Thriving in Florida During a Decade of Rapid Change

The Florida window and door market has been transformed in the 10-plus years since Hurricane Andrew, and while PGT Industries has adapted successfully, it points to basic issues of delivery and service as keys to growth.
January 15, 2004
FEATURE ARTICLE | Close-Ups

Hurricane Andrew brought devastation to many areas in south Florida in 1992. It also changed the landscape of Florida’s construction industry, as the past decade has seen the implementation of new building codes by the state and many local jurisdictions in the storm’s wake. For window and door manufacturers, these changes have presented many challenges. One company that has thrived in this environment is PGT Industries.

Originally known as Vinyl-Tech, PGT got its start in the early ’80s producing a porch enclosure window featuring a clear, non-structural vinyl glazing. “That’s where its original name, Vinyl-Tech, came from,” states Rod Hershberger, PGT’s executive vice president and chief operating officer, as well as one of the company’s founders. The product had been around for a number of years and was very popular in the Florida market, because it provided wind and rain resistance and could be opened easily to provide ventilation. PGT’s EZ-Breeze window is still in the product line, he notes, providing a good niche business for the company, as it has few competitors in the market.

To complement its original line, the company began carrying glass windows for porch enclosures later, and then began manufacturing glass windows itself in the late ’80s, because it was having difficulties with a supplier that was “less than reliable” on deliveries. Its aluminum windows were sold under the Progressive Glass Technologies name. At the time, much of the market was still bronze and anodized finish aluminum, Hershberger recalls. “Five to seven day lead times weren’t unheard of for those products, but they were for white,” he explains. “What did we know? We offered white with the same sort of five to seven day lead times. As a result, the aluminum window business began to grow quickly.”

In fact, PGT grew to become the largest manufacturer in Florida, a position it has probably held for at least the past six to eight years, according to Julie Heinsman, vice president of marketing. The company, based in Nokomis, FL, changed its name officially to PGT Industries in 1999, and continues to enjoy strong growth too. Revenues in 1997 were about $75 million and were expected to total about $220 million for 2003. 

In addition to its success in aluminum windows, still the mainstay of the Florida market, another element in its growth came unexpectedly from the North, Hershberger states. “We had these people—primarily from the Midwest and Northeast—who had homes down here with our porch enclosures who decided they really liked them. They went back home in the spring and couldn’t find the same sort of products there.” As a result, PGT began looking for ways to supply its NatureScape patio rooms and porch enclosures through dealers in the North. “It started as a small project,” he continues, “but it has evolved dramatically,” and become a significant portion of PGT’s business.” 

 

Andrew’s Immediate Aftermath

While the company grew steadily in the years prior to Andrew, the storm did play a key role in its growth, Hershberger states. PGT had entered the Dade County market in 1990 and was in the process of developing this business when Hurricane Andrew hit in 1992. Certainly a tragedy for southern Florida, the devastation caused by the storm proved to be an opportunity for PGT. The company, Hershberger notes, had a solid record of always paying its bills, and, in the aftermath, immediately told suppliers it would pay COD if they continued to deliver materials to the manufacturer as scheduled. “We didn’t ask for more or early shipments, we just wanted to make sure we would get what we ordered. That was critical. Demand for product was huge. There were dealers just asking for truckloads of units, and companies were trying to meet it as best they could.”

Some manufacturers were unable to get the material shipments they needed, and weren’t able to deliver product, he continues. “We were able to deliver, which helped us establish relations with new dealers in Dade County.” At the same time, because demand in Dade County was so high, many window and door manufacturers weren’t able to deliver units to dealers in other areas. “We never did that. We maintained our commitments to dealers in other areas.” The manufacturers which didn’t upset a lot of customers, he states, “And that opened up even more new potential customers.” As a result, the company saw a real growth spurt in the storm’s aftermath.

 

The Impact of Impact resistance

The manufacturer also got involved in the code development process early on, says Hershberger. Fairly soon after Andrew, teams of engineers, architects and other experts began surveying the damage. There were questions about whether it was the roofs that caused the failures or the windows. “However you look at it, “ he adds, “they ended up with the conclusion that the code wasn’t strong enough.”

At the time, there was some fear in the industry that new codes designed to make homes more resistant to hurricanes would mean homes with large window and door areas might be regulated out of the market or priced so high that homes would be built with significantly fewer units. Looking back at the initial Date County proposal, the standard would have required a window that was stronger than a cement block wall, notes Heinsman.

PGT management reached the conclusion quickly that codes related to windows and doors needed improvement to protect the homeowner. “But we also wanted to make sure it was fair,” Hershberger states. “We weren’t there to fight the code. We wanted to be friendly to the code process.” That attitude was shared by several other window manufacturers in the market, but not all. The window industry didn’t really fight the implementation of new codes at all, he says, but a good number of companies chose to ignore the whole process.

There were manufacturers that said, “they just can’t do it” or “it will never happen,” he continues, but changes did make it through. Initially, Dade County (Miami) established requirements that windows and doors (or shutters) must withstand not only higher windloads, but wind-borne debris. Impact-resistance requirements were established because it was determined that many homes suffered more severe damage after glass was broken and the building envelope compromised. Other jurisdictions, such as Broward County, followed suit. “And those that were involved in the process and understood what the requirements were going to be were much better prepared,” Hershberger explains. “When the new protocols went into effect, some companies couldn’t do anything.”  “PGT developed a product to meet the new codes quickly,” states Heinsman. The company has been selling its WinGuard impact-resistant product line since 1996, and the most difficult part of adapting to the code changes was not product design and development, but educating the market, she says.  “The biggest challenge with the implementation of a new building code is the learning curve for all people involved: manufacturers, dealers, contractors, architects and inspectors.”

Markets such as Miami-Dade, where the code has been in effect for several years—and where that has been a significant hurricane—are the most accepting of the new codes, she continues. “Talk to people on the East Coast (of Florida) and they’re much more knowledgeable about everything,” she notes. “They know how many shutters they have and what’s involved in locking them up before a storm, so there’s a high level of understanding about the value of impact resistance.” In these markets, she says, despite the higher costs involved, there does not appear to be any reduction in the number of windows per home or in the size of windows.

Now, impact resistance is required beyond the original south Florida jurisdictions. The International Residential Code, Hershberger explains, requires impact resistance for most coastal areas in the state of Florida. And that, he adds, is where most of the state’s population lives and most construction takes place.

While PGT has been successful adapting to the changes in Florida’s building codes, Heinsman doesn’t see the changing code landscape as central to the company’s success. “PGT doesn’t view codes as threats or opportunities, but as a necessity for the safety of the public and property. It was clear to anyone that visited Homestead after Andrew that there needed to be improvements to reduce the devastation caused by hurricanes,” she states. “PGT has always provided products to meet the building codes in Florida.  The growth PGT has experienced,” she emphasizes, “is a result of our on-time delivery and exceptional customer service. All products are made to order with a short lead time.” In addition, she points to the added value offered to dealers in the form of technical support, PGT University (an education and training program) and service.

That’s key, she adds. “The market’s a little different here.  You don’t see the big boxes selling a lot of windows. There’s too many difficult issues to deal with.” The company has invested in a state-of-the-art training center in its facility, because of the importance of dealer education.  It has also worked on sales tools, like a software package that allows dealers to create virtual patio enclosures to show homeowners. “We’ve got a great dealer base,” she says, and despite the fact that PGT is not the lowest priced competitor in the market, dealers return because “the value proposition is there.”

 

Manufacturing and Delivery

Hershberger also downplays the significance of code changes in spurring growth, and points to PGT’s basic operating philosophy as the main reason for the company’s success over the past decade. Unlike other manufacturers, which credit automation or the latest computer systems, he points to people. “We’re big into the theory of constraints around here.” The theory, developed by Eliyahu M. Goldratt and originally laid out in the business novel, The Goal, basically states a production line’s capacity is limited by the slowest step in the process and that a company’s overall capabilities are limited by the weakest areas, he explains. The theory of constraints has been applied by thousands of companies, and forced manufacturers, in particular, to look for the bottlenecks in their operations.

How does PGT apply the theory? Hershberger begins by explaining that higher wages aren’t given for seniority, but for how much a worker can do. Workers on a line are encouraged to learn more than one job on that line. Those who can perform all the jobs on a line are paid more than those which can perform just one. Workers earn even more once they can perform tasks on other lines, he continues. The highest paid workers can perform all the jobs on four different lines. “Once they can do that much, we’ve found they can do pretty much anything in the plant.”

This approach is key to PGT’s ability to maintain short lead times as it enables the manufacturer to move personnel around to the lines where they are needed. For example, PGT’s awning line generally operates at a fairly low-volume, he explains, but every now and then a big order comes in for them and the manufacturer is able to shift people to that area of the plant. This approach, Hershberger notes, means PGT has not placed a great emphasis on automated equipment.  While it makes investments “when they make sense,” he says, PGT still finds it can do many things more effectively with people than machines.

The theory of constraints shares concepts with lean manufacturing approaches, but there are also differences, Hershberger states. “It handles hiccups better,” he notes, as it allows for buffers, as long as they don’t slow the whole process. “There’s more emphasis on working as a team.”

This aspect of the theory of constraints, as applied at PGT, can be seen in its program of “gainsharing.” Beyond basic salaries and compensation, worker bonuses are determined by the company’s overall success, as far as improving processes and surpassing goals, rather than individual accomplishment. Again, Hershberger explains, the goal is to get individuals to work together and eliminate problems or strengthen weaker areas, because these determine the company’s overall level of success. “Everyone here knows it doesn’t matter how well their line or their department per forms. What matters is how PGT performs,” he states.

That emphasis on PGT’s overall performance is employed with management level personnel, as well as line workers, he continues. Executives are not tied to a specific function and are shifted around to various tasks. A vice president with a more extensive IT background is now managing operations in the former Binning’s plant in North Carolina, Hershberger notes. He will later be rotated back to the Florida plant with more experience in production and greater understanding that can enhance his IT expertise. This keeps generating new ideas and improvements. As with line workers, this approach also makes it clear to managers that “We all know it’s not just about increasing production on one line or how much our area is improving, but rather, how much PGT is improving.”

Hershberger says that in its earlier years, PGT grew, but “it didn’t grow real efficiently.” To meet increased demand, it used to simply hire more people. Now, he states, it is constantly bringing change and improvement to its operations. Implementing the theory of constraints has enabled the company to not only grow, but grow more profitably.

Both Heinsman and Hershberger expect that will continue too. One reason is new ownership. PGT, which employs over 1,600 people at its 470,000-square-foot plant located near Venice on Florida’s Gulf Coast, was acquired by a management group and Linsalata Capital Partners, a Cleveland-based investor group, in 2002. This new ownership remains fairly hands-off, Hershberger states, allowing the company to continue building on its successful formula, but it provides additional resources for growth.

The new ownership, for example, enabled PGT to acquire Binnings Building Products in Lexington, NC, in early 2003. That operation, with over 200 employees and a 230,000-square-foot plant, provides a platform for significant further growth. PGT has a history of focusing on organic growth, rather than growth through acquisition, Hershberger notes, so the addition of the Binnings operation does represent a change. The Florida manufacturer had been considering a new facility outside the state, so the availability of Binnings presented a significant opportunity. In addition to producing the existing lines of Binnings aluminum and vinyl windows, the operation will give PGT a production and distribution base for its NatureScape patio rooms closer to the Northern markets where they are popular, he explains.

PGT sees significant opportunity to expand sales of its windows and doors outside Florida. “Florida continues to be a large market, although PGT has sold outside of Florida for years,” notes Heinsman. She points to its history of selling patio rooms throughout much of the Eastern U.S., as well as distribution throughout the Caribbean market. As the coastal states adopt wind-borne debris codes, PGT will expand distribution of WinGuard to those markets, she expects. “Others are just starting to learn about the wind-borne debris requirements and have not yet developed the design expertise for developing those products.” PGT has already expanded its impact-resistantline  with the addition of vinyl-frame products in addition to the original aluminum-frame line. This enables PGT to meet the energy requirements of the more Northern states.

She emphasizes again, however, other factors as key to future success. “We see ourselves offering a full market basket. It’s the products. It’s the service. We have PEs on staff who can provide customers with the assistance they need.” Dealer education programs and marketing support packages are areas where PGT is expanding its efforts.

Hershberger points to the company’s people, and the commitment they show to getting jobs done. “We all understand that it’s not just products. You can’t just offer a short lead time. Hitting it is critical. And you have to do it all the time.”