Now that things are starting to settle down and states are beginning to re-open from COVID-19 shutdowns, the question on everyone's mind is "What will happen next?". It feels like we were cruising (speeding?) along at a comfortable pace of 85 mph and slammed on the brakes to avoid a multi-car accident that came out of nowhere. We've crashed. Are we seriously injured or just severely shaken up?
Our guess: Producers will manage better than most industries but will experience a lagged impact that will hit in the second half of 2020. This is based on conversations with the industry, construction data and a wild card factor that has not received as much attention as it should.
Conversations with producers
Our conversations with precast producers have consistently revealed that their plants are open and work is continuing while promoting appropriate social distancing. While everyone is consumed with figuring out how to manage within the new reality, we have yet to be told that they are assuming the worst. We've not yet lost a sale and, in fact, we've seen a growth in interest as the times have sensitized businesses to look for productivity solutions.
Conclusion: Things are still okay and very cautious optimism exists about riding out the storm.
A data point by produced by HubSpot (a cloud-hosted marketing automation and customer relationship management solution provider) may substantiate this. It's COVID-19 Sales and Marketing Benchmark Data report issued last week showed that construction is one of the few industries reporting more deals among the 70,000 businesses using the HubSpot customer relationship management solution. (Caution: as we all know, a data point is not a trend.)
In a May 8 blog post, Dodge Data & Analytics reported on that 20.5 million jobs were lost in the US during the month of April. ("Gut-wrenching" as it was accurately described.) Of the 12 industries reported, construction was the 8th on the list in terms of severity with 975,000 jobs lost. Painful to be sure, but the industry has not been affected as much as most others.
Conclusion: It is safe to say that these data don't refute the anecdotal information we've gleaned from speaking with producers.
We hear a lot about state operating budgets being over-spent in responding to COVID-19, but the budgets most important to us are the DOT highway trust funds (out of which projects are funded). Supported by gasoline taxes, receipts have been impacted by lower demand for gas from reduced traveling in response to the COVID-19 shutdown.
We've heard from our DOT contacts that this is already starting to dampen project budgets. Since most states have fiscal years starting July 1, we can expect reduced highway project spending to start in calendar Q3 and extend through June 2021.
Conclusion: We need to anticipate fewer highway projects over the next 12-18 months absent enactment of a federal infrastructure investment program.
Fortunately, a drop in highway spending for new projects will not affect spending already authorized for existing projects. So, our hope is that this will buffer the drop in future spending for the foreseeable future. That said, successful businesses will see this as a wake-up call and proactively seek ways to become more productive. In so doing, they will emerge stronger following the fall-out of those businesses that don't.
If you want to explore more ways to improve productivity at your plant, we've prepared a report on lean manufacturing principles for the precast industry:
Going digital can be a strong first step. Use our web calculator to see how much it can save your company. (Spoiler alert, the average savings to our customers from going digital is $48,000 per year.)
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Our mission at Idencia is to elevate the productivity of product manufacturers serving the infrastructure and commercial construction markets. We offer tracking solutions that improve productivity and offer value throughout the value chain. As a cloud-hosted product tracking system that is seamless between manufacturers, contractors and asset managers, Idencia adds information value to all, eliminates redundancy and saves time.