Don Ferrier is your customer, even though he doesn't buy the bulk of his framing lumber from you anymore. In fact, except for what he needs for interior walls, Ferrier doesn't buy framing lumber at all. For the envelopes of the half-dozen custom homes he builds every year in the Fort Worth, Texas, area, he uses structural insulated panels (SIPs). And he's not the only one.
Conventional wood framing still dominates the U.S. home building industry, commanding a nearly 80% share of above-grade walls, according to the NAHB Research Center. But SIPs, insulated concrete forms (ICFs), structural steel framing, and precast concrete panels–materials and systems that LBM dealers rarely stock or even source–have helped steadily reduce framing lumber's market share by more than 10% in the last decade.
Credit: Courtesy Sipa
With the combined pressures of increasing energy costs (and consumer consciousness), ever-faster cycle times, skilled-labor shortages, concern about customer satisfaction rankings, and waning lumber quality, housing insiders predict the trend will continue.
All of which is not to say that dealers are, or will be, left out of the loop. A few have taken to stocking, sourcing, and/or delivering such systems, while others inventory accessories, fill-ins, tools, and fasteners to support customers who have made the switch to alternative methods and materials.
Credit: Portland Cement Association
Still, a combined estimated market share of 10% is hardly enough critical mass of contractor demand to push or threaten most dealers to change their SKUs. Both SIPs and ICFs take up a lot of yard space for such relatively low demand; despite being high-margin products, they are also perhaps 5% to 10% more expensive on a per-foot, materials-only basis compared to framing lumber. Those factors, among other hindrances, have led manufacturers to employ mostly direct or two-step supply chain models–so far. "We'd love to sell through lumberyards, but we still need to watchdog how the product is sold and serviced," says Damien Pataluna, president of FischerSIPS, a manufacturer in Louisville, Ky. "Once we get standardized, like the engineered lumber industry, that will open the doors to dealers."
Until then, forward-thinking dealers can educate themselves about ICFs, SIPs, steel framing, and precast concrete in anticipation of increasing builder demand, starting now.
Insulated Concrete Forms
Easily placed over and within standard rebar, lightweight insulated concrete forms create a permanently insulated poured concrete wall above and below grade, speeding cycle time and improving the home's energy performance.
Credit: Portland Cement Association
ICFs are molded from expanded or extruded polystyrene into lightweight, interlocking foam blocks that serve as permanent forms for poured concrete walls. The resulting walls combine the thermal mass and strength of concrete with the energy-saving benefits of integral insulation panels. Sophisticated systems feature metal inserts that act like rebar within the blocks and as vertical, standard on-center nailing strips on both faces of the insulated wall structure.
Of the alternative structural systems trying to enter the mainstream of housing construction, ICFs have made the most headway. The NAHB has tracked the industry's trajectory from a 0.7% market share of above-grade walls for single-family homes in 1997 to a 6.5% share in 2006–equaling more than 103,000 homes last year alone. About three-quarters of the 50-million-plus square feet of ICFs sold annually are used in residential construction.
Once a cottage industry that first took hold as a below-grade system in the northern U.S. and in Canada for its obvious energy-saving benefits, the ICF business is maturing rapidly. There are now about 60 manufacturers distributing ICFs across the country, mostly through regional two-steppers; the International Building Code accepts ICFs among poured-in-place concrete systems, enabling their use nationwide. Big-name suppliers such as Owens Corning (a proprietary ICF system), Dow (sealants), and Simpson Strong-Tie (connectors and bracing), among other logical players, have piggybacked on the system's growing popularity and legitimacy among builders and contractors.
ICFs' most recent popularity is fueled by current events, primarily the Gulf Coast hurricane seasons of 2004 and 2005, as well as nationwide energy price hikes and the green building trend. "We're talking about a system that resists fire and high winds, creates an energy-efficient home, mitigates noise, and is highly durable," says Jim Niehoff, residential promotion manager for the Portland Cement Association in Skokie, Ill., which counts ICFs as the fastest-growing segment of the concrete and masonry systems available for home building.
ICFs also offer production benefits. "Builders love them because they're easier and faster to use [than removable forms] and there's one less sub [insulation] to hire," says Frank Chambers, regional vice president of The Contractor Yard, a Pro-Build dealer in Nashville, Tenn. The forms, he says, are easier and faster for contractors to set in the region's hilly terrain. Combined, the dealer's Knoxville and Cook, Tenn., locations sell about $600,000 worth of ICFs annually. "Those locations carry a good inventory and it turns quickly."
Minnesota custom builder John Vogstrom took to using ICFs eight years ago, specifically to reduce the potential for mold and moisture-related issues that feast in the cavities of framed walls but have no place to fester in solid concrete with integral insulation. Since then, he's further leveraged the energy efficiency of the system to get the most out of geothermal heating, among other green building practices; he also enjoys the ability to create larger window openings than he could with lumber.
Working in a market that was ahead of the current curve for the technology and that currently purchases the most ICFs of any state, Vogstrom has no problem accessing ICFs from several competitive suppliers outside of his lumberyard. "They didn't offer to source it for me, but they couldn't sell it at the same price that I get, anyway," he says. "I still spend a lot of money there, and they're glad to get my business." Short of stocking ICFs, dealers do have an opportunity to support customers who make the switch. Like any system, ICFs have ancillary products, such as snap-together window bucks, tie and drywall anchors, sealants, and a variety of power tools that take up less shelf space than the forms themselves and deliver an attractive margin.
Still, ICFs' 5% to 10% materials-only price premium over CMUs and poured concrete, not considering the labor savings of having integral insulation and permanent forms, is a tough nut to crack with price-sensitive builders. And, ICFs take up a lot of yard space for their weight. "Shipping is a big issue," says Chambers. "The product is so light, but you have to get a tractor-trailer load [to inventory enough volume]."
ICFs also suffer from regional building cultures that are married to stick framing and slabs (as opposed to more masonry-friendly markets in the South and basement-building areas up North) and from a shortage of trained installers to meet demand.
To address the latter issue, the ICF industry is working with the NAHB and its Home Builders Institute educational arm, as well as the United Brotherhood of Carpenters union, to "transition them from stick-framing to ICFs and concrete," Niehoff says. Owens Corning, meanwhile, announced a training and certification program for its ICF system earlier this year.
As for distribution, the ICF industry seems typically fragmented for a relatively young industry. While some manufacturers are actively initiating direct sales relationships with builders to help keep prices competitive, others are willing to suffer supply channel markups of up to three times the cost of a block to enable local support for the technology. "A manufacturer 1,000 miles away can't provide the level of support that a local dealer can," says Dave Zimmerman of WinForm, an ICF distributor in Brodhead, Wis.
Even so, the regional, two-step distribution model will likely continue to dominate. "Some dealers are getting into it, but the distribution right now works well [for the industry]," says Niehoff. "Distributors are knowledgeable about the product, have a secure geographic territory, and want to focus on selling ICFs and training others [contractors] to install them."
SIPs
Structural insulated panels serve as both roof (left) and wall panels (right) for the home's structural frame. Like ICFs, the system speeds cycle time and improves energy efficiency; as a wood-based system, however, SIPs might be easier for builders and framers to employ.
Credit: Courtesy Sipa
Like ICFs, structural insulated panels combine multiple building materials into one, sandwiching a thick foam panel between two layers of OSB to create structural wall and roof sections. The resulting panel is ready to finish on both faces, reducing cycle time. It also creates a thermally superior and more reliable envelope to a stick-framed house; a 4-inch SIP wall is 36% more thermally efficient than an insulated 2x4 wall, according to the Oak Ridge National Laboratory (part of the Department of Energy) in Oak Ridge, Tenn.
According to NAHB research, SIPs were used as the structural wall material for 1.7% of all new, single-family homes built in 2005, a full percentage point higher than five years earlier and now representing nearly 30,000 new homes annually.
Despite its small share, the technology's upside is perhaps even greater than ICFs'. Simply, SIPs are a wood-based system, making them more familiar to framers than a concrete alternative. As such, SIPs are easily manipulated on site with common construction tools, are compatible with other wood framing materials and practices, and offer greater design flexibility and mainstream marketability. As full wall panels, they often assemble even faster than ICFs, and require no pour or cure time. Those savings help balance a 15% or more materials-only price difference between SIPs and stick framing, one of several hurdles the industry faces in its fight for market share.
SIPs' installed cost savings, and the system's energy-saving benefits, are what drove Ferrier to the technology. "When buyers are looking for a truly high-performance home, you can't build the standard way," he says. "SIPs give me the biggest bang for my energy-efficient buck."
The market share for SIPs, forged in the custom-home realm, could get a big boost if other large-volume builders follow the lead of Pulte Homes, the nation's second-largest builder. Two years ago, the company opened a manufacturing plant in Manassas, Va., under its Pulte Home Sciences Division, to build a variety of engineered building systems, including SIPs. The panels, reports the builder, shave nearly three weeks off of its already efficient production schedule, and with less skilled labor. Pulte has used the technology to build 1,000 new homes near the facility and plans to expand its geographic reach as the operation ramps up to full capacity.
Historically hindered by building code acceptance, especially at the local level where building inspectors are typically wary of new methods and materials, recent advances on that front should help. A recently released prescriptive method for SIP wall construction developed by the Partnership for Advancing Technology in Housing, should grease SIPs' road into housing's mainstream. The standardized method for calculating and using SIPs enables builders to gain code approval without the stamp of a licensed architect or engineer and puts the technology on par, code-wise, with ICFs and steel framing in residential construction.
The question is whether the SIPs industry is ready for a larger wave of demand from the housing industry. "We're seeing more demand, but there aren't experienced and qualified contractors in the field to install it," says Al Cobb, director of SIP School, an outreach education and training effort based in Shenandoah Junction, W.Va.
Like ICFs, the SIPs industry also is still grappling with its supply chain model. Bill Wachtler, executive director of the Structural Insulated Panel Association in Gig Harbor, Wash., isn't aware of any lumberyards currently stocking SIPs, though some may be acting as distributors or middlemen. "It's been talked about on a number of occasions, but you simply can't throw an 8-by-24 [SIPs] panel in the back of a pickup," he says. "I could see a customer ordering SIPs as an option when purchasing a house package [from a dealer], but not walking down an aisle and picking out a panel."
Manufacturers and even SIPs builders also seem hesitant to turn the reins over to local dealers. "At a lumberyard, you can just swing by and grab a few sticks from the pile when you need them," says Gary Pugh, a SIPs builder and industry advocate in Santa Rosa, Calif. "With SIPs, you have to think about them long before you start building."
Though Wachtler can envision LBM dealers one day supplying SIPs, the most likely scenario is one in which manufacturers sell their systems through existing component manufacturers. "As that industry matures in supplying wall panels, it becomes a faster distribution route for us," he says. "They already have the engineering, equipment, and expertise in making and selling wall systems to builders and lumberyards."
Until then, builders are left to look for the best SIPs they can find and afford, often going out of market to get them. Ferrier, for instance, has his panels shipped from 800 miles away. Both he and Pugh, however, still rely on their local LBM dealers for interior studs, windows, millwork, sealants, and fasteners. "They give us referrals [to consumers asking about SIPs]," says Pugh. "It's not a threat."
At least in the short term, says Pugh, lumber dealers interested in selling SIPs will likely be kept on a tight leash. "If lumberyards are willing to work with suppliers as a sales conduit and logistics partner, it could be a good marriage," he says.
–Rich Binsacca is a contributing editor for ProSales.
EDITOR'S NOTE: See how steel framing and precast concrete are faring in home building and LBM supply in part two of this series in the May issue.