Tuesday, October 6, 2020

The Next Evolution in Modular Has Started

When the first automobiles began showing up on the streets more than 100 years ago, most were built in barns and warehouses one at a time. There were no car dealers as the two or three person shop that built them also sold them. Car builders began popping up in every small town in the country. 

As time went on, the surviving shops began to expand both their manufacturing space and their workforces to meet the growing demand. The entire car was built in one place with all the parts and pieces being brought to it, similar to building modular units on cribbing today.

That was the case until the first moving assembly line was built by Henry Ford in 1913. Increased production space was no longer determined by how many individual cars could be built at one time, which required more space and workers as demand increased, but by how many cars could be sent down the assembly line in a day. This was the first true evolution of the auto industry. Many more would follow including establishing dealerships and national advertising.

An Industry Begins

The modular industry didn’t start with cribbing but was instead an idea by senior management people of the manufactured housing industry that thought they could build better houses that would meet the tougher standards that site built homes met.

They already knew the importance of the assembly line and dealerships (authorized builder networks) and started using Ford’s assembly line approach from the start. 

Within a few years two distinct types of modular factories were being built. One for modular housing and the other for commercial projects. The two types were rarely built inside the same factory. The modular housing factory would build multifamily projects but usually they were townhouses or small apartment buildings.

The commercial modular factories started at building multifamily and quickly moved into apartment buildings, dormitories and other commercial buildings.

A Tipping Point for the Modular Industry

2008 saw the modular housing industry take a major hit when more than 50 modular factories across the US closed their doors forever. Both commercial and housing factories were part of this mass exodus from the modular business.

Slowly the industry began to reinvent itself. The commercial modular side began building bigger projects and expanded into medical and hospitality while the dwindling home builder base forced many single family home factories to begin accepting some bigger projects of 100 to 200 modules.

The aftermath brought about a min-evolution to our industry but it was more about realigning it than an actual evolutionary moment.

But there is an evolution about to come over the horizon and it just may change our industry forever. 

Just like the auto industry that started off with one or more car builders in every small town with each building a different type of automobile with no interchangeable parts, service network or safety features as part of their cars, the auto industry began consolidating into what we see today.

What's Just over the Modular Horizon?

And that brings us to the next evolution in modular waiting just behind the horizon. Consolidation!

There are new factories showing up across the US competing with the established modular factories for business. So far there is more demand than there are factories to meet it. But that is our industry's future blessing and also our curse.

Every single one of these factories builds their module in a slightly different way even though they are regulated tighter than bark on a tree.

Even with the number of new factories opening up for business, that still won’t keep up with the ever increasing demand put on them and as every business person knows, there is a high failure rate in opening any type of new business.

And just like the Borg told the Captain of the Star Trek’s Enterprise, “Resistance is futile!”

The first wave of consolidation will occur within the commercial side with several factories joining together to build new and even bigger projects. Within a decade, these growing factories will acquire more and more factories and their labor pools. Consolidation will bring standardized pricing and specifications.

Projects will become commodity items that can be quickly ordered, produced and shipped anywhere in the country. Competition between factories over price will no longer be the big issue. It will be the capacity to produce and deliver on time. Time will be what they compete over.

The next of the evolution also involves the residential modular home factories. They will begin either to join the commercial side of the modular industry as many of them are already taking on more and more commercial projects or they will join together in marketing groups promoting modular single family homes. Buying groups may even be part of their revolution.

They will also become the place new groups of modular home builders, who have joined together, will begin demanding standardized construction and pricing. Even though not many of the residential modular will combine, they will be facing a more organized group of home builders demanding better pricing and service. 

These builders may even start their own set crew business which has been one of the weakest parts of the build for most builders. Finding a set crew and getting any kind of standard pricing is a thing of fiction. Until the evolution. Then the home builder groups will take over that part and work together to organize a part of the industry that has always been hard to manage.

Even though most of the evolution is still hiding just over the horizon, there is some evidence that parts of it are already creeping in.

These include the new startup S2A Modular that is working on opening modular factories across the US, the Modular Mobilization Coalition with its network of independent commercial modular factories working together to produce larger and more diverse projects and Impresa Modular Franchise building a network of builders and developers all working together under a single banner.

It may take a decade for the evolution to be completely visible but when it arrives, modular will be the World’s “construction method of choice” and will be a commodity instead of individual projects competing on price.

Lead Time is the key that will unlock the next Evolution in Modular.

Gary Fleisher, the Original Modcoach, is the owner/editor of Modular News, Modular Home Coach and Modcoach Connects. Contact Gary at modcoach@gmail.com


Unknown said...

Great article Gary I couldn't agree more. I have been doing this since 2003 and there is a lot of change for the better in the industry. 2021 is going to be a great year.

John Alan Garingalao said...

I agree with you Gary, it's identifying the extent of evolution that's critical. One would be the integration of more panelized/component type builds to complete the full modular. This has already started with the use of bathroom pods (built with elements as a component) and later integrated to complete a module in another factory.