Using Warehouses to Store Excess Materials

RCS Influencer Trent Cotney says that he has noticed a trend of smaller contractors needing to store excess materials, and what that means for their monthly rates.

Editor’s note: The following consists of a conversation between RCS Multimedia Producer Megan Ellsworth and Partner of Adams and Reese, Trent Cotney. You can listen to the podcast or read the transcript below.  

Megan Ellsworth: Hello everyone, my name is Megan Ellsworth here at rooferscoffeeshop.com, and I am back again for an influencer response with Trent Cotney. Hi, Trent.

Trent Cotney: Hey, how's it going?

Megan Ellsworth: It's going good. I'm excited to hear what you have to say. The topic for this month is about material coordination, and the question is, "How are contractors balancing just in time ordering with warehousing their own materials? What is best practices for the changing economy?"

Trent Cotney: A big question, all right. A lot's changed in the last year and a half or so. I mean, we went through a huge change with COVID and then with the material shortages. Manufacturing ramped up significantly. And now kind of what we're seeing is there's a glut of materials available through manufacturers. I was talking to some manufacturers last week, they said they're down about 35%, about as low as they've been since 2009. Part of that they think will remedy itself as the year goes on and goes through. But it's interesting to hear that in both residential and commercial. I think part of it is there's plenty of materials available, so just in time really isn't as big an issue because pretty much you can get a lot of what you need right now. I think distribution is kind of the same way. I think contractors also have an overabundance of materials that they bought in anticipation of there being continued shortages.

They're still working through their inventory. A lot of larger commercial contractors have become distributors. They're basically shelling it out to their subs or smaller competition so that they've got materials on hand as well. Looking into the future, I think manufacturing will still have a good year. We got to get to the storms and then once storms hit, I think it'll equalize. I think basically if you combine this year and last year, it's about even, is how I would view it from a manufacturing standpoint.

I think contractors moving forward will no longer just have a just in time. I think everyone will have some on hand. There's going to be at least a week or two's worth of materials on hand. I'd be shocked to see people go to just order and pick up as they need it, because I think the last few years have taught everybody a lesson that all it takes is a couple of blips. And then all of a sudden we've got a year wait time. Especially as we head into storm season, I think a lot of contractors are going to start stocking up shingles and plywood, and that kind of stuff. It'll be interesting to see how the rest of the year plays out.

Megan Ellsworth: I'm also interested to see, and especially with smaller contractors, are they trying to find warehousing space? Or are they just going to do just in time still? Well said.

Trent Cotney: The warehousing is a big issue because the cost of storage has gone up significantly. I saw it was up 14% year over year for storage costs. I've got a couple of storage units I can attest to that, all my rates have gone up monthly. I do think that smaller contractors will warehouse and will store some things, but definitely, it's going to hit the bigger contractors more. The ones that don't have facilities onsite that have to store offsite. It's going to be this way for a little bit, where this is like a slow burn. They keep cranking the interest rates a little bit. You're not going to see any kind of cataclysmic drop, barring some unknown, but it's going to take a while for us to normalize. It's going to be a year plus before we start seeing anything that resembled pre COVID.

Megan Ellsworth: Wow, that's good to hear at least. Thank you so much for a great response this month. Any last words?

Trent Cotney: Everybody needs to go to RoofersCoffeeShop to check out all the latest news and resources. It is the place to go. It's where I go to learn about stuff. Make sure you go there and say hi to Megan and Heidi and the rest of the crew.

Megan Ellsworth: Thanks for that. Awesome. Well, this has been a great conversation and we will chat more next month.

Trent Cotney: Sounds good. Thank you.