By Diane M. Calabrese / Published December 2016
Look on the bright side. It’s good advice, especially now. As we near the end of 2016, challenges are many. Some are serious; equally serious is resolve among industry members. Meeting any challenge requires a positive outlook and a thorough understanding of reality. Members of our industry possess both.
The strengths of the industry are great. “The people are resourceful and adaptable,” says Gary Scott, president of Alkota Cleaning Systems Inc. in Alcester, SD. “We keep diversifying our businesses and preparing for the future with better programs and products to make everyone involved more successful.”
Steadfastness—think of keeping a sailboat steady in a swell—carries us through the most significant disruptive forces. As such, resoluteness is needed in the current business climate.
“The industry is contracting at this time due to weaknesses in commodity prices,” says Scott. “Oil, natural gas, and coal prices are low and volatile. Energy companies are ‘waiting out’ the tough times and not investing in cleaning equipment.”
It’s not just one sector that poses challenges, explains Scott. “The agricultural market is in the same situation. Corn, soybean, and wheat prices are the lowest they have been in a long time, making it hard for the farmer to break even. They have a wait-and-see attitude when considering cleaning equipment. Other markets are feeling the effects of a slow-growing economy and are delaying purchases of cleaning equipment.”
Evaluating fluctuations in economic activity is an integral part of being able to maneuver and adapt. Pointing to the slow economy as the year ends, Scott is candid in his assessment. “We haven’t faced such a challenging economy since the 2009 recession,” he says. Even in 2009, many in the industry were in businesses old enough to have experienced similar trials. “The years 2000 and 2009 were similar due to the recessions in those years,” says Scott.
Having been through it all before, Scott knows the less-than-robust conditions are not static. “I am optimistic about the industry as always,” says Scott. Although economic activity may be sluggish, it will bustle again because people and not measurements will determine future opportunities and outcomes. “The people in the industry are adaptable and talented and will weather this storm as always and come back stronger than ever,” says Scott. “The people make the industry.”
On September 28 and 29, 2016, the Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce released reports on durable goods (manufacturers’ shipments, inventories, and orders) in August and information on the gross domestic product and corporate profits for the second quarter. (The releases, which were available in early October, are the last available before the deadline for this article.)
Both orders and shipments of manufactured durable goods were down in August, after July had shown an uptick. Shipments were down, too, although they had shown an increase in the two previous months. Inventories, on the other hand, were up in August, as they were in July. Machinery (category) led the increase in inventories.
In short, the data dash hopes that August, a summer month, would encourage commercial transactions, which had been slow all year. (As many readers recall, a slow-moving economy in the early months of the year was often attributed to a harsh winter.)
How slow has 2016 been? The BEA assesses the economy in terms of real GDP (gross domestic product), real GPI (genuine progress indicator), current-dollar GDP, average of real GDP and real GPI, and more. Which-ever evaluation is used, however, the final assessment is similar and indicates weak economic activity.
Averaging GDP and GPI, the BEA reported a 0.6 percent increase in economic activity in the second quarter in contrast to a 0.8 percent increase in the first quarter. So, economic activity actually fell in the second quarter (when the weather was fair).
There are regional differences in economic activity. The BEA reports them, too. For example, in the first quarter of 2016, GDP increased in 37 states and the District of Columbia, but not in the remaining states. In the states showing an increase, there was a big range, with North Dakota leading all. Some of our readers may be experiencing regional economic activity that is either far more vigorous or much weaker than the average for the nation.
Two other pieces of information from the repository available at BEA (www.bea.gov) are worth noting, as they fill out the image of an economy that is not ideal. The U.S. trade balance remains negative. Imports exceeded exports by $40.7 billion in August, an increase over the same measure for July ($39.5 billion). The greatest contributors to economic activity for the first quarter of 2016 were construction, health care and social assistance, and retail trade.
BEA analyses are useful to members of our industry not only in determining whether new investment is a prudent decision, but also in deciding where to invest. For instance, members of our industry who are not now serving customers in health care and social assistance—with equipment for cleaning and cleaning services tailored to the specific sector—might want to consider expanding their products and services to do so.
Like Scott, Roy G. Chappell, CEO of Chappell Supply and Equipment in Oklahoma City, OK, is optimistic. First, he notes, downturns happen from time to time. In many ways, 2016 is like 2008–2009 when we had a housing bubble, he says.
Chappell also has confidence in the people who are the industry. “Every-body’s attitude” is a cause for optimism, he says. At trade shows and in the day-to-day interaction with clients, the focus is on the positive, he explains.
“I see the industry as a whole as picking up,” says Chappell. “Wholesale sales are also increasing, especially in the last four to six months. Dealers are getting a lot of churn in inventory.”
The movement (out and in) of inventory indicates that buyers are acting. In some cases, inventory is moving out before it can be restocked. That’s also a good indicator, says Chappell. “We’re getting to a period of time where inventory is down and will require replenishment.” The replacement will require manufacturers to increase production.
Selling, even in the most difficult periods, demands that customers be given the products they want, so know what they want and understand their unique needs to stay strong. Among the big requirements among customers our industry serves is the disposal of wash water in a way that protects the environment (and meets all local, state, and federal regulations).
“Wastewater is definitely picking up as a customer niche,” says Chappell. “A lot of big industries are taking it upon themselves to deal properly with wastewater.” In other words, he explains, they are not even waiting for regulations. Such industries turn to manufacturers and dealers in our industry capable of providing exactly what they need. Serving them is one example of a way for a member of our industry to stay strong.
“The bigger companies are, the more interested they are in treating wastewater,” says Chappell. There is a proviso though: “They really make you jump through hoops.” He explains the straight-up approach his company takes to serving such industrial firms. “We take a water sample before we sell them the unit, so we know we can treat,” he says.
“Every six months we’re going to sample to make sure we’re meeting city codes,” says Chappell. “One of the challenges in the future will be to train people to make sure they are going to be able to meet expectations.” By that, he means that all people on a company’s team must have a thorough understanding of what they are doing and why.
That’s where alliances among industry members and ongoing education enter the picture. “The one thing I’ve seen in my 35 years in the pressure washer industry is the people involved in the associations are always most progressive and active,” says Chappell.
In the foregoing context, Chappell admits to being a bit puzzled. “I don’t understand why we don’t get more participation in professional organizations,” he says. “Everybody has a need for more education.”
Ongoing training and education for team members are priorities for Chappell at his company, which has been CETA-certified from the inception of that certification. Recently, the company also became ISO-9000 certified. Although the ISO is “very new, it makes a difference already,” he says.
The notion of making a difference is a good one on which to sum up the state of the industry in December 2016. True, the industry is not so vibrant that a business can take a passive approach to serving customers. And, as Chappell and Scott emphasize, businesses committed to our industry never have been and never will be passive.
In the most difficult times, those committed to our industry persevere, adjust, refine, innovate, and keep their focus on excellence. It’s the best way to do business and the only way to stay steady and move forward until the winds shift—as they always do.