Saturday, December 14, 2019

The Mis-Perception of Modular Construction

We’ve all heard the wonderful benefits of modular construction all the media folks, construction experts and paid speakers have been feeding investors and developers for the past 4 years.

It reminds me of a dozen blindfolded people trying to describe an elephant. It all depends on where you’re standing and what they touch. They all know it’s big but beyond that there is no point of reference for them to collaborate on.

The person in the front may think he is touching an extra long tail as is the person at the back. Are those tree trunks or legs? And what’s with those long rock-like projections?

You get the picture. We all know something about modular construction but very few know it all. It all depends on your viewpoint.

About four years ago I invited a modular home “expert” to tour a modular factory with me. As he looked at the production line, he asked me when the steel frame gets added to the house? Turns out he had only toured two factories, both were manufactured home plants. I spent the rest of the tour explaining the differences to this university professor.

Fast forward to the present and I’ve encountered many more of these housing “experts” that had no idea what true modular manufacturing is all about. These same experts were speaking at events and conferences I was attending. You have to ask yourself what part of the elephant were they touching before they spoke to their audiences?

The problem with this begins when they speak to a group of investors and developers that are so ready to drink whatever Kool-Aid these experts provide. I know very few speakers that have ever been in the trenches of modular construction. There are so many levels of knowledge and expertise needed and most of them only know their small segment.

One of the first mis-perceptions is when the developer is told, usually by the expert along with the factory rep, exactly what they want to hear. Modular construction is cheaper by 25%, it’s finished in half the time, it is available whenever the developer wants it; etc. I know, this sounds like the perfect way to build a 5 story apartment building or hotel.

And it could be if it was reality. I know of no modular factory in the world that can shave 25% off the cost of a site built project. That ship sailed a long time ago. And that part about taking half the time; who’s kidding who here? Yes, you will probably save some time but not by half unless you’re just counting the time from the modules arriving on the jobsite until the building is ready for occupancy.

And what about the part of getting it when the developer needs it? Let’s look at that. Factories can’t afford to set idle just waiting for the developer to secure permits, financing, tax credits and code approvals, each of which can extend the lead time for producing the modules in the factory back weeks, months or even years.

So the modular factory must accept whatever comes in their door ready to begin the process. If a factory produces 15 modules a week and the project is 75 modules, that is five weeks the production line is building nothing but that project.

Suppose that project gets delayed a week before going to the line because of a SNAFU with financing, zoning, etc, can the factory wait for the developer to correct the problem? No, they are a business and building modules is their product. Without product, they lose money. Lose enough money and they are forced to close their doors.

People have been asking me lately, why would a modular factory go out of business when there are so many modular projects that need built? Now you know part of the answer.

Since there is no national network of independent modular factories that could easily shift the developer’s project to another factory, the project is delayed and the developer is stuck in the void.

So what is modular reality?

It’s the best way for investors, developers and builders to construct everything from hotels, affordable housing projects, single and multi-family homes, ADU’s, tiny houses, workforce housing and just about any other type of building.

But there are limitations and that’s the reality. Listening to those “experts” and planning your project around what they say is not the way to go.

Before you even begin talking to any modular factory about building your next project, you should take the time to find a consultant with the working knowledge and expertise of what is modular reality for your project. That reality is not always found by just talking to the factory people.

I recently learned that the engineering department at one modular factory turned down a developer’s project after the developer spent countless hours and many meetings talking about it with the sales and management side of the factory. They couldn’t build what the developer wanted, so he went back to using a site builder for the project.

Little did the developer know that another factory within a hundred miles actually has built similar projects but since they didn’t use any consultant with modular knowledge, they missed the boat.

Here is more reality.

Modular construction can be slightly faster to complete, it can save you money and it will definitely give you a better product over site-building your project. It is also inherently more energy efficient, greener and sustainable.

The modular factory becomes your partner in identifying problems and offering solutions before anything is even built. You can also visit the production line and watch as your modules are produced. Your groundwork and foundation can be completed at the same time your modules are being produced.

And let’s not forget the people that build the modules for your project. They actually show up every day! They also work in a stable environment and usually work in the same station on the production line where they hone their skills.

It was Winston Churchill that said “Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…”

That is also true for modular construction. It is the worst type of construction except for all those other types that have been tried from time to time.
Gary Fleisher is a housing veteran,
editor/writer of Modular Home Builder blog
and industry speaker/consultant. Contact


Anonymous said...

Good piece but missing one ingredient. This assumes all buildings are different, implies volumetric is the way to go and supports the Katerra model of product vs project.
Bathpods for example could have 4 or 5 versions and if hotels used one of these they could have a supply chain for them at lower cost and higher quality.
Boeing showed us the way, standardized things like storey height, baths and kitchens, grid and wall finishes, electrical outlets and HVAC systems and then the industry can move behind it.
Making a factory for a custom product is never going to succeed.

Ken Semler said...

This is a great post! Just like you observe, investors and developers are discovering modular construction. They are searching for experts and knowledge and find some conferences and events where the so-called experts are speaking. However, they also discover Express Modular when doing their internet searches.

You make a statement:
"Since there is no national network of independent modular factories that could easily shift the developer’s project to another factory, the project is delayed and the developer is stuck in the void."

That isn't actually true. "Virtual Factory" is one way to describe Express Modular. We have a network of 20+ factories that provides modules to us across the country. We are the actual experts in modular construction and modular sourcing. Small and medium developers are using us to create designs, learn modular logistics, source modules, train local site contractors, and manage proper installation onsite.

Large developers will attempt to work directly with a factory and may have the resources to absorb the learning curve that comes with adopting modular construction. Small and medium-sized developers and investors don't have that luxury. Express Modular is the nationwide network of modular factories that can direct factory support to meet project demand across the country for developers and investors.

Ken Semler

Builder Bob said...

Ken Semler. it looks like you may have a sensible solution to "Since there is no national network of independent modular factories that could easily shift the developer’s project to another factory, the project is delayed and the developer is stuck in the void."

I don't know anyone else that has even considered doing this in such a big way. I think you will be the person everyone turns to for modular construction advice very soon.

Watching you closely hoping you are successful

Ken Semler said...

Builder Bob, We have a booth at NAHB International Builder Show in January for Express Modular Franchising. This is where we really do the big roll-out for the builder community. Epcon Communities and Arthur Rutenberg Homes are the only two home building/developer franchises in the U.S. They ranked 39th and 101st, respectively in the Builder Magazine top builders in 2018. We believe this is the perfect time to introduce off-site modular construction in the form of a franchise to the builder community. 2020 will tell if the combination of franchising for custom builders and our support for developers/investors is the powerful combination that propels Express Modular to a Builder Top 100 ranking.