Friday, January 22, 2021

The Dilemma Facing Modular Construction Today

As more builders, developers and customers begin using modular construction instead of just thinking about it, the existing modular housing industry is being pushed, pulled and thrown into a new reality.



Too Much Demand!

How can that be a bad thing? It can if there are very few new modular home factories being built right now and only a few on the drawing boards.

About eight years ago the media began touting the benefits of modular construction again which opened an entirely new customer base. Hotels, college dormitories, taller multi-story apartment buildings, retirement homes, more demand for single-family homes and let’s not forget the Hurricanes, fires, floods and affordable housing projects over the past 6 years.

But all that new business coming into the existing modular factories, both residential and commercial, simply allowed many factories to get back to the capacity they had prior to 2008.

Now full capacity is not enough. Between big modular projects practically falling in the front door and the builders having a terrific year, there is no more capacity to be had forcing many, even commercial modular factories to have lead times of 20 weeks or more.

Here a couple of problems that are occurring right now in our industry and it won’t get any better when Spring and Summer get here.

Builder and Developer Complaints

There are two major types of complaints facing the modular factory. First, there are builder complaints about the lead time to get modules built and delivered to the job site. Even if a factory is at capacity, it doesn’t want to turn away business so they continue to take orders and deposits for work they know will stretch their production schedule out further.

Secondly, in the rush to at least try to increase production speed, shortcuts are taken and modules sent into the ‘yard’ to wait for special order windows, cabinets and other materials that vendors couldn’t supply in time, thanks to COVID-19.

Overworked and Stressed Out Workers

In some cases, overtime is becoming mandatory which isn’t really too bad in the winter but spring and summer are just around the corner and if there is mandatory OT now, what will it be like later in the year.

The urgent need for both skilled and unskilled labor on the production line will probably get worse this year and with President Biden pushing for a $15 an hour Federal minimum wage, look for more price increases in the construction industry.

Not only are the production people beginning to feel the stress, but the sales department is also seeing an overload of builders and developers relentlessly calling asking when their modules will be delivered. In reality, nobody can give the builder a real-time for delivery until the module is complete and just about ready to ship.

Suppliers Can’t Keep Up

Lead times from the vendors and suppliers is growing as well. The days of getting custom windows from a vendor within 2 weeks are over, replaced with a longer lead time that has to used to calculate when the completed module can leave the factory’s ‘yard’.

Quantity vs Quality vs Price

Remember the old saying “You can have great quality, low price or quick delivery. You can choose two out three.” Today it seems you can only get one out of three.

Builders are only loyal to a factory as long as certain things remain in place. Good pricing is one, short lead times and few service problems are some others.

What is happening today are builders and even large commercial developers not getting one or two of these things as they expected and then shopping their plans to every factory.

And of course, those new factories coming on board would never stretch the truth about the delivery time, quality, or price……. They just want to add that builder’s business to their income statement.

What is the Dilemma?

Many established modular factories that don’t have enough capacity and/or labor and are beginning to look at expansion. That takes a major investment in money, talent and time which modular factories don’t have in abundance.

For the most part, the new modular factory startups really don’t want the custom side of our industry, instead, they focus on multi-family, multi-story projects and tract home developments. And that’s where the real growth is happening.

The dilemma….do the established US modular factories simply try to ride out this huge wave of demand hoping that it will end in a couple of years and go back to a more manageable level, or do they rush into expansion by building or buying capacity, or will they simply fold under the pressure and stress of not being able to keep their builders.

Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects

Contact Gary at modcoach@gmail.com

1 comment:

Unknown said...

Do you in the USA have better solutions to fire stopping and firewalls than us in the UK or are you still awaiting a massive fire with loss of life to awaken you guys to the problems. Perhaps you dont build as high as us with system builds (I doubt that).or perhaps tenants are faster on their feet than us, so they don't die in the sane numbers. All I do know is system builds (the way we build them) is no good at all.