Saturday, May 11, 2019

3 Correctable Problems Facing the Residential Modular Housing Industry

Since 2014 the modular housing industry has shined under the spotlight of innovation and improvement. Seminars and conferences on modular construction can now be found everywhere from California to Boston, from Chicago to Miami.

All of these events share one common theme. They talk about the future of modular construction and all the innovations coming onto the market. New products, new procedures, new software, automated modular factories and total online sales.

These are great things to talk about and should be explored to their fullest. But there are underlying problems that have not been adequately addressed and in some cases simply ignored hoping that someone, somewhere will hand our industry solutions to them without our industry having to lift a finger.

Well, that ain’t gonna happen Folks!

Our industry, especially in the New England and Mid-Atlantic regions, has problems that not only aren’t being addressed, most of them are not even talked about except by a few factory owners, management, builders and suppliers huddled in dark corners.

Problem #1 Lack of New Modular Home Builders

This is a problem I have been telling everyone about for over 10 years. When the housing recession of 2008 hit most of the very small modular home builders couldn’t survive. They turned to remodeling, changed careers, retired or died. Only a very small percentage ever returned.

Here we are eleven years later and I’m not aware of even one factory has an active ‘New to Modular” marketing and training program installed to replace those builders. Instead we still see new factory sales reps going after other factory’s existing builder base or talking to site builders telling them the same old batch of puke about modular homes being 90% complete from the factory, how it will save them 10-15% over site building and that they can finish homes in less than 30 days.

After 2014 many factories began the march into more and more commercial work in the form of hotels, dormitories, apartments and affordable housing. This was about the only revenue stream available to factories as the builder pool dried up.

Possible Solution:

It is time for modular home factories to join together and start several programs to solve this multifaceted problem.

The ‘marketing to new site builder’ part should be a collaborative effort by EVERY factory, not just a couple doing all the heavy lifting while others sit on the sidelines waiting to reap the rewards of the other’s effort.

Training new builders is actually a two part process. First, every salesperson both new and experienced should go back to school on what benefits the actual modular building process can give to builders. Those far-fetched statements concerning saving lots of money and lots of time need to be revisited and real information provided to them. An informed sales rep explaining in detail the benefits of modular to ‘new to modular’ builders is the gateway for both the factory’s and builder’s success. This training should happen at the factory level but it is both time and money intensive and hardly any factory can do it on their own.

Which brings us to those builders that the modular factory seems to think instinctively know everything modular from the day they buy their first modular. Builders are at a disadvantage when it comes to our industry. They don’t really have the time to meet and talk with each other and most factories actually discourage it.

But that has to change. Builders need to learn about our industry and share their best practices in order to continue to improve. Builder meetings should be open to every factory’s builder base. Ideas should be shared. New products introduced to them and real training should be available to them.

All of these efforts take time, money and resources. These are within reach of our industry. Someone has to take the first step in accomplishing it.

Problem #2 Service After the Sale

There are factories that own their mistakes, there are factories that drag their feet getting around to fixing service problems and shamefully, there are even factories across the US that either believe all service issues are caused by builder or are only willing to pay a pittance of the costs their builder incurred.

Every factory has or should have a service manager. Unfortunately even some that do put so much pressure on them to stay within the budgeted guidelines established back in the 1970’s when building a modular home was not as well engineered or having to meet the strict building codes as we must today.

Complicated custom homes, options unheard of being done in the factory 40 years ago and what at some factories is a lack of skilled inspectors has allowed some problems to only become evident after the home is set on the foundation.

That is when the “Blame Game” begins. As emails, texts, pictures, videos and phone calls about the problem fly back and forth, many builders blame the factory first and demand they send out a service crew immediately. Factory service managers can look at those same pictures and know it was caused after the modular left the gate.

And so for many builders and service managers the battle begins. Since hardly any modular factory is vertically integrated the battle can quickly escalate. Sales Managers and owners stand behind their service managers while builders often recruit the set crew and subcontractors on their side. If the battle drags out more than a few days with work stopped on the house, this can lead to the new homeowner getting involved bringing in their attorney, the local building inspector and the bank.

There have been stories of homes being unfinished for years because nobody wanted to compromise to get the house finished. This is not entirely a modular home problem, it happens every day in site building as well.

Possible Solution:

If every factory, builder and homeowner would enter into an arbitration contract limited to the time until the customer is handed the keys at the certificate of occupancy we might be have a tool to quickly end the stalemate.

It would require a third party arbiter. That could mean a group if engineers, attornies, fellow builders or others across the US that have agreed to be the final decision maker and everyone MUST abide by their decision.

After the certificate of occupancy there are many other remedies available to the homeowner if service or workmanship problems arise. Warranties can be the best thing a builder could ever buy for their customer and is required in almost all states.

The grey area has been and will continue to be the timeframe from the time the house leaves the factory gate until the certificate of occupancy.

Will this ever happen? Not in my lifetime unless a Federal regulation is passed and we all know how quickly logical things get passed in Congress.

Problem #3: Weather and Delays

Everyone’s heard the only two things that are certain in life are death and taxes. If you are a modular home builder there are two more certainties, “Weather and Delays”

While modular home factories brag that their modules are built inside where it never rains or snows, the same can’t be said for builders.

For the past two years rain has been our industry’s nemesis. It wouldn’t be so bad if it only rained a day or two a week. No, rain falls for a week and brings along its best friend “Wind” before, during and after. Sunshine has been reserved for days when there are no homes to set.

Both modular and site builders are having a tough time getting foundations in the ground. Both are having product delivered to muddy job sites and both are scrambling to give subcontractors dates to start.

However the modular home builder has two challenges their site built siblings don’t have, module carriers that can’t get to the jobsite because of mud, snow and rain and set crews that may or may not be able to fit your delayed home into their schedule after you cancelled them for a certain date.

There are 3 main parts to every set, 4 if you count making sure there is a job johnny on site!

They are getting the carriers on site in a position they can lifted by the crane, the crane itself which must also wade through the mud along with the truck carrying the crane’s counterweights and last but not least, the set crew.

Set crews come in all sizes and shapes but they have one thing in common. They need to stay busy. When the builder sees lots of rain or snow in the forecast for ‘set day’ they will cancel and reschedule the set.

Since the modules are already setting at or near the job, waiting another day or two will find the builder with ‘overnight’ charges from the factory who thought they were getting there driver(s) and carriers back to ship out another home.

The crane, if called and rescheduled early enough may not charge you for the extra day but also may not be available on your rescheduled day. And finally there is the set crew who may live up to 200 miles away from the job and now must quickly find another builder’s home to set or risk losing money while their crew sits in their pickups or in the motel.

There is a very limited number of modular set crews and if your set crew is already scheduled somewhere else on your revised date you will be left scrambling to find another crew.

Possible Solution:

The modular housing industry is actually just a small part of the nation’s housing industry even though it continues to grow. Just about everyone is aware of the others involved in it within each region.

With all the advances in cell phone technology, software and Cloud storage and sharing, wouldn’t it be great if there were a central clearing board for scheduling modular home deliveries, set crews and cranes.

One builder’s delay could mean another builder would be able to set their customers home. Set crews would have fewer days without work and factories will have advanced knowledge of weather problems that could be happening in certain areas.

The answer to this problem is not easy but I’m sure with what is available in custom programming today one of those brilliant high tech people we hear so much of just might want to take a crack at this and maybe create the only national modular scheduling system and become the next techie millionaire.

Watch for more problems that impact mostly the modular housing industry. Send over your problems and let’s see if we can’t help find a solution.

Gary Fleisher (the Modcoach) is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker.


Discouraged Builder said...

Only 3 problems? I could give you many more and a lot of them start with the factory. Nothing will change until builders unite and begin demanding they start acting like a professional industry instead of a bunch of prairie dogs poking their heads out of their factory only when someone offers them a free lunch.

I had high hopes for the MHBA but I am not sure I will renew my membership. No help for builder problems ever seems to be come from them.

Anonymous said...

...there is only one professional trade organization in the housing industry the United States..the NAHB those letters spellout and stand for the National Association of Home Builders. There are local and state chapters in every nook and cranny in our vast country..each chapter meets... every.. join, contribute and lobby for what you need!

Tom Hardiman said...

MHBA is set up primarily to address two main areas: 1) Promoting the advantages of modular construction to potential new home builders and 2) maintaining a level regulatory climate between modular and site built contractors.

We are continuously working to improve the programs and relationships with key administrative staff in MA, NY, NJ, PA, MD, VA, RI, GA, SC, and CA and building better relationships in places like NC, OH, and anywhere else our members do business. ANYWHERE the industry is treated unfairly, MHBA will be there to speak on your behalf.

We launched a Consumer Awareness Program about three years ago asking mfgs to contribute $10/floor manufactured, with those funds set aside specifically to market the industry as a whole. To date, only nine manufacturers (with 13 brands) are supporting industry wide marketing efforts. There is no other industry-wide modular promotion happening.

I'm not trying to be defensive or make excuses, but it can be quite frustrating to read anonymous comments about how little is being done, how much more should be done, and how much more MHBA should be doing - when so little support is given by the industry at large.

This is a great industry with great people involved. But there are too few companies carrying the water for the rest. And when they get tired of doing so, things will get much, much worse for everyone.

It is extremely difficult for a national association to try to help manage the business relationships between 30 manufactures and hundreds of builders, set crews, crane operators, etc. It makes it even harder when many of the builders and set crews are not members. So our focus at MHBA has been to concentrate of delivering on the two things we do well with the level of support we get from the industry.

There are probably a dozen off-the-shelf scheduling tools that could be used to help address some of the concerns cited in this post. Rather than dropping your membership, I'd encourage you to get more involved (not sure how involved you are now) and make your voice heard. Bring your concerns and ideas to the staff or board, offer to assist in implementing new programs.

Because the alternative is withhold funds from the trade association and continuing to hold out hope that somehow your concerns get addressed.

Discouraged Builder said...

Anonymous 9:44,
You are obviously a site builder. Modular homes only make up 3% of the total new home sales in the US. I used to belong to the NAHB and attended many local meetings but the problems and training for modular home builders was never addressed.

In fact, I never mentioned I was a modular builder as I was the only one that ever attended those meetings because the vast majority of talks and discussions were irrelevant to modular.

Tom, I bought into the MHBA because I thought you address issues facing modular builders. That really never happened. I get more pertinent information when I attend Modcoach meetings. He is the one willing to express what we modular builders are actually facing everyday.

I build quite a few mods a year and not one of my customers ever heard of CAP.

Anonymous said...

Ive built all SFD systems in my some 30 + years, i.e. pre cut kits, prefabs, timberframe and yes mods..FYI there is also..of course, the Systems Building Council within the
NAHB which is specific to many of your needs..just ask Coach for details..+.++..try it you might find it effective too...Oh and find a straight up mod company..there are some you know! Mod coach can tactfully help you there too Im sure!

Tom Hardiman said...

Discouraged builder - We represent the whole industry - not just builders. If the regs are unfair for modular, it hurts the manufacturer, builder, set crew -everyone.

And I would not expect your customer to have ever heard of "CAP" as that is just an industry name we give to the program. The purpose is share great modular projects and stories to end users. Thousands of people have seen the work and projects funded by CAP.

Rather than anonymous posts and vague complaints, call or email us and tell us what issues you are facing. Maybe we can help.

Tubby McFatso said...

Re: Problem #2

In order to solve a problem you must first understand the root cause of the problem, then develop a solution to prevent the problem from recurring. Proposing arbitration as a solution to service (read: quality) problems implies the root cause of the quality problems is "lack of arbitration." It's like taking aspirin to cure a headache -- a headache is not caused by lack of aspirin.

Resolving an issue (fixing a factory defect or installation error) is not solving a problem (why did the defect or error occur?). The best way to effectively solve problems is using structured problem techniques. It takes serious engagement, dedication and support from the top of the organization.

Implement an industry-wide centralized quality collection and reporting system administered by an independent third party or industry group.

Gary W said...

Only three? I can start a much longer list and I have been in this industry since 1984.I know that i worked for a company that wanted the sales people to convert HUD code dealers into Modular home builders..that almost never works due to the modular product being much more complex. Oh remember the people who advertise cheaper than stick built, wow.. great marketing selling ourselves for less on a superior product.Now we are dealing with new federal regulations on the freight companies. I have seen multiple times where the retail customer is put in the middle of product issues. This is not the manufacturer's responsibility it is the builders. Why would we put the retail customer in that position?This industry has a need for change, some may seem radical and others not so much but with everyone doing the same thing, and trying to under price the next guy we all,will at some point, fail