Succeeding in Inflationary Times Practical Ideas for the Producer Presented by Bill Ray of Precast Consulting

2 Succeeding in Inflationary Times Practical Ideas for the Producer Agenda  Precast Costs  Precast markets  Inflationary responses  Cost Reduction That Works Cement Reinforcing steel Fuel & transportation Labor costs  Summary

3 Succeeding in Inflationary Times Practical Ideas for the Producer Who is Bill Ray Principal at Precast Consulting Background  Business ownerPCI certified producer  General managerSales exceeding $15 million  Project managerProjects exceeding $ 10 million  Chief fin. OfficerSales exceeding $150 million  Education MBA University of Chicago BS Florida state Contact info:

4 Succeeding in Inflationary Times Practical Ideas for the Producer 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 Succeeding in Inflationary Times Practical Ideas for the Producer 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 Succeeding in Inflationary Times Practical Ideas for the Producer 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 Succeeding in Inflationary Times Practical Ideas for the Producer Proven methods that will offset higher costs

8 Succeeding in Inflationary Times Practical Ideas for the Producer Cement Costs  Will cement reach $100/ton?

9 Succeeding in Inflationary Times Practical Ideas for the Producer Cement Costs Batch Plant Controls  Aggregate Moisture Control Pile rotation Watering management Bin moisture Microwave moister meter  Chemical Control Pre-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 Succeeding in Inflationary Times Practical Ideas for the Producer Cement Costs Management  Place the batch plant under good management Minimize organizational layers Provide incentives for improvement milestones Start a QC program if you don’t have one now  Begin a training program Mix design for salaried supervision QC methods for QC technician Batch plant training for operators  Statistical Process Control Standard deviation for breaks Tools for tighter control

11 Succeeding in Inflationary Times Practical Ideas for the Producer Cement Costs – reduce mix $5/yd

12 Succeeding in Inflationary Times Practical Ideas for the Producer Reinforcing Steel  Will rebar double in price ?  Will the price pull-back actually happen?

13 Succeeding in Inflationary Times Practical Ideas for the Producer Reinforcing Steel Design Review  “Feel good steel” More bars, heavier bars than engineering requirements Reductions of 5% are typical  Over-design product Standard product exceeds stated engineering requirements Submit a proprietary design Bid an alternate to the standard design

14 Succeeding in Inflationary Times Practical Ideas for the Producer Reinforcing Steel Synthetic Fibers replace steel mesh  Can be used in many underground applications Widely accepted in septic tanks Good application to vaults Performance equivalence in manholes  Significant savings Septic tanks 10-15% in production cost savings Largest savings in labor Increased plant productivity

15 Succeeding in Inflationary Times Practical Ideas for the Producer Synthetic Fibers replace steel mesh

16 Succeeding in Inflationary Times Practical Ideas for the Producer Reinforcing Steel Higher steel price means new competitive standing  Short span bridges Steel bridge beams are up sharply Speed of erection favors precast  Shelters Cost, availability of small buildings up sharply Security, speed of erection favors precast.  Light poles  Sound barrier wall  Stay in place floor panel systems

17 Succeeding in Inflationary Times Practical Ideas for the Producer Fuel  Fuel costs affect curing heat  Fuel costs affect delivery cost

18 Succeeding in Inflationary Times Practical Ideas for the Producer Fuel Most producers have large savings in curing  Interruptible gas cost/therm is less  Dual fire boilers Gas company will show you when to switch to oil  Boiler efficiency Review curing curve, institute control Inspection by boiler engineer Insulate pipes, kiln Improve R value of curing blankets

19 Succeeding in Inflationary Times Practical Ideas for the Producer Fuel There are opportunities to save in delivery costs  Dispatch training, load consolidation Route selection & load analysis Many producers report 10% savings in vehicle costs  Charge for delivery distance Most producers are delivering loads that loose money  Common Carrier Delivery Under the crane delivery Common carriers are more efficient No back haul 40% savings for qualifying loads

20 Succeeding in Inflationary Times Practical Ideas for the Producer Fuel - Training in routes & consolidation can save 10%

21 Succeeding in Inflationary Times Practical Ideas for the Producer Labor cost Industrial engineering methods  Traditional IE job design analysis  New disciplines Six-sigma Lean Manufacturing  Cost savings 20% or more are typical Work Group Productivity Improvement  Most valuable underutilized resource  Focus on developing skills, teamwork  Reduce turnover  Cost reductions of 10-20% are typical

22 Succeeding in Inflationary Times Practical Ideas for the Producer Labor cost – What’s Lean Manufacturing IE discipline based on continuous improvement Separate activities into value added and waste  Value 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 Succeeding in Inflationary Times Practical Ideas for the Producer Lean Manufacturing – Steel shop example Typically over 90% of work is waste

24 Succeeding in Inflationary Times Practical Ideas for the Producer Labor cost – What’s Lean Manufacturing Reduce waste through:  Standardized tasks  Workplace organization  Visual controls  Plant layout  Building quality in  Mistake proofing  Setup reduction  Focus on work team effectiveness

25 Succeeding in Inflationary Times Practical Ideas for the Producer Labor cost – What’s Lean Manufacturing Lean is about making improvements in processes and teamwork, not by spending money on new equipment  Lean is not high tech – it is low tech  Lean is about great ideas that cost little or no money  Lean is about teamwork, working smarter  Lean is about making small continuous improvements

26 Succeeding in Inflationary Times Practical Ideas for the Producer Labor cost. Cost reductions of 10-20%/year are typical

27 Succeeding in Inflationary Times Practical Ideas for the Producer 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

28 Succeeding in Inflationary Times Practical Ideas for the Producer Proven methods that will offset higher costs

29 Succeeding in Inflationary Times Practical Ideas for the Producer