Posted by McElroy Metal ● Dec 2, 2021 8:00 AM
Post Frame Panel Manufacturer Pricing and Risk Differences
Product price is an integral part of every buying decision, and there are three factors to consider: sales price, cost, and value. The sales price is represented by what you physically pay for the product; however, it’s essential to also consider cost and value in price discussions.
Product cost includes overall product life expectancy and labor differences to install one product over another. Ultimately, value is the most crucial factor in the equation since it represents what contractors and building owners believe the product is worth.
Let’s consider an example to bring some clarity to this topic. Factory eave notching on standing seam panels is a service that national manufacturers typically offer more often than regional manufacturers.
Factory notched panels can save contractors between 2-3 minutes on every panel. So, suppose a project has 100 panels. In that case, crews spend approximately 5 “additional” hours measuring, cutting, and folding panels before installation. Not to mention the time wasted by other crew members waiting during the process.
As you can see, costs can spiral rather quickly. Yet if someone with eave notching capability manufactured those same panels, chances are good they could arrive at the job site ready to be unpacked and immediately installed on the roof. Again, given current labor shortages, finding crew efficiencies are the name of the game. In this example, when labor is considered, panels with eave notching that “cost” more might be the most economical option.
Consequently, if eave notching is an essential criterion, you should check availability with both national and regional manufacturers while doing your research. While they are most often available from national manufacturers, a few regional manufacturers are offering this technology.
Trim is another excellent example. Some regional manufacturers offer trim only in 10’ length, yet national manufacturers often produce trim up to 20’ in length. The 10’ option requires crew members to handle twice as much material, require extra time to perform an adequate lap condition, and install sealants or butyl tape.
Laps can also create an aesthetic concern with owners and, perhaps most importantly, allow one more opportunity for water to infiltrate into the building. Consequently, while the trim “price” might be higher from a national manufacturer, the “cost” for longer trim may be considerably lower than that offered by a regional manufacturer.
National vs. Regional: Regional roll former’s products will almost always be lower “priced” than their national manufacturer counterparts; however, it’s essential to realize that they can actually “cost” more in the long run. Sometimes the additional costs can occur in labor due to the lower quality manufacturing equipment. In other cases, the overall “cost” can be higher because the lower quality paint and substrates don’t perform as well as those historically used by national manufacturers.
Summary: While contractors can experience soft “costs” during installation, building owners are faced with long-term “cost” consequences if the material doesn’t perform as expected. For this reason, contractors are beginning to bring building owners into the manufacturer selection process and ultimately place a higher emphasis on value than price.
Only you can decide what is best for your customers or projects. While “price” is a healthy part of every purchase decision, “cost” and ultimately “value” should also be considered in the decision-making process.
Admittedly, successful business owners and consumers keep a constant eye on trends. They also routinely consider risk in their decision-making. Granted, some folks by nature are risk-averse while others are risk-tolerant.
Regardless of which profile best fits you, the reality is that you intentionally think about risk. For example, interest rates or product costs might go up if you decide to wait until next year to start a project. It’s a risk you either accept or decline. Taking the risk means you might delay your project start. But you might also decide the risk (or potential loss is too great) and move forward with your project now.
Interestingly enough, many contractors, distributors, and building owners fail to consider risk in their decision-making process when comparing national and regional manufacturers. Much like your other decisions, the risk is an essential element and bears consideration.
There are three main types of risk concerning national vs. regional manufacturers: risks rooted in product quality, risks involving the manufacturer solvency, and, lastly, risks to your reputation.
Product Quality: Let’s start by addressing risks rooted in product quality. First, it’s essential to realize that product failures can happen whether you’re working with a national or regional manufacturer. Metal panels are no different from any other product you might purchase. When something in the supply chain doesn’t work as expected, products can fail.
Here’s the real risk on this topic: national and regional manufacturers often work with entirely different types of suppliers. National manufacturers work with a tiny number of the most respected steel mills in the industry, many of whom have been in business for literally decades. Conversely, regional manufacturers rarely buy their coils directly from the steel mills.
Instead, they buy their coils from a middle man, often referred to as a service center. And instead of buying based on relationships and loyalty like the national players do, regional manufacturers often purchase their coils primarily on price.
While there are many reputable service centers in the market that sell high-quality, domestic (US-produced) steel, others offer a much lower product quality. As an example, it’s not unusual for service centers to supply foreign instead of US-produced steel. Does that mean that foreign steel is bad? Not necessarily; however, a large percentage of our contractors and building owners, and almost all government projects, place a significant emphasis on using American-made products.
In those cases, working with a service center supplying foreign steel is often a resounding no-go. But even for those without a strong opinion of domestic (US produced) vs. foreign steel, this decision should be heavily considered. Like many other products, there are many different levels of quality available from foreign steel producers. Some are high in quality, but you’ll also find some poor-quality products that may even be coated with generic paint systems.
For all of the reasons mentioned above, it’s best to ask your manufacturer or supplier about their source of steel. You might also consider requesting mill certifications that show the actual specifications and origin of the steel (foreign or domestic). While these aren’t automatically provided, steel mills do provide mill certifications upon request.
Bear in mind; this isn’t to say that you will have more product failures when working with a regional vs. national manufacturer, merely that you assume more risk by working with someone with an inconsistent supply chain. While catastrophic failures aren’t common in our industry, they do happen. The question to consider is if the risk is acceptable to you. If you choose to work with a regional manufacturer, weighing the risk means answering these types of questions:
- Will the regional manufacturers’ records be good enough to determine who supplied the coil to them?
- Will the service center or regional roll-former still be in business to respond to the claim?
- Has the regional manufacturer done enough business with the service center to gain any loyalty and sway in the event of gray areas?
- Is the material supplied by the service center seconds or lesser quality than that provided by national manufacturers?
Manufacturer Risks: The second type of risk to evaluate involves the actual national or regional manufacturer. We’ve talked rather frankly in this blog post about the differences in their respective market approach. These differences are especially relevant when considering risk.
To reiterate, many regional manufacturers position themselves on lead time and low cost, whereas national manufacturers position themselves on their long-term reputation, service, and product quality.
Stability and long-term reputations are key hallmarks for most national manufacturers. That’s why most of them have been in business for literally decades. For example, McElroy Metal is privately owned by the McElroy family and has been in business for over 57 years. We couldn’t have achieved that type of success without providing quality products and caring for our customers.
In sharp contrast lie the regional manufacturers who appear (and disappear) often overnight. The reality is that some have been in business only 2-5 years. With minimal capital required to jump into the manufacturing business, they find it equally easy to jump out in some cases, leaving customers holding the bag.
Service interruptions are another differentiator between national and regional players. Severe weather events like tornados and hurricanes, and even structure fires can easily idle the single location manufacturing facilities that are the regional manufacturers’ hallmarks.
Conversely, because national manufacturers have multiple facilities, they can flex production during these events to other facilities and continue uninterrupted material supply to their customers. While granted, these events don’t occur often, the risk to business operations is significant when they do. Consequently, working with smaller regional manufacturers carries more risk than working with their national counterparts.
Does all of this mean that you shouldn’t partner with a regional manufacturer? Not necessarily. But it does mean that before agreeing to do so, you should thoroughly consider and be willing to accept the risks associated. If you choose to work with a regional manufacturer, weighing this risk means answering questions like:
- Will the regional manufacturer still be in business if/when you have a product issue?
- Is the regional manufacturer supplying you the same quality of material as their national counterparts?
- Since service may not be a primary component of their marketing approach, can you expect support from them when you need it?
- How will you get products to satisfy your customers and keep crews busy if the facility unexpectedly closes due to an unexpected fire or weather event?
Reputation Risk: The last of the three risks to consider is potentially the most important. Whether you choose a regional or national manufacturer, that choice becomes an extension of you, your brand, and ultimately your reputation. Consequently, it’s vital to pick a manufacturer who aligns with your values. After all, no one has more at stake than you do.
While satisfied customers can be generous with praise, unsatisfied customers are often vocal about their dissatisfaction. Statistics tell us that one dissatisfied customer tells seven more people. While that’s not the kind of publicity any business owner wants, buying and selling on price instead of quality can encourage just that behavior. As Benjamin Franklin once said, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”
Again, the question to consider is if the risk is acceptable to you. If you choose to work with a regional manufacturer, weighing this risk means answering these types of questions:
- What happens to your reputation if you can’t resolve product issues for your customers?
- Ultimately what do you want your legacy to be? (supplying quality products or lower-priced products with perhaps quicker lead-time)
- How do you support your customers if the manufacturer you used goes out of business?
National vs. Regional: Given their inconsistent suppliers, the propensity to pop into and out of the market, reduced financial strength, and impact on contractor reputations, most would agree that regional manufacturers present far greater risk than national manufacturers.
Summary: It’s impossible to eliminate risk. So it’s essential to intentionally consider the risks different types of manufacturers expose you to in your decision-making process. For the reasons we’ve discussed, working with regional manufacturers often carries more risk than working with national manufacturers. Only you can decide if the additional risk is worth your reputation.
About McElroy Metal
Since 1963, McElroy Metal has served the construction industry with quality products and excellent customer service. The family-owned components manufacturer is headquartered in Bossier City, La., and has 13 manufacturing facilities across the United States. Quality, service and performance have been the cornerstone of McElroy Metal’s business philosophy and have contributed to the success of the company through the years. As a preferred service provider, these values will continue to be at the forefront of McElroy Metal’s model along with a strong focus on the customer.
Topics: Post Frame