Tuesday, November 13, 2018

Innovation or Disruption - Which is the Future of Modular Construction?

Today there is a lot of talk about somebody like Toyota or IKEA finally entering the US modular home industry and being the Disruptor we’ve all heard is coming. Let me be the first to tell you that is BS.

The US modular home industry shouldn't be looking for a disruptor, but rather an innovator.

Looking at Disruption, if it actually came to fruition, you would probably see a modular disruptor have the following in place:
  • Get pricing online almost instantly with an approximate date of occupancy
  • Have a website where home buyers could choose their home plan
  • Choose from a list of standard options and upgrades
  • Have a mortgage as part of the process
  • Have a large factory with high tech automation
  • List of approved site builders for excavation and permitting
  • Factory crane and set crews
  • Factory finish crew
  • Quality control crew arrives after completion to make last minute repairs
  • Customer moves in

To say this is a logistical nightmare would be an understatement. As long as there are buyers that own their own plot of land and “want what they want” and don’t want to have a house like everyone else, this will never work. And let’s not forget there is a skilled labor shortage that those disruptors would need to overcome.

It could work if the housing unit was an apartment in a 200 module production run like we see in many foreign countries and in affordable housing like Google’s factoryOS order for their employee housing.

Innovation on the other hand is already available for modular factories and builders. It’s called Extreme Quality Control.

When I say extreme I mean having people look at EVERY part of the process from the initial order from the builder through to the day the house is set.

Every step has to be run through the QA machine including the costing, engineering, production and factory finish. The factory’s QA job should not end at the gate. Quality of the modules when they arrive and unwrapped needs verified. Then the set crew will be evaluated for quality of the set and finally a total walkthrough of the home prior to release to the builder must be made with the builder signing off.

What would be the cost of all this quality control? I’ve talked to a couple of factory owners who thought it could be between $3,500 - $5,000 a house. Could the factory absorb that cost without passing it onto the builder? Absolutely not.

Would the builder be willing to pay an extra $3,500-$5,000 a house to insure getting a house that has been inspected and signed off by the factory Quality Assurance people? Probably not.

Even if this saved the builder thousands of dollars in service and the factory agreed to service or repair any problems incurred by the factory I doubt many would sign up for the program.

The reason is twofold. First, many modular home builder are still thinking that price sells the home and secondly they simply don’t trust the factory to do it right.

For the Innovation of Extreme Quality Control to be the rule rather than the exception, both sides have to believe in it.

The factory needs to place trust in the QA people and give them the authority to actually stop the process and rethink or rework the problem. Can you even imagine one person stopping the entire process because someone made a mistake or an omission? That would be a tough one for any factory owner or GM to swallow.

The builder also has to once again trust the home being delivered that it will be free from defects and if one is found they have to trust the factory will make the repair or service without a major complaint or a delay.

Again, this only works if both sides agree on what exactly is meant by “Extreme Quality Control”. Builders can’t come back on the factory for small repairs as that could happen even if it were site built. And factories have to agree to fix the problem without blaming the builder and do it quickly.

This is the Innovation that will propel modular housing to the forefront of construction. Factories building a well inspected home they will stand behind completely and builders willing to accept the added cost of having significantly fewer problems in the field.

If the industry would do this the big commercial repetitive foreign modular factories that are headed our way would not want to enter the single family or small multi-unit modular market as US modular factories would already own it.

Would you pay extra for Quality? Your comments please.


Anonymous said...

A quality inspector at the site is not necessary if quality is built in. The builder today checks for shipping damage at nominal cost. Would you inspect a car at the end of the production line to improve quality? Of course not.
Quality is built in, not inspected in.

Coach said...

A factory inspector should be at every job site for two reasons. One is to inspect each module with the builder and second is to make decisions for a course of action IF there is a problem in the actual fit during the set. Otherwise the builder, set crew and crane operator might begin pointing their fingers at the factory when it is clearly not the factory that caused the problem. There are too many hands in the pot from the time the module arrives on the job site until the set is complete.

Would a factory rather pay an QA inspector a couple of hundred dollars that could save the factory thousands? I would think that is a good business decision.

Marta said...

I agree that quality is built in. Perhaps the title of Quality Inspector is misleading. I also agree that the factory should have representation at each set to insure the home is set properly and to inspect the home and ship loose. We have a person in place that fills this roll and it has turned out to be well worth the money.

jason webster said...


Thank You for continuing to ask questions on how we can all get better. A rising tide floats all boats.

I do think that all factories should be responsible for setting their own products. (State Sales Tax Departments agree.) It's better for the client (and FYI I call the Owner the client, not the Builder the client) when high emotions on set day don’t spiral the rest of the project out of control. The factory being responsible for the Set cools down the Client and the Client Contractor’s emotions.

Our company has been transitioning away from the "builder / dealer" system since the mid 90s. And today most of our sales are direct to client. Through our 40 year history we have always supplied at least one factory rep to oversee every set. However with direct to client sales we also offer a Factory Set Crew option (crane, set, air tight, water tight, finish shingled roof, structural connections made, temporary marriage walls removed, ship loose counted). Most clients take us up on (and pay for) it. When a factory set crew is provided it drastically reduces finger pointing and service issues. . . . . see the video you posted of our company below. The two house sets at the end of the video are direct to client, with a factory set crew provided. See the one clip of carpenter (our set crew) and a skilsaw fixing the attic floor before we set a gable panel. This $5 action of our set crew saved us $1000s in a service bill. AND the client (filming the video) and client’s contractor saw it as “typical” and nothing spiraled out of control.

Keep up the good work.

Jason Webster
Huntington Homes, Inc