There is no doubt that building materials, after the initial chaos of the COVID-19 pandemic, has rebounded strongly and flourished over the past two years. It goes without saying, however, that this boon was not spared from challenges. Just as the human body can suffer scarring after trauma, the industry is bound to experience residual fallout after a major business disruption.
We saw it from 2008 to 2009 with the Great Recession, when demand plummeted after a huge and prolonged boom. Countless businesses went bankrupt, unemployment soared, and construction workers had to find new vocations. The impact was palpable, and the hard-hit timber industry spent the next 10 or 11 years treading water until the next major disruption. Although this event, COVID-19, has propelled us in a more favorable direction, we are still dealing with “scar tissue”.
Some measures of pre-COVID-19 normalcy have been restored, but many issues that arose or were exacerbated during the public health emergency persist. The supply chain continues to struggle, for example. There are weather issues, COVID-19 issues, newspaper availability issues, and unresolved trade issues between Canada and the United States. The list is long, but a few areas are particularly troubling.
• Labor shortages are out of control at all supply chain stops, and will likely remain so for the next five to ten years. We can’t do everything we used to do in a day with all the other issues still in play. So who’s going to do the work? It’s not like we can just flip a switch and have a bunch of people come in and get it all done.
• Commodity prices soared, helping the average price of a single-family home in the United States continue its upward trajectory. That figure now stands at over $300,000, which is out of reach for many, especially first-time buyers. I’ve heard arguments that today’s younger generations care less about property, but I disagree. I think everyone still wants to own their living space – the pandemic has obviously highlighted that. Home ownership is still the ultimate goal for many people, and as an industry, we are on the front lines of making that possible.
Lumber, heal yourself
That being said, the industry has opportunities ahead to fix some of the areas where it is hurting.
Self-promotion: For every worker another industry lands, that’s one less we have the ability to capture. Once they arrive, people may change employers, but they tend not to leave the lumber or building materials ecosystem. At Amerhart, some of our employees have 25, 35, 40 years of experience in; it’s a common theme with other companies. The question becomes how to fill the funnel? How do we convey the message of why someone should be in this industry? We need to be able to convey that you can make a good living as a plumber, or in the trades, or working in a sawmill, or working for a wholesale lumber distributor.
Time will tell, but perhaps the industry’s newfound prominence in the public eye will help promote his career potential. The lumber industry has had more visibility in the news for the average person than ever before, thanks to more mainstream stories, the industry’s presence on CNBC and other platforms, and even memes spread on social networks.
Priority to sustainability: A big part of improving the status of the lumber industry comes down to playing it right. It’s hard to find a product that grows freely and can be managed sustainably. We make meaningful contributions to people’s lives and we do so responsibly. We provide an essential service, and where you live has become much more important during COVID-19.
As we emerge from the pandemic, we can take advantage of this. The sustainability message is a good way to do this. It is up to us to ensure that the message is not only heard loud and clear, but that it is heard outside the industry. Maybe if we could talk about it in a bigger context – why it matters to the city you live in, for example – it will resonate with you.
No matter what you think about consolidation – which is happening at all levels of the timber industry – big companies could help in this effort because they have the resources and the scale to deliver these kinds of messages.
Innovation: If demand increases and the pool of workers shrinks, it will be impossible to keep pace. What are the alternatives ? It’s either automation or finding a way to get things done with less staff. Given the shortage of tractor-trailer drivers, for example, this means advancing the concept of self-driving, making the job of a truck driver easier, or automating other parts of our operations: receiving materials, loading trucks, etc have to give. Many companies are already rethinking logistics, and third-party involvement in the segment is sure to grow in the future.
Additionally, we could see significant disruption in the residential market, with new materials or technologies such as 3D printing likely to reduce costs. The industry could also revisit the potential of manufactured homes and manufactured homes as cost-cutting options that have garnered a lot of hype in the past but failed to have a lasting impact at scale.
Consolidation can help promote movement here too, thanks to the efficiencies it creates. Eight steps in a supply chain will obviously work better than 17. So when you’re talking about making housing affordable and fostering innovation, getting there might be faster with fewer players and more streamlined relationships than with three times more companies and less transparency.
A healthier future?
These themes are likely to continue long term, but for now, the COVID-19 pandemic has taught the wood products industry an important lesson about self-care. The entire supply chain, from wholesalers to retailers to builders, is increasingly aware of how and where they are thriving in the business. There is more thinking centered around where a company gets its products, who it partners with, and control over inputs and raw materials. When you can’t get a part for a $500,000 machine because it’s sitting on a barge in the middle of the Pacific Ocean, you start wondering if maybe we should make them somewhere closer. from our home.
There is also a recognition that we can no longer do everything for everyone all the time. In the past, a company could run its factory 24/7, 365 days a year, producing as much output as possible no matter what. There is now a greater sensitivity to operating in a smarter way that delivers lasting success. Everyone, including Amerhart, is exploring this path for their individual business. Our business has grown and built a reputation by always saying “yes” to anything asked of us. We just can’t do that anymore, we don’t have enough staff. We have to pick and choose where we want to focus.
We must also overcome our apprehension. Today’s business climate is very much like the period before the Great Recession, and there is a sense of anxiety that our good fortune will not last. It’s like things are too good to be true, something is waiting to hit the fan and we’re not ready for anything. In turn, there is sometimes a reluctance to make the necessary investments. And it’s also scar tissue.
–Chad Warpinski is president of 11-branch Midwest distributor Amerhart, Green Bay, Wi. (www.amerhart.com).