Sunday, November 30, 2014

My Interview with Express Modular's Founder - Ken Semler

Ken Semler from Express Modular recently took time from his busy schedule to sit down and answer some questions that affect the modular housing industry. He has a very unique viewpoint when it comes to the both the great side of our industry as well as what problems face factories and builders across the US.

Ken started in the modular home industry in 2004 and today is President and CEO of Express Homes, Inc, dba Express Modular.

Modcoach (Gary Fleisher): Ken, how did you get started in the construction business?

Ken Semler: I started doing construction while I was in college. Worked doing electrical construction for my uncle and then worked doing interior button up on modular homes for a friend of mine that had a contract with a local developer. I actually started my own construction/renovation business doing rehabs, rentals and flips through the 90’s and into 2003 in addition to a “day job”. In 2003 I turned my side job into my full time job. I viewed Modular Home Construction as a new revenue stream using the skills my team already had and it grew from there. Today it has turned into a national company licensed from coast to coast. We will be licensed in practically every state by early 2015. 

Modcoach: Knowing that you operate in just about every state in the US, how have hurricanes and other natural disasters, like floods or forest fires, impacted your business?

Ken: We are a national company which means we get calls from customers that have lost homes due to wild fires, hurricanes, tornadoes, floods, etc. Because prospective customers find us when they are looking to rebuild quickly, we can demonstrate how we can use modular construction to get them back into their homes faster. We have provided homes on the Jersey Shore to help victims of Superstorm Sandy, to Kentucky to replace homes destroyed by tornadoes, and to many others that have lost their home due to flooding and fires. We have a special Quick Recovery Program that we offer to assist victims under special circumstances to fast track homes and get back to “normal” quickly.

Modcoach: Have you explored the commercial side of modular yet?

Ken: Yes, we are currently doing two assisted living facilities, one is North Dakota, on the Canadian border, and one just outside of Philadelphia, PA. We are also quoting on several duplex and 4-plex projects. Because of the way Express Modular is structured, in addition to being licensed in practically every state nationally, we have a large number of projects presented to us. This gives us the opportunity to expose project owners to the advantages of modular construction that would have normally not even considered it. As the economy has started to come back, we are seeing developers, project owners, and lenders relooking at projects that had been mothballed. I think this is an exciting time for us and we will get more opportunities to do additional projects in 2015.

Modcoach: Do you think modular home builders getting the product innovation they need from the factories?

Ken: We work with factories across the country. I personally have visited over 50 factories that produce modular homes in the U.S. It has been interesting to see how each factory has developed unique solutions for common issues found in the production of modular homes. While the factories work to cut costs and provide greater efficiencies I have seen specific factories that have been better at this than others. We work with one factory that did a complete review of the modular production process and engineered their construction processes so that they produce 100% of their homes using structural spray foam. This allowed them to use 2 x 4 construction to cost effectively build a strong home while simultaneously providing a much better insulated home at a competitive price. I believe that if more factories could take the lead in introducing technologies such as this into their products across the country it would further promote the advantages in quality and livability for off-site, modular construction compared to those of conventional site construction.

Modcoach: I talk quite a bit about the need for better relationships between factories and builders. Are you seeing that need also?

Ken: Yes and I believe the solution is spelled C-O-M-M-U-N-I-C-A-T-I-O-N. The common issue I see across factories and the country is the lack of communication. And yes, this does work both ways between factory and the builder. I think as an industry, we first need to set expectations. We then need to work to meet those expectations. However, when there are issues that arise, we need timely and accurate communication. I think we really started to see home construction start to bounce back in 2014. The resulting production increases created gaps in quality. While communication is key across the business relationship, I think it is imperative in the service process. As an industry we sell the concept that modular construction is faster… many builders and buyers expect to be able to get CO’s within 6 weeks of delivery. However, when ship loose items are shorted and back ordered, quality issues aren’t communicated, and service crews can’t get to the home until 4 weeks after it is set, it gives all of us a black eye! The entire quality/service process is the biggest frustration point for both builders and factories. There isn’t enough space to detail the opportunities here but the old adage of $1 to fix it in the factory, $10 to fix it in the yard, and $100 to fix it in the field is very true. I think fixing it in the factory is the key to solving one of the biggest issues that strains the factory – builder relationship.

Modcoach: Do you believe state and local code regulations have been hurting your business and the industry?

Ken: Because of Express Modular’s national presence, we see this differently across the country. I don’t know that we feel an impact from local codes as much as others might. In the northeastern portion of the U.S., modular construction is best understood by the industry. While builders and factories in that region may not believe it, it is really the dream location to build. Having said that, it is surprising how much isn’t understood even by the factories and builders about the modular construction process, building codes, and permitting at the state and local level. It is not consistent in almost any state. While each state is different, most states don’t actually allow the locality to inspect or require changes to modular homes to meet local code. However, because of either the lack of understanding at the local level by both the permit office and the builder/factory, modular construction continues to get discriminated against. MHBA, with a strong membership, can help all of us educate local building officials as to the streamlined process of permitting modularly constructed homes.

Modcoach: Another hot button for the industry in the miniscule market share enjoyed by modular home construction. Why do you think that the modular home industry is still stuck at 3% of the total new home market?

Ken: The modular home industry is at 3% because as an industry we allow it to be this way. With the internet, the computer technology, and the marketing software that is available to everyone, everyone should be able to promote the advantages of modular construction as superior to any other means of building a home. However, each builder is very local and each factory is very regional. Until a national voice brings the power of every one of these together, the industry itself will remain fragmented. Site builders have the NAHB which promotes the status quo, conventional construction, because it is in the best interest of the majority of its members. However, 97% of homes are built essentially the way they have been built for hundreds of years. Computer technology, phone technology, automotive technology all have made huge leaps in relatively short periods of time. Building technology isn’t sexy though. As soon as factories can find and exploit new distribution channels for the product, more voices will be added to the ranks of modular home builders. If we can consolidate the voice of those new builders under a single organization with the promotion of this industries interests as it core purpose, I believe we may actually break the 3% barrier.

Ken, I want to thank you for talking with me about modular’s future. You have probably visited more modular factories than anyone I know and sharing what you’ve learned is truly interesting. I may ask you to sit down again and talk some more about what you have seen out there.


Anonymous said...

So what does Express do? Are they a retailer? The business model is to have relationships with factories all over the country? From the article I ma not sure what they do?

Anonymous said...

He sells homes to people that want to build their own home.

Anonymous said...

Actually while expanding they are developing relationships with builders, remodelers, lenders, R/E professionals and owners educating each concerning the advantages of system built modular homes for the home buying public.