Saturday, November 21, 2020

Is Factory OS Simply a Test Platform?

Has anyone thought to ask why West Coast tech companies are so enthusiastic to throw millions of dollars at start-up modular factories west of the Rockies but haven’t invested a single dime in any established, profitable modular factories east of the Rockies?

Factory OS recently raised $55 million in investment capital from Autodesk Inc., Citi, Facebook, Google, Morgan Stanley, and Lafayette Square. The investment will help Factory OS accelerate growth and further integrate digital technologies.

Is it simply the housing shortage in the West? Whatever the reason, the money is flowing in from the West Coast at unprecedented amounts.

But let’s take a little peek behind the curtain of what could be the real reason the high tech money is flowing into Factory OS and why the affordable and homeless housing markets are getting so much attention.

There’s definitely is a housing crisis on the West Coast and the Rockies and meeting those needs is something everyone in the off-site construction industry needs to do. Panelized wall and truss factories can only meet a portion of the demand, modular can only meet a small portion which means that somehow the output from both has to increase dramatically.

No off-site factory would ever turn their backs on millions in investment dollars to build more and hopefully, profitable product. However, they are turning their backs on the history of the modular industry and what got us to this point.

I’m not a betting man but I would wager those millions from the high tech companies came with the offer of lots of research, rethinking the entire process including the production line, and getting developers and investors to think of modular as simply a repeatable, lower-cost way of fulfilling the housing needs of the affordable and homeless markets.

The high tech money simply looked at the modular process and thought if we can make every module the same, keep options at a minimum, use BIM, AI, and other cool toys they’re working on, test them in an actual modular factory, then that is the place to spend all their time, talent and money.

The big question for everyone. What happens to all those senior management people that have spent decades learning the skills needed to run the unique production processes required to build modules on an assembly line?

The answer to that came three months ago when a Director of Production wrote me to say he was let go from his job and replaced with a college grad carrying a tablet and connected to a program written to help improve productivity.

Turns out the new guy was doing a time study of each production worker’s activities using a chip in the new badge every line person had to wear. He walked the floor with little interaction with the line people.

The line people kept calling their former boss asking what was happening and of course, he didn’t know. 

This created a rift between the line worker and the tablet carrying “replacement” production supervisor (not his official title). Several line workers quit, which was probably going to happen anyway, but when more than usual began not showing up for work, production began to slow down. 

The workers that remained were told to pick up the slack and the tablet-carrier kept an even closer eye on their efficiency. 

The bottom line in this example is this modular factory used to have a reputation for building good quality custom-designed modules but now it’s trying to enter the huge project market where cookie-cutter designs are the norm. That market is a penny-pincher’s delight but one wrong step can mean the difference between profit and loss while the modules are still on the production line.

I hope it isn’t the case with Factory OS where the high-tech money is pouring in just to give Google, Autodesk, Facebook, etc a testing site for all their new digital and electronic experiments.

The off-site construction industry can meet the demand for all that new housing but it needs more factories that can turn out a 1,000 modules each year instead of just increasing a factory’s production output by 100-200 modules at the cost of tens of millions of dollars.

Gary Fleisher, the Modcoach, publishes Modcoach News and Modular Home Coach blogs for the modular industry professional and Modcoach Connects for construction consultants

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Builder Bob said...

Gary, that one came out of left field. Not saying you are wrong because I never gave that a thought before.

You da man.

Kevin said...

My experience in two other industries may shed some light, not saying I am right or that Gary is wrong. Gary has a different insight into the industry than I do and many others have as well. With that said here goes:

From my experience in Real Estate Value and Market analysis I believe that the Market West of the Rockies is not use to Custom Housing as a Commodity especially those seeking entry level or affordable homes and therefore are more accepting of Cookie Cutter Housing. The Tech Companies have incurred issues finding suitable housing for new staff in both quantity and quality as many of those bright minds place their priorities in constant self improvement, research and development, creative thinking and less on material things like new homes.

My second observation comes from my time in the Waste Management Industry, yes plain old trash pickup. Recently I watched a video of a young man starting a trash pickup business in rural New York state. The odd part was he was using collection processes common in the fifties and sixties and not automation common in today's methods of collection. I don't mean this as an insult to him or the Modular Home industry, its just an observation, OK. My last statements are the most important in my observation so please keep reading.

In the sixties my Dad started a residential trash collection business on the side from his full time career as a firefighter which is similar to the young man in the video. My Dad purchased a pickup and dumped trash containers by hand, after a short while the volume of business mandated he add employees to keep up the manual collection and offloading of trucks. In then moved to trucks with dump beds to speed up the offloading yet kept up the manual process of emptying containers in the new dump truck yet continued to add employees to keep up with the added volume of new customers until he reached a MAXIMUM CAPACITY OF customers using these methods. In the seventies after I got out of High School we converted our entire fleet to automation and went from 10 employees to 3 mostly through attrition. Automation in the Waste Industry started in the fifties with the Dempster Brothers in Tennessee creating a vehicle and container known as the Dempster Dumpster that automated for years to come the waste industry.

So I hope you can the crossover, the companies that Gary speaks off are the Dempster Dumpster of the nineteen fifties. Many folks in the industry during the fifties, sixties and seventies stated there was no way the entire waste industry would be automated and resisted change and the evolution of the industry to what it is today. Last week Gary wrote about New Carriers and I immediately reflected upon how the leading Truck Manufacturers had to change to adapt to the Waste Industries automation, which required lighter trucks, and truck bodies in order to increase payloads given landfills moved further from collection points over time. Weight distribution, the correct placement of axles on chassis, torque ratios, automated transmissions in heavy trucks in the seventies, A/C and HP jumped leaps ahead with MACK trucks taken and keeping the lead to this day.

And just like the Trash Business the Modular Home business will need to adapt as West Coast practices move East yet one element is crucial; knowing what to automate and what not to automate. Just because it can doesn't mean it should because the quality of products and services provided should never be replaced by the quantity of customers served through automation.