Sunday, November 11, 2018

Modular Builder's Question Opens Pandora's Box

Recently a modular home builder in Virginia wrote and asked if I knew any factory that would sell him finished modules without interior trim, cabinets and plumbing fixtures? When I asked why he told me that he is getting tired of not having the factory properly install the trim and cabinets or not installing what the customer ordered.

Looking at the reason for his question I realized that “Bob” (not his real name) has been in the modular housing industry longer than I’ve been writing this blog and though he won’t tell me how many homes he builds a year I think the total is North of 20 a year.

It seems that quite a lot of the modular home factories that used to cater to the small builder supplying them with not only standard homes but also true custom designs are now putting huge 100-200 commercial module projects into the production mix which is hurting the quality he used to take for granted from his factories.

Merriam-Webster defines quality as a degree of excellence and superiority in kind or as a distinguishing attribute as a characteristic.

While service (Amazon) and technology (Apple) providers are able to measure specific attributes objectively to determine quality, a modular builder’s customer generally measures quality subjectively through their perceptions.

I reached out to some builders and factory owners to get their opinion of what he asked and the responses I received were quite eye opening.

A New England builder responded:
“The problem is with the service departments…. getting parts and or service crews if needed to resolve things in a timely manner when at times the trim maybe short or a cabinet door may need to be replaced etc. I mean the time frames are really ridiculously long, especially for parts, and most often come in wrong and the wait starts again. However time frames to get parts is often a problem everywhere even for us locally. Getting service crews on the other hand for non-parts problems takes way too long and can really tax a good relationship with a customer that up to that point we have so carefully built and enjoy.”

A Mid-Atlantic builder said:
“This would depend on the market that you are catering to. If you are in the starter to mid market - you are defeating the cost and time efficiency of the modular building process by deleting the trim and the cabinets. In this scenario, the builder would incur additional labor, additional job time and the cost of the cabinets and trim which will never equal the delete credit from the factory. At the high end there can be an advantage. If you are selling a spec home for over $850,000 or have a "high end client" who's lot your are building on, it may be a very good idea to delete the trim and cabinets from the factory.
The high end client will expect all the bells and whistles - including of course custom trim and a custom kitchen that the factory would most likely be unable to provide. The builder will also avoid any during construction job site damage to any high end trim or cabinets that were ordered from the factory. With the high end client, the custom trim and custom on site cabinets can be a additional profit center for the builder. We never ever obtain the flooring from the factory - to few selections to choose from and to much risk of damage during the completion process.”
 A large regional builder replied:
“We don't have labor to do it right in the field. We need to fix a factory mindset issue. Not excuse it. That would just be taking us backwards in the quest for factory built housing…”

An East Coast custom modular home builder:
“I have to be honest, it is getting to the point that stick building is faster than modular anyway. I truly can stick build a house for less money and less time. The factory quality has been abysmal as of late and service is just as bad as always. It’s a complaint I’m getting from other builders.”

A modular factory sales rep added:
“Just look at what happens to the majority of stick build guys that try mods. Their expectations are much greater than the reality of what was delivered. Why, cause we are just trying to fill our production schedule.
Our factories know only one way to sell to those builders. We have asked people with limited building experience, if any, and then refuse to educate them in proper modular housing techniques; engineering departments that cannot clearly understand what the builder wants and/or do not clearly know how to build it and hence can’t communicate it to the production line and we have management that wants only to know how much and how many........”

A Midwest Builder said:
“Today there is no clear cut case for service and repair after a home is delivered. Builders find problems and the factory service department asks you to give them a list of problems and cost to repair. At that point it could take weeks to get an answer and when they do get back they always want to cut the costs in half. It has become a two week negotiation process and we builders always lose money.”

Several major changes have had a huge effect on quality and affordability of modular housing across the US. First is the cost of freight which will continue to climb. Second is modular factories that used to exclusively build single family houses now adding hotels and apartment buildings into the mix where speed and cost are the keys to a developer’s profit while quality is often short changed in order to get them.

Third is the time needed to get state approvals for modular home plans. A truly grueling process for many factories and third party inspection services.

And lastly is the lack of training for quality control inspectors in the factory and for builders, set and finish crews.

Does this mean that modular is not the best way to build? Certainly not. Modular is finally being recognized as the future of construction in the US and around the world. We just need to realize that the old reasons for going modular is saving money and time are almost behind us.

In the future we must see a higher quality product that may cost the builder more up front but will not have the thousands of dollars in service and repair costs we see today.

Just look at the agenda for all those conferences and seminars where modular construction is at the forefront of everyone’s future thinking.


Anonymous said...

It appears to me that it might take ...yet another whole generation of owners... to finally rid the mod industry.. once and for all.. of that lingering trailer mentality..sadly, that approach still remains in far too many places. Trailer-coach reasoning and it's thought process, if only..subliminally ...still... dies hard! From the dealer up and the factory down..sad!

Anonymous said...

Valid points all. I've been in this business for more than 20 years and have not seen it as bad as it is now. It wouldn't take a lot of work on the factory side to correct these issues.

Maybe it's time for new high tech young people to begin working for the factories in management positions to start the change. I love building modular houses but what goes on behind the scenes between the builder and the factory service departments needs improved now not later.

VM said...

Very valid points made here about service issues after the set, workforce skilled labor staying on and showing up. What I believe will be the way of the Modular future is this:
Big High Tech Companies will moved into the USA and provide the builder with "one stop shop".
The builder will get a great house, factory set, factory finished and guaranteed a positive experience being a builder that's buying from said factory. Then the old school Modular Factory has a meeting and ask their sales rep's "why are we not selling houses like we did in the past"? Then it will be too late..

Anonymous said...

Good morning Coach, I just got done reading your article titled "Modular Builder's Question Opens Pandora's Box". This article really caught my attention on the opening question from the builder from Virginia, where they were asking if any company would sell them basically just the boxes with the bare minimum in them? I do know a company that does this for builders. Durabuilt Custom Homes is a small family owned Modular company that works with custom builders who do just that. They will provide as much or as little as the custom builder wants per his/her request or the request of client they are working for.
Coach if you are still in contact with that builder I would pass this company name along to them for them to check out.
Thanks for this article.

Anonymous said...

Amen Coach and good for you to start asking the tough questions to the industry. This is not something that is new though in the industry. Right before the crash of 2008, the same problems were happening. The factories were ramping up production and quality crashed hard. The factories right now do not need new builders and new sales, but this time they are really going to cut themselves off at the knees. Innovation is starting on the West Coast, in Canada, and in China. I would say I feel bad for the factories in PA, but I don't because they have been sitting on their hands for so long. The inability for them to innovate and put money into technology is going to be the downfall of the industry. IT IS ALREADY HAPPENING IN OTHER PARTS OF THE WORLD. Laborers are being replaced with robots, sales representatives are being replaced with clients being able to order houses themselves via online systems, and the list goes on. One of the comments above is perfect and I can see it now. Everyone will be staring at each other from across the table asking what happened? Technology is moving so fast right now and big players like Google and Amazon are getting involved and have the resources and innovation to take the industry to where it needs to be. We are just waiting for Home Depot to catch on and there goes the industry. 10 years from now 90% of modular factories will not exist if they don't start shaping up, but I fear it is too late. Everyone is just chasing the dollar right now and their ability to keep new business is impossible. The quality has been outright terrible and we are all just trying to ride this last wave. The next crash is going to be hard and no one is ready for it. One of the other comments I couldn't agree with more is stick building is faster, cheaper, and the quality is becoming superior. Our industry will never grow because stick builders are realizing this after they take one modular. They realize the issues, the service headaches, the pain of trying to order a house, and the additional governmental and transportation challenges with modular. It is a scary time for modular and I fear for the industry.