Rising material costs, long lead times, and labor shortages have dramatically impacted the commercial roofing industry over the past two years, beginning with the impact of COVID-19 and carrying into today’s supply chain shortages and inflation. In my 28 years of experience – 18 as a concrete coating subcontractor and the last 10 from the manufacturing side of the commercial roofing industry – I have never seen this duration of difficulty. As a vertically challenged former volleyball player and current coach, I am reminded of a grueling five-set side-out match, where you first must win a rally to side-out, and only then can you serve to win another rally to score a point. Matches were often a test of mental and physical stamina more than a burst of your team’s skill.
Many of us are tired and worn out from 1,000 knives and 10,000 cuts to our routines and normal decision-making process. There were so many price increase emails, that for about six months, they may have rivaled the number of email phishing attempts we receive. Fortunately, the roofing industry understands resilience. Roughly 1 million roofing industry workers have shown stamina, and we are learning how to speak together with One Voice.
As with any difficult game against a daunting opponent, we learn something and grow regardless of the match outcome. Looking at the forest through the challenging trees of today, what are the key issues that will remain before we begin the next match?
Skilled Labor Shortage
Unfortunately, labor will remain a key issue. NRCA Roofing Day 2022 in Washington D.C. was a tremendous experience. From the topics raised by the largest contractor organization in the industry, it is no surprise that skilled labor will likely remain the primary issue facing roofing. U.S. demographics are not the bearer of great news with predicted slowing population growth rates. Statistically, the labor participation rate in the U.S. has recovered from its recent low of 60.2% after COVID’s initial impact to its current 62.4%. Sadly, the participation rate has remained on a decline from its peak of 67.3% in early 2000. The Bureau of Labor Statistics forecasts a continued downward trend, projecting a 60.4% rate by 2030.
How will the impact of COVID change this pre-COVID participation forecast? It would be logical to assume COVID did not reverse the current trend. Will the exceptional efforts by contractors, manufacturers, and industry partners to recruit and train replacement and growth workers increase roofing installation capacity? Will we be trading labor with each other regionally and between industries, and simply have winners and losers in the race for teammates? With expanding installation portfolios like walls, envelope products, and solar, what shift will we see at an industry level from labor deployment decisions?
Industry growth requires a significant catalyst in demographics, immigration, or a labor shift from other industries, during a time when many other industries will need similar catalysts.
Productivity Will Be More Critical
The overall construction industry has a glaring productivity issue. From 1995 to 2012, McKinsey reports that construction productivity in worker output declined, whereas manufacturing productivity in worker output increased 1.7 times. McKinsey estimated the lack of productivity improvement impacted the construction industry by over a trillion dollars of GDP. The data from 2007 to 2020 was similarly dismal, showing in specific construction categories that gains in productivity were largely offset by other factors.
While it can be logically argued that commercial roofing is “more productive” due to the increase in single-ply installation, new roofing application methods and tools, worker productivity will be more critical given the difficult labor market. Total cost of ownership of systems and products, total installed hours, and total product life are critical for productivity. When we choose products that require less labor to install with longer effective lives, we make a difference both now and for the next generation of roofers. Solutions for productivity require local specifying and buying decisions to account for labor availability both now and in the future. This may not be the norm today as “think global, act local” has always been a difficult challenge.
Tracking and supporting labor productivity belongs front and center in industry organizations, manufacturers, and contractors alike. Roofing installation labor is a limited resource that needs productivity improvement. An industry that is focused on labor as a limited resource may actively look for positive disruptions. In 2018, the American Trucking Association referenced a 15-year shortage of drivers and said, “The increase in the driver shortage should be a warning to carriers, shippers and policymakers because if conditions don’t change substantively, our industry could be short just over 100,000 drivers in five years.” The 2022 current state, wherein driverless or semi-driverless trucks are not yet visibly impactful to trucking labor productivity or have not yet solved this issue, provides little hope. It would be pleasant to see roofing lead productivity improvements now and not look back 15 years in the future at the same threat. The challenge of productivity will remain and how we handle it will be impactful to all of us.
Rising Risk Environment – For Everyone
I mentioned 10,000 cuts, try 27 billion. Aon estimated 2021 Weather, Climate, and Catastrophe total insured losses from severe convective storms (SCS) at $27 billion dollars. This was the third costliest year on record with three years in a row at $20-plus billion dollars of loss. In 2021, NOAA reported 1,376 tornadoes, below the average of 1,500; however, this was unfortunately bookended by 193 December tornadoes, almost twice the previous December record of 97 in 2002. We sadly learned and will not forget what a derecho is, generating billions of dollars in damage and, more critically, loss of life. It is estimated that 50-65% of insured loss in wind events occur at the roof of a commercial property. It should therefore not be a surprise that those who focus on resilience fare better in these rising risk environments. Reading the 2021 annual report from one of the most recognized names in the commercial building insurance industry, I was struck with one finding that conveyed a lower-than-expected loss ratio in a clearly terrible year of loss: “Consistent with findings from previous years, clients who implemented our recommendations weathered the elements with minimal damage.”