What Keeps Manufacturers Up At Night?

WWEMA just concluded its 96th Annual Meeting at the charming Wigwam Resort in Arizona. The general managers of the surrounding communities' water and wastewater facilities were among this year's program speakers...

by Dawn C. Kristof, WWEMA President

WWEMA just concluded its 96th Annual Meeting at the charming Wigwam Resort in Arizona. The general managers of the surrounding communities' water and wastewater facilities were among this year's program speakers who shared their views about the future of the industry. It was somewhat ironic that as they spoke about the historic drought that has recently plagued their communities, their voices were being muffled out by thunder claps as the heavens opened up to give the Phoenix area its first major rainfall of the year.

Besides being grateful to WWEMA for the good luck it brought to the area, they were gracious in their candor about the challenges they face and the types of technologies they seek to meet their water quality and quantities needs. Other topics addressed on this year's program included changing delivery and procurement methods, the state of the water industry, and Wall Street's view on the marketplace.

The quality of market intelligence offered by our outside speakers was comparable to that shared among our members who participated in roundtable sessions. Senior executives from the industry's leading providers of water and wastewater products and services, and their manufacturer representatives, were challenged with considering two questions at their roundtables. First, "Will the water and wastewater industry experience a tidal wave of growth in the coming years in response to pent up demand for infrastructure needs, population growth and regulatory demands or will business continue to trickle along as usual?" The second question, simply put, was "What keeps you up at night?"

Here is the top ten list of responses:

Funding

Until the issue of funding is resolved with consumers being charged full cost-of-service rates and the state revolving fund program being adequately capitalized to provide a steady source of financial assistance, there will be no tidal wave of new investment and the industry will continue to trickle along at a modest pace.

Procurement

The industry is still plagued with a low-bid mentality that sacrifices quality, and ultimately long-term savings, for short-term lowest price and lowest denominator product offerings.

Bidding

Unrealistic terms and conditions continue to be passed along to suppliers, forcing reputable companies to walk away from projects and leaving inferior suppliers with no assets willing to accept any terms and conditions.

Work Force

The graying - and sometimes balding - of the workforce, both of employees and customers, threatens a loss of institutional knowledge and creates a challenge of attracting, securing, training and keeping younger, more mobile professionals who are more interested in looking at a computer screen than watching floatables in a water stream!

Operational Costs

Fees continue to skyrocket for health insurance and workman's compensation; revocable letters of credit are being demanded in lieu of bonds; 401(K)s are replacing pensions, negating the need for employees to stay with their companies in order to get fully vested; complying with the Oxley-Sarbanes Act is resource intensive and costly.

Manufacturing Costs

The costs and availability of raw materials, especially stainless steel and concrete, are causing havoc in the marketplace, as is the cost of transportation with diesel gas price hikes having a ripple effect on ocean freight costs and trucking surcharges.

Security

Security at ports has created an additional burden on manufacturers in guaranteeing timely delivery of their products, not to mention the unknown consequences should another 9-11 occur on American soil.

Technology Shifts

While federal and state regulations have been a catalyst behind the demand for the technologies provided by our member companies, the regulatory evolutionary process causes uncertainly in the marketplace as end users debate whether to invest in certain technologies that are appropriate today but may be inadequate for tomorrow's regulatory regime.

Economy

Another factor out of the manufacturers' control but of critical importance to their economic welfare is the general health of the global economy. Should the war stabilize and the economy improve, cities and industry will have greater resources to expend on environmental improvement projects. The reverse holds true as well.

Forecasting

Lastly, today's senior executives in the water and wastewater equipment community are challenged with trying to forecast sales and predict capital budgets and expenditures of their customer base. WWEMA's 2005 Strategic Plan has identified the lack of good market data as a serious problem and has committed to generating this information for its members in the coming year.

In summary, the members of our Association are "cautiously optimistic" about the outlook for the water and wastewater industry. On a range of 1 to 10, with 1 being a "trickle" and 10 being a "tidal wave" of future growth, they view the marketplace in the 6-7 range and will continue to seek ways to turn today's challenges into tomorrow's opportunities.

About the author:
Dawn Kristof is president of the Water and Wastewater Equipment Manufacturers Association. WWEMA was established as a non-profit trade organization in 1908 and represents the interests of the nation's leading producers of water and wastewater technologies used in municipal and industrial applications worldwide.

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