Recently we provided a brief review of 2020 and some of the business lessons learned from the chaos and struggles. One of the main points in that article was that the industries served by CCG - construction, transportation, manufacturing, waste – are essential to the nation’s economic wellbeing.
This post will explore some of the challenges and changes that occurred for each of these industries.
As did nearly every industry, when stay-at-home orders were issued, most construction sites halted work. This led to some initial furloughs and lay-offs as companies determined how to safely bring employees back to work to continue operating. Additionally, the shutdown of material manufacturing facilities led to disruptions in the supply chain, extending lead times and causing price increases for many construction materials (lumber, steel, drywall, etc.) and delaying delivery dates of finished construction.
In addition, the various sectors of construction have been impacted differently. For example:
The ongoing impact remains to be seen, especially for commercial construction as the market for office and retail space takes shape. Expect continued extended lead times and high prices for construction materials but improving confidence due to the roll-out of the vaccine, and an accommodative federal reserve.
On March 18, 2020, to help quell the spread of the coronavirus, the major automakers in Detroit announced a complete shutdown of operations in the U.S., Canada and Mexico, idling factories until at least March 30. This led the way for other manufacturing companies to shutdown temporarily.
The temporary shutdowns allowed the manufacturers to implement safety protocols so they could safely get employees back to work. Short term these temporary shutdowns caused significant disruptions in the supply chain for nearly every raw material and component product. Longer term affects have also materialized.
Despite the volatility and general pessimism in 2020, the U.S. manufacturing industry ended 2020 in good spirits. The Manufacturing Purchasing Managers Index (PMI) for January 2021 hit a 10-year high and while some supply chain delays and raw material shortages can still be expected, it looks like 2021 will be better than 2020.
The initial shutdowns sidelined transportation and logistics companies much like the rest of the world. However, given that the trucking industry moves approximately 75% of the nation’s goods, a full and extended shutdown wasn’t feasible and the demand for consumer goods remained unabated. In fact, the American Trucking Associations’ truck tonnage index shows December 2020 registering the first year-over-year gain since March 2020 and ending the year on a high note.
Key industry statistics and observations include:
For trucking companies, 2020 was very much a roller coaster ride, which is reflected in the graph of the truck tonnage index. The outlook heading into 2021 is fairly optimistic but volatility in tonnage, spot rates and fuel prices are always difficult to predict.
In spite of the work-from-home orders, waste companies remained operational, but the shift from office to home and the closing of restaurants, hotels, gyms and other business altered how and where waste, garbage and recycling were generated.
The changes in waste creation and disposal posed financial challenges for many waste companies. The increased tonnage from residential customers resulted in increased costs, but most companies with municipal contracts or homeowner’s associations (HOA) could not increase contracted prices to offset the rising costs. Companies with subscription business (individual accounts with homeowners) could possibly increase fees, but many homeowners are provided with yearly pricing, so some increases could not be achieved.
Waste companies that operate a variety of equipment types (front-loaders, rear- or side-loaders, roll-off trucks) had the flexibility to make route and fleet deployment adjustments, allowing many to remain profitable despite the challenges.
Regardless of the industry in which you operate, the pandemic exposed the importance of being prepared to address business disruptions and having the resources to adjust your business model to cope with and take advantage of changing markets.
Some form of market volatility can be expected in any industry and being prepared is the best way to survive and capitalize on any opportunity.
Additional Resources:
Construction Material Shortages
COVID Impacts on the Construction Industry
Pandemic Effects on the Construction Industry
U.S. Factories Closed or Open Due to Coronavirus
Coronavirus Impact on Manufacturing Industry