DuPont's Patrick Owens, Americas Business Segment Manager for Commercial, deals with the commercial side of both solid surface and engineered stone. He has been involved in the surfacing area for over 10 years and with DuPont for 21, also working on the OEM side to take solid surface beyond the countertop.
DuPont has led the effort to develop the commercial construction market for the better part of 30 years, and Owens' duties involve leading the company's strategic efforts to capture the existing market and expand the space available to solid surface and engineered stone.
The commercial side of the industry continues to grow, but navigating it is complex. The commercial market has two major parts in its value chain: The design end, where architects and designers develop ideas and create plans, and the construction end, where the building takes place and fabricators play an integral role.
Owens generously shared his time and insight into the world of commercial fabrication. For those of you pondering a jump into that side, this information may prove to be invaluable.
SSM: What differences should fabricators take note of if they want to add commercial work to their operations?
Owens: For one thing, there is no average price in commercial. The price is dictated by the value created as well as the specific project. Your cost structures have to be more variable so you can respond to rapid ramp up of capacity if necessary when a large project falls into your lap. You need to have a more sophisticated understanding of working capital requirements because construction payment terms are different than residential payment terms. With commercial billing, you can sometimes wait 60, 90 or 120 days to get paid by the general contractor, who is waiting to get paid by his or her customers.
There are a couple of levels of opportunity in the commercial market for fabricators. I look at it as a pyramid. The base of the pyramid has the most space and is where most fabricators are today. Most fabricators look at commercial work as opportunistic. In the period of time they have been in business, they've developed relationships with some local resources, such as general contractors, construction managers and facility planners. And they take orders from these people when they happen to have an opportunity. And typically, based on relationship, they'll be the default go-to person for that commercial marketplace. Commercial business is a steady percentage of their business, but the majority of their business, by far, is residential.
The next step up on the pyramid, which is a little smaller space, is made up of fabricators who are beginning to develop a competency in commercial work. Those fabricators may be creating some demand in the marketplace in which they are actively trying to capture commercial projects, but they are still early in the process and are learning how to compete in commercial. They are probably winning less than 50 percent of the bids they participate in. But, they are coming up the curve and are developing the capability.
At the top of the pyramid, the smallest space, are today's commercial fabricators. There are very few focused mainly on commercial, compared to the total number of fabricators out there, but they are extremely competitive and can basically dictate the speed at which they grow. The difference between the commercially established fabricator and a fabricator that looks at commercial opportunistically is the established fabricator has demand establishment capability. He or she can actually determine his or her own fate rather than waiting on a retail dealer, builder or a consumer. The commercial fabricator has much more control of his or her destiny by virtue of the fact that they control the demand creation to a certain extent.