Manufacturers told: Pay attention to contractors

BY BOB MIODONSKI

ASHEVILLE, N.C. — The aging of America's population and building stock puts contractors in such a favorable economic position that manufacturers should pay more attention to them, two consultants told members of the Plumbing Manufacturers Institute April 2 during their spring meeting here.

"The two most important parts of the value chain are the manufacturer who produces the product and the contractor who installs it," Clark Ellis of industry consulting firm FMI said. "The problem with this is that manufacturers have been concentrating most of their marketing and selling efforts on distributors.

"Distributors are adding less value. Distributors now are much more of a logistics house. The contractor is adding more value."

Some large plumbing manufacturers have been able to stave off this trend by creating consumer awareness of their brands, Ellis said. Consumers, however, don't care about a manufacturer's rebate program with a distributor, so manufacturers should devote more time to developing positive relationships with contractors.

"Adversarial relationships get you nowhere," Ellis told PMI members. "Collaboration has to take place."

Manufacturers that help contractors become more effective might sell more product, he said.

"Would you add more service to someone who adds more value or less value?" he asked. "Get close to contractors; get close to the trades.

"Engage your contractors earlier in the product development cycle. Get a core competency in product development or risk becoming a commodity."

A critical service that manufacturers can provide to contractors is training. Unions have been a primary source for training plumbers, yet union membership continues to wane, Ellis noted. Technical skills are important, although other types of training can help contractors too, such as on how to make the jobsite more productive.

"The biggest area for improvement is communication so that people understand what their job duties are," he said.

A combination of the obsolescence of old buildings and need for new construction will create demand for plumbing products, Ellis said.

Adding to that demand is the fact that fewer homeowners are buying that retirement home in Florida and instead putting their money in their primary residence, said Carl Cullotta of consulting firm Frank Lynn and Associates.

"There's less migration and more remodeling," he said. "The 76 million baby boomers approaching retirement still control a majority of construction spending. Less than half will purchase retirement homes. Many more will remodel or retrofit existing dwellings."

A study commissioned by The Home Depot states that 80% of the aging baby boomers making remodeling purchases can be categorized as "do-it-for-me" buyers who will hire contractors to install products, Cullotta said.

"That means an inevitable decline in the DIY market," Cullotta said. "Contractors are poised to win in the aging of America. The age of the big box is over. I hope you [manufacturers] haven't burned too many bridges with your traditional customers."

Contractors, however, are not immune to aging. Both Cullotta and Ellis agreed that the plumbing industry is getting older as well as doing a poor job of communicating with young people and minorities.

The continued decline in union members means that unions likely will represent less than 20% if all plumbing employees in 10 years, Cullotta said. He predicted a 10% drop in the number of young males entering the plumbing industry with more diverting to other career choices. Hispanics, however, are likely to increase their representation in the labor pool.

Among the trades, only boilermakers have a higher percentage of older workers than plumbers/pipefitters, Ellis said. While 27.7% of boilermakers are 50 and older, 21.6% of plumbers/ pipefitters are.

On the other end of the age spectrum, plumbers/pipefitters will need 17,500 new entrants annually between 2005 and 2015 to maintain the current labor level, Ellis said. The only trades that will need more are equipment operators (22,400), carpenters (22,000) and millwrights (20,100).

"We've really done a poor job of communicating the benefits of the construction industry to young people," Ellis said.

In the next 10 years, the plumbing trades will replace a population dominated by white baby boomers with a much more diverse mix of people, he said. It will feature a high growth rate of Hispanic workers and a phase-out of baby boomers as generation X (born 1965-1980) and millennium generation (1981-1999) take over.