.”

“We’re not doing B2B yet, maybe later,” adds Wallick. “We use the Internet as a communications tool and it helps us facilitate change within the company. We also see a lot of manufacturers publishing literature electronically. And we file for warranties electronically. But the Internet won’t change the fact that roofing is a people business; the relationship part will never go away. The Internet may be faster and more organized, but people do business with people.”

Words of Wisdom

“Focus on the customer and listen well in order to deliver,” advises Kaller. “And also make sure to listen to your employees. Everyone’s market is different.”

“Work smart. Hold on to your good laborers and customers and let your competitors struggle with the others,” says Newton. “Realize that builders and homebuyers are really serious about quality in both products and workmanship and will pay for it – eventually.”

“Your goal should be to create an environment that allows people to grow individually and improve their careers,” explains Wallick. “If workers are successful, the company will be successful.”

“Educate your customers so that they can make good decisions,” comments Lyons. “Remember the importance of selling value, not low price.”

Roofing Contractor thanks all of the industry leaders for sharing their views and opinions with our readers.