succeeding in inflationary times practical ideas for the producer presented by bill ray of precast...

Succeeding in Inflationary Times

Practical Ideas for the Producer

Presented by Bill Ray of Precast Consulting

2

Succeeding in Inflationary TimesPractical Ideas for the Producer

AgendaPrecast CostsPrecast marketsInflationary responsesCost Reduction That Works

CementReinforcing steelFuel & transportationLabor costs

Summary

3


Who is Bill Ray

Principal at Precast Consulting

Background Business owner PCI certified producer General manager Sales exceeding $15 million Project manager Projects exceeding $ 10

million Chief fin. Officer Sales exceeding $150 million Education

MBA University of ChicagoBS Florida state

Contact info: 770-979-3711. [email protected]

4


Price History & Outlook

Cement Short Supply – rationing Regular increases every quarter 2004 Price could exceed $100/ton this year

Steel Price explosion early 2004 Rebar over $0.40/lbs. Could go higher

Fuel Sharp price rise starting 2002 Fuel oil – Diesel exceeding $2.00/gal Trucking costs up sharply Uncertain outlook

5


Responses that don’t work:

Do nothing – wait for prices to go down

Produce out of spec product – cut quality

Don’t raise your prices – concern about competition

Don’t know costs – uncertainty about impact on profits

Solve the problem with automation & capital spending

Don’t involve employees in the solution

6


Proven methods that will offset higher costs: Cement

Batch plant controls Mix design Improved management

Reinforcing Steel Design review Use of Synthetic fibers New products

Fuel Interruptible gas Boiler efficiency Delivery alternatives

Labor Industrial engineering methods Work group productivity

7


Proven methods that will offset higher costs

Septic Tank Example

Sales price $400 100.0%

Mix 115 28.8%

Reinforcement 20 5.0%

Direct Labor 35 8.8%

Parts & Supplies 20 5.0%

Plant burden 60 15.0%

Total production cost 250 62.5%

Gross margin $150 37.5%

Delivery & field costs 40 10.0%

General & Admin 85 21.3%

Profit $25 6.3%

8


Cement Costs Will cement reach $100/ton?

Cement Price - 20 City Average Engineering News Record - Historic Series

$80

$90

$100

6/1/

2003

8/1/

2003

10/1

/200

3

12/1

/200

3

2/1/

2004

4/1/

2004

6/1/

2004

8/1/

2004

10/1

/200

4

12/1

/200

4

2/1/

2005

4/1/

2005

6/1/

2005

8/1/

2005

10/1

/200

5

12/1

/200

5

Date

$/T

on

HISTORY

$82.70

$97

$86.02

Forecast

9


Cement CostsBatch Plant Controls

Aggregate Moisture ControlPile rotationWatering managementBin moistureMicrowave moister meter

Chemical ControlPre-approved “fixes” to batch problems

Mix design 30% fly ash, slag = about $3/ yard ½ bag cement due to better controls = $2/yd.

Most producers have $5/yard from improved control

10


Cement CostsManagement

Place the batch plant under good managementMinimize organizational layersProvide incentives for improvement milestonesStart a QC program if you don’t have one now

Begin a training programMix design for salaried supervisionQC methods for QC technicianBatch plant training for operators

Statistical Process ControlStandard deviation for breaksTools for tighter control

11


Cement Costs – reduce mix $5/yd

Septic Tank Example $5/yard

Sales price $400 100.0% $400

Mix 115 28.8% 105Reinforcement 20 5.0% 20Direct Labor 35 8.8% 35Parts & Supplies 20 5.0% 20Plant burden 60 15.0% 60Total production cost 250 62.5% 240 Cost reduction 4%

Gross margin $150 37.5% $160

Delivery & field costs 40 10.0% 40

General & Admin 85 21.3% 85

Profit $25 6.3% $35 Profit increase 40%

12


Reinforcing Steel Will rebar double in price ? Will the price pull-back actually happen?

Rebar Price - 20 City Average Engineering News Record - Historic Series

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

5-Ju

l-03

16-A

ug-0

327

-Sep

-03

8-N

ov-0

320

-Dec

-03

31-J

an-0

413

-Mar

-04

24-A

pr-0

45-

Jun-

0417

-Jul

-04

28-A

ug-0

49-

Oct

-04

20-N

ov-0

41-

Jan-

0512

-Feb

-05

26-M

ar-0

57-

May

-05

18-J

un-0

530

-Jul

-05

10-S

ep-0

5

Date

Re

ba

r p

ric

e -

$/c

wt

History Forecast

Rebar PriceENR 20-city Average

?

13


Reinforcing SteelDesign Review

“Feel good steel”More bars, heavier bars than engineering

requirementsReductions of 5% are typical

Over-design productStandard product exceeds stated engineering

requirementsSubmit a proprietary designBid an alternate to the standard design

14


Reinforcing SteelSynthetic Fibers replace steel mesh

Can be used in many underground applicationsWidely accepted in septic tanksGood application to vaultsPerformance equivalence in manholes

Significant savingsSeptic tanks 10-15% in production cost savingsLargest savings in labor Increased plant productivity

15


Synthetic Fibers replace steel mesh

Septic Tank Example Fiber Repl.Steel

Sales price $400 100.0% $400


Gross margin $150 37.5% $175




16


Reinforcing SteelHigher steel price means new competitive

standingShort span bridges

Steel bridge beams are up sharplySpeed of erection favors precast

SheltersCost, availability of small buildings up sharplySecurity, speed of erection favors precast.

Light polesSound barrier wallStay in place floor panel systems

17


Fuel Fuel costs affect curing heat Fuel costs affect delivery cost

18


FuelMost producers have large savings in curing

Interruptible gascost/therm is less

Dual fire boilersGas company will show you when to switch to oil

Boiler efficiencyReview curing curve, institute controlInspection by boiler engineerInsulate pipes, kilnImprove R value of curing blankets

19


FuelThere are opportunities to save in delivery

costsDispatch training, load consolidation

Route selection & load analysisMany producers report 10% savings in vehicle costs

Charge for delivery distance Most producers are delivering loads that loose money

Common Carrier DeliveryUnder the crane deliveryCommon carriers are more efficientNo back haul40% savings for qualifying loads

20


Fuel - Training in routes & consolidation can save 10%

Septic Tank Example Save 10%Delivery

Sales price $400 100.0% $400

Mix 115 28.8% 115Reinforcement 20 5.0% 20Direct Labor 35 8.8% 35Parts & Supplies 20 5.0% 20Plant burden 60 15.0% 60Total production cost 250 62.5% 250 Cost reduction

Gross margin $150 37.5% $150




21


Labor costIndustrial engineering methods

Traditional IE job design analysisNew disciplines

Six-sigmaLean Manufacturing

Cost savings 20% or more are typical

Work Group Productivity ImprovementMost valuable underutilized resourceFocus on developing skills, teamworkReduce turnoverCost reductions of 10-20% are typical

22


Labor cost – What’s Lean ManufacturingIE discipline based on continuous

improvementSeparate activities into value added and

wasteValue added is any activity that transforms the

product in a way that the customer will pay for it.Waste is any activity that does not add value

from the customer point of view.

23


Lean Manufacturing – Steel shop example Typically over 90% of work is waste

Activity Transforming (value added)

Waste

Unload rebar from the delivery truck Transport/Motion Shake down the rebar from storage racks

Motion

Transport the rebar to the shear Transport/Motion Set the stops for cutting the rebar Setup Cut rebar on shear Value Added Stack rebar in piles Motion Transport to bender Motion Setup bender stops Setup Bend rebar Value Added Stack bent rebar parts Motion Transport to cage assembly area Transport/Motion

24


Labor cost – What’s Lean ManufacturingReduce waste through:

Standardized tasksWorkplace organizationVisual controlsPlant layoutBuilding quality inMistake proofingSetup reductionFocus on work team effectiveness

25


Labor cost – What’s Lean ManufacturingLean is about making improvements in

processes and teamwork, not by spending money on new equipment

Lean is not high tech – it is low techLean is about great ideas that cost little or no moneyLean is about teamwork, working smarterLean is about making small continuous

improvements

26


Labor cost. Cost reductions of 10-20%/year are typical

Septic Tank Example Reduce Labor15%

Sales price $400 100.0% $400


Gross margin $150 37.5% $155




27


Proven methods that will offset higher costsCement

Batch plant controls Mix design Improved management

Reinforcing Steel Design review Use of Synthetic fibers New products

Fuel Interruptible gas Boiler efficiency Delivery alternatives

Labor Industrial engineering methods Work group productivity

28


Proven methods that will offset higher costs

Septic Tank Example $5/yard Fiber Repl Save 10% Labor TotalSteel Delivery 15% All

Sales price $400 100.0% $400 $400 $400 $400 $400 100.0%

Mix 115 105 115 115 115 105Reinforcement 20 20 0 20 20 0Direct Labor 35 35 25 35 30 21Parts & Supplies 20 20 40 20 20 40Plant burden 60 60 45 60 60 45

Total production cost 250 240 225 250 245 211 Cost reduction 16%

Gross margin $150 37.5% $160 $175 $150 $155 $189 47.3%

Delivery & field costs 40 40 40 37 40 37

General & Admin 85 85 85 85 85 85

Profit $25 6.3% $35 $50 $28 $30 $67 16.8%

Profit increase 168%

29


succeeding in inflationary times practical ideas for the producer presented by bill ray of precast...

Documents

producer responses

producer reinfor

higher costs

yd slide

solution slide

producer proven methods

improved control slide

tighter control slide