Sunday, October 27, 2019

Time for the Offsite Construction Industry to Bake Its Own Pie?

If you look at the total construction industry, residential, commercial and affordable, as one of the largest industry pies in the US, you have to ask why offsite construction is such a tiny slice of it.

One reason it's such a small slice are the offsite companies, both large and small, are not working together but rather they’re all fighting for that same small slice.

Panelized companies like Katerra and Entekra appear to have stopped fighting to get a share of the that tiny slice of pie and have begun working hard at getting a fork into the rest of that pie belonging to the on-site industry.

As I see it, there are two ways to get a bigger share. The total offsite construction industry could continue to fight over that slice and hope it grows bigger as the entire construction pie gets bigger but that won’t increase our percentage of the market, it will only keep the status quo.

The other way is to forget about how much market share we have of the entire pie.

Instead we need to bring the ingredients together to bake a new pie filled with all the ways offsite construction can go after problems like labor shortages, sustainability, energy efficiency, jobsite waste and increased the use of automation and technology. That’s when developers and investors will want to try a slice of our fresh baked pie.

Offsite can be panelized, modular, concrete or steel construction. All these industries together still haven’t made a huge dent in construction market. Even if they account for 20% of some of the country’s regional markets, that simply means that 80% of construction is completed on-site using methods that have been around for thousands of years.

The offsite construction industry should really be trying to find ingredients for our own pie but unlike our site-built competitors who work together to grow and learn, the offsite community is less willing to communicate. Sharing ideas for improvement only seems to happen at the annual conferences of the MHBA and the BSC with speaker after speaker tying to introduce new ingredients for our pie but honestly with most of the offsite companies not willing to talk about it once they leave those conferences, what chance is there of baking a new offsite pie?

If you want our offsite construction industry taken seriously and hope to grow the entire pie, there’s a lot of work that needs to get done. In fact, there is so much work that a single company probably can’t do it alone.

Offsite has traditionally been the segment of the construction industry that doesn’t like to share their toys and for the most part don’t talk or meet on a regular basis to go over new ideas and procedures.

We share seminars and conferences with our on-site siblings learning the newest and greatest ways to help the total construction industry and then we get home and quickly lose interest in most of those good ideas because we don’t share them with other offsite companies.

One of the biggest modular events is MBI’s World of Modular where thousands join together to learn and share but even that isn’t going to produce any new ingredients for our pie if we don’t share those ideas with our offsite siblings.

But why should you talk to your competitors? Honestly, you don't have to, but it might be good if you did. Those first conversations could be ugly, but more likely you'll find you have a lot in common. There might even be some challenges you could tackle together.

So think about sitting down for a coffee with your competitors. Maybe you can share some resources for better economies of scale. Maybe you can determine how to boost search volume and awareness for the entire industry. Maybe you'll even make a new friend, one who knows your pain and frustrations as well as you.

We need to stop wanting a slightly bigger slice of that big on-site construction pie and begin warming the oven for our own pie so we can actually begin to be all those things the media says we can be for affordable, residential and commercial construction.

Hmmm! I can almost smell that pie right now.

Gary Fleisher is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant.


Steve Murphy said...

Gary, I totally agree with this. The other offsite producers are not the competition, it’s the entrenched attachment to the on-site sector! Here in the UK I think we’re perhaps doing a better job of working together on a common agenda. We need the Supply Chain to understand and respond to our needs, we need the warranty providers to respond more rapidly to the benefits, opportunities and challenges, we need the regulators to help out - stop excusing the poor performance of the traditional sector and stop penalising innovation! We can do our bit by training (and collaborating with the colleges on common curricula) and working with the universities and others on common approaches to automation.
I do like pie and I intend to do my bit to make our piece as big as possible.

Anonymous said...

I also totally agree with Gary. Offsite and Onsite construction methods are different in several key ways and continuing to compare our numbers with the rest of the industry will never make sense. We are eventually going to be the major way to build in every segment of construction and as Gary says "We need to begin baking our own pie"

Anonymous said...

Gary, It's a problem that has existed in this industry since it's inception. I am not saying that because it has been that way for such a long time it is the right, but from first hand experience it is what it is. Years ago, the BSC organized secessions at their Showcase with manufacturers, in both panelized and modular for the purpose of sharing ideas and concepts. Share the challenges and opportunities and see if we, as an industry can improve our market share and the products we build. The meetings I attended were for the most part informative and enlightening and candidly I did leave the meetings with some ideas for the challenges we faced at the time. When everyone starts to realize that we as an industry have no competition, and the Builder/Developer is our best potential customer, then maybe we will progress. Look the fact is that in most markets in the Northeast and Mid Atlantic regions, builders and developers are faced with projects that make economic sense, but the work force available to site build these projects is stretched very thin. Sometimes adding months to the time line to site build a job. Once the industry has the opportunity to demonstrate that we are not cheaper than site built out of the factory and set, but once all costs are considered we come in at much the same number as site built given accounting for hard and soft costs combined, we will close more deals. And part of this analysis has to be quicker rent up of the job whether it is a hotel or a apartment building or building and selling out a townhouse development. Where can a developer build a 24 unit affordable apartment complex (4 stories over a podium) in 8 months from start to C of O? And we as an industry see that happen every day but on a more limited basis than we should. There are plenty of good solid manufacturers out there, with good facilities, good engineering staffs and capabilities and a good production team capable of MANUFACTURING most jobs that we are shown. Yes, in some ways, we as manufacturers, have different procedures or processes that we would like to believe are proprietary, but they are code compliant just the same. I do not see the day when there is total transparency between manufacturers, it's just not going to happen as quickly as it should. But I can say that this is the best I have seen from a potential for sales in the commercial side in the time I have been in this industry.