Stone-Cold Challenges
Construction materials across the board have been spiking nationally the past 18 months, another negative impact of the pandemic, and local stone and tile firms find themselves scrambling to keep profit margins from completely disappearing.
The primary culprit to soaring coasts: supply chain woes via a dwindling lack of transportation options. Getting product from point A to B is often fraught with crippling delays and/or skyrocketing costs.
“It’s been a real challenge,” said Dale Butler, an Owner with Salt Lake-based Millcreek Tile & Stone. “We have products delayed for months because of lack of containers, lack of transportation from Asia. We had one order placed in March and we never did get it and had to get alternative product locally.
Butler was specifically referencing stone products, but the same challenges exist in the tile market.
“Tile probably isn’t quite as bad because most [product] comes from local distributors,” said Butler. Lead times have gone out significantly and transportation costs have gone up exponentially. It’s a bidding war for a [shipping] container. Ground transportation has similarly skyrocketed.”
As an example, Butler said the cost of a container has risen from $2,500 to more than $20,000, a nearly ten-fold increase. He also mentioned that on a recent paver quote, what used to be $700 for a truckload is now $1,800, illustrating the price increases associated with ground transportation. It makes staying profitable an even greater challenge than during a normal business climate.
“We primarily are absorbing those costs because we have a contract,” said Butler. “We’re being more careful to line item the transportation and telling clients this is subject to whatever the transportation costs are at the time of [shipping]. We’re typically working a year out or even longer on commercial projects.”
Butler, who has worked in the industry since 1984, continued: “We’re not as profitable as we want to be. We’ve had our guys working overtime the last two months—they’re authorized to work 60-hour weeks, but after about 55 your productivity goes down.”
Alan Jorgensen, CEO of Bedrock Quartz of West Jordan, echoed Butler’s concerns.
“Costs of shipping from Asia and related time constraints have become worse—from six weeks to 10-12 weeks,” said Jorgensen, whose firm is celebrating its 45th year in business since his father, Dave, started the company in 1976 out of the back of his truck, and has grown into a dynamic company that added a 125,000 SF addition in June 2020 to its 25,000 SF headquarters and now boast 150 employees. He gave an example of a recent shipping cost increase from $4,500 to $15,000 – more than triple what it once was pre-pandemic. “There are some serious concerns with global shipping lines and so many layers of problems. We need more port capacity, which takes years to build out. We need more containers. It has put pressure on distributors and caused price increase on all product.”
Labor Shortages Persist
Butler, whose firm has 55 employees, including tile setters, apprentices and helpers, plus three project managers and six other office staff members, mentioned labor constraints as another thorn that puts pressure on firms like his when trying to meet demanding construction schedules. “There is a lack of personnel—we can’t get enough people,” he lamented. “Sometimes you get a good person every six months. Nobody wants to stick around. Sometimes they don’t even show the first day, which is disheartening. Distributors are having the same issue, and they offer a corporate job.”
Jorgensen said finding good workers requires a solid internal training program and plenty of patience as a new employee gets up to speed, adding that creating a workplace that is pleasant and rewarding is essential. Beyond competitive wages [which have also risen significantly the past couple of years], workers demand good workplace conditions and an atmosphere they can truly enjoy.
“We have to be more thoughtful about our culture,” said Jorgensen. “We’re providing ongoing management training to accelerate their growth and [individual] skill sets. All of us need to keep elevating what we’re doing.”
Butler said labor concerns obviously aren’t unique to just his industry. Lack of skilled manpower has forced general contractors to be honest with owners about hitting unreasonable schedule goals.
“I think it’s been a learning process over the last year for general contractors,” he said. “Subcontractors have had [labor issues] for awhile; generals have to adjust their thinking and tell owners the truth [that] it’s going to be a slower process to build buildings now. Covid has had its effect. Delays have been horrendous.”
Product Diversity a Must
Jorgensen said one of the things that has helped Bedrock Quartz—which specializes in stone countertops for kitchens, bathroom/shower installations and custom fireplaces, among other items for homes and commercial businesses—is that it stocks over 100 types of materials.
For years, the firm specialized in laminate-type products before transitioning to various types of stone, including natural stone like granite, marble, and quartzite, along with man-made quartz products and some porcelain.
The company began experimenting with quartz in the early 2000s and quickly had to make the decision to go all-in with stone products, purchasing $150,000 in equipment.
“When we run out of a certain product we can find something else that is close,” he maintained. “Our products are delayed, but not to the extent of other items.” It’s critical to let clients know immediately of potential delays and/or price increases. “Forward communication is key—if we know there is going to be a problem, we try to let [clients] know about it well in advance.”
Automated equipment has been a boon to streamlining production and maximizing labor overhead.
“When we started in the business, CNC [computer numeric control] machines weren’t commonplace,” said Jorgensen. “We got our first one in 2003 and the technology and equipment that processes stone has continued to improve. We’re continuing to see even more future automation with very heavy equipment. We use cranes, vacuum lifters, carts, dollies to lessen the impact to people working on the stone.”
Powerful, high-speed water jet cutting machines are another essential machinery item utilized during the manufacturing process. Large pieces of stone can be digitally measured using laser template devices that capture a 3-D image, programmers then manipulate drawing files used CAD and CAM [computer-aided manufacturing] software, and intricate final pieces are created with much less waste and much faster speeds.
Buter, whose firm deals mainly with tile products, said larger format tile sizes are becoming increasingly popular among owners and architects. The larger tiles sizes include 12” x 24”, 30” x 30”, and 24” x 48” pieces, he said. The new Utah State Office Building in Taylorsville [a renovation of the former American Express headquarters] is an example of a current project that calls for 24” x 48” tile, along with smaller wall tile that is 12” x 24”.
The large-format sizes “are harder at installing,” Butler said, adding that preparation is critical with the larger product, where crews create their own mortar beds and custom surfaces, which allows for faster installation and a higher quality finish. “The prep work has to be perfect. We have to do a lot of prep work for both floors and walls. We actually can flatten surfaces well with our methods.”
Both Butler and Jorgensen said they are optimistic that the challenges their firms currently face with logistics and product delivery will ultimately recede, and that their respective businesses will continue to flourish in Utah’s thriving construction market.
“We get 20 bid invites a day and we’re not accepting any right now—our backlog is big and we don’t want to jeopardize our ability to react to the market, because it’s so fluid right now,” said Butler.
“The element of growing and improving is highly motivating for me,” added Jorgensen. “There is wonderful satisfaction of creating a beautiful product in people’s homes and businesses. We’re creating opportunities for our employees to grow. Our goal is to triple the size of the company over the next 10 years.”
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