Friday, March 16, 2018

Has Customization Gone Too Far in Modular Housing?

When you look back on the history of the modular housing industry you find that the earliest homes built to IRC standards were simple ranches, capes and 2 story models. If you were a builder you presented your new home buyer with the factory’s plan book which usually had between 30 and 100 different but strikingly similar dimensions and layouts.

Before 2000 very few modular home factories allowed their builders to veer far from the plans in the ‘book’. You could add a couple of feet to the width and length as well as changing the roof pitch from 5/12 to 7/12 in a ranch or 2 story and from 9/12 to 12/12 in a cape. Houses fit neatly into 2 modules for a ranch and cape to 4 modules for a 2 story.

After 2000 a new breed of modular home builders came into the market, the site builder that switched to modular. Buyers were beginning to ask, no demand, changes to the factory’s basic plans and management was more than happy to meet those demands.

Buyers asked for tray problem. 9’0 problem. Hip roofs...problem. 20’ wide marriage wall openings...problem. The list of wants and desires kept growing and factories kept saying “no problem.”

Modular builders began testing the limits of what their factory could do. A buyer wants a wall of windows at one of the lifts points, another wants a 10’ ceiling and yet another wants to add an apartment into their home with totally separate utilities. Factory engineering departments and their CAD operators were more than happy to be creative in designing a plan to meet the builder’s demands.

When business hit the recession in 2008 the factories were scrambling for orders from builders who were also looking for new home buyers in order to stay in business for just one more year.

With mortgages at a premium it seemed like only the Boomers had the resources to build new homes but they wanted features and options that were being shown to them on the Internet through YouTube, Facebook and at Builder’s Shows where site builders who were used to customization ruled the fairway.

By 2010 these wonderful new options along with all sorts of ‘Green’, ‘Sustainable’ and ‘Energy’ options were no longer the things of wishes and dreams but became necessities and demanded options.

Many modular home factories moved away from plan books, especially by those serving the highly custom Mid-Atlantic and New England markets. The message brought back from the factory sales rep to management was that nobody builds from the plan book anyway so why push it.

It’s hard for a sales rep to tell a builder that buys 2-3 homes a month from them that the factory won’t do a hip roof. Instead he/she brings the buyer’s plan, usually drawn on an inexpensive CAD program purchased for $29.95, to the factory and says they will lose the order if the builder can’t give the buyer a hip roof. Or a dutch clip or an oblong turret roof or a triple reverse shadow line something or other.

Now the factory management is faced with a problem of turning away work from a good builder knowing that they will probably shop it around to other factories that will agree to try building it or simply give in and try to do it themselves.

I was walking through a factory a couple of years ago when I came across the A and B boxes of a house without a ceiling. When I asked what was going on the owner told me that they now build 2 story homes with 10’ ceilings with the ceiling actually being part of the joist system of the C and D boxes.

He told me that he charges less than $2,000 for this option and I decided right on the spot that if I built another home it would be with his factory because I couldn’t that done in site building as a $2,000 option.

Tile work was a ‘no-no’ in the house just 20 years except as a backsplash in the kitchen and above the bathroom sink. Today extensive tile work is done on the production line in mere hours compared to what would take a tile setter a week to do in the field.

Recently I’ve written about a growing concern about the quality of the product the builder receives from the factory. One builder told me every house was like Christmas as he unwraps module after module and is greeted with a surprise in each box. That’s not how modular housing is supposed to be.

Factories must think that flitch plates and 16” LVL’s can solve just about any structural problem they encounter as more and more of them are being used. Twenty years ago I never had an ‘offset’ roof line option or the ability to order installed custom finished oak staircases on my factory’s order form.

Let’s pretend we’re a fly on the wall when the sales rep comes into the Sales Manager’s office with a demand from their builder for something that has never been done by them before.

After arguing for a few minutes the SM concedes that they just may lose a big builder if they say they can’t do it. Then engineering is brought into the discussion as if it is going to happen and it’s up to them to design it.

Engineering works on it with the help of the third party inspectors who will have to sign off on it in order to get it approved for the state where it is needed. Hours are spent designing it, figuring out how to do it and then being reviewed by the third party.

In just about any other industry in the world the process of working on a special order item doesn’t involve so many ‘outside’ people’s input as much as IRC modular housing does. Bottlenecks and regulations can kill a lot of time and use up a lot of money getting an OK to build it.

If the option is to get past the state code people, the third party may ask them what they want and since it something that needs researched, it could take a while before the state and the third party work out the final details that will get it approved.
By now the production department has looked at it and decided how it will get built on the production line. Maybe one or two people from the production line will sit down with them and figure out a sequence of events in order to make it happen.

The time and money already spent is ignored when the option is ready for costing to the builder. It is done almost on a “how much do you think we should charge for this?” basis. That cost usually has nothing to do with the amount time, talent and money that has already been exerted in figuring out how to do it.

Then comes the moment of truth. Presented with the cost, will the buyer say yes or no? If yes, will the factory ever be able to recover their cost and can this ‘one-off’ design that has never been done before reach the builder exactly the way everyone has envisioned?

Or the customer could simply so “No” and all that time and money preparing for it was a total waste.

I wish there was an easy way to tell a builder ‘no’ and have them understand that it just might be a nightmare when it reaches the buyer’s lot. But that could mean that the builder goes to another factory that says “yes, we can do that” and then the major problems that could arise fall on the shoulders of the other factory. Nobody is a winner in this scenario.

Being a modular home factory doing custom ‘bleeding edge’ work is really not for everyone. Maybe it’s time to let those factories that want to do this continue to do it and those that don’t want to ride the sharp cutting edge continue to do the custom work that they have perfected over the years.

But there will always be that customer that walks through the modular home builder’s door and asks “Can you build this for me? I saw it on YouTube.”

New Commercial Modular Factory Being Built in Chicago Area

Chicago-based general contractors Skender are getting into the modular manufacturing game, with an announcement that they will be building a factory on Chicago’s southwest side that can crank out hotel rooms and entire apartments.

Skender is going all in on the new factory and modular fabrication startup, which they claim will put 100 people to work (an impressive number, as Skender only has 300 employees), and is using the opportunity to shift towards a design-build model.

The company has bought out local firm Ingenious Architecture and will use the 10-person studio to guide the design and manufacturing of the modular units. The move represents a huge expansion in scope for Skender, which has also changed its name from Skender Construction as part of the new direction the company is pursuing.

“We are asking new questions,” said Skender President and Partner Justin Brown in a statement. “Why can’t we apply sophisticated design principles to modular manufacturing? How can we eliminate weather delays by bringing large parts of the process indoors? How can we significantly boost productivity without sacrificing quality?”

Skender is expecting to roll full apartments, hotel rooms, and pieces of both multi-family residences and healthcare buildings off its new assembly line. Everything can be fabricated at the factory by tradespeople, from cabinets to light fixtures to units that have been pre-wired and set up for plumbing, then shipped to the potential construction site and unloaded via crane.

Besides being able to construct modular buildings from the ground up, Skender plans to use the factory to work on both the interior and exteriors of its projects simultaneously, and standardize production.

Thursday, March 15, 2018

BSC's January Lunch-N-Learn Webinar Now Available

Kicking off the new building year, the Building Systems Council (BSC) of the NAHB, held their first Lunch-N-Learn of 2018 with "Innovations in Offsite Construction". As the presenter, I enjoyed being asked to speak about what I see coming our industry's way in innovative ideas.

Here is the entire January, 2018 rebroadcast of the BSC's Lunch-N-Learn.

CLICK HERE to listen to Gary Fleisher, the Modcoach

Canada’s Shelter Modular Acquired by Horizon North

Horizon North and Shelter Modular, a full-service modular construction provider based in Aldergrove, British Columbia, have signed a Binding Letter of Intent pursuant to which Horizon North has agreed to make an offer to purchase (the "Offer") all of the issued and outstanding common shares of Shelter Modular (the "Shelter Shares") for $4.75 million, payable in a mix of common shares of Horizon North ("Horizon Shares") and assumption of existing debt. The Binding Letter of Intent is subject to certain conditions, including the receipt of all necessary and required consents, including those from the Toronto Stock Exchange and the Corporation's lending syndicate. The transaction is scheduled to close in mid-April 2018.

Shelter Modular in Aldergrove, British Columbia

The Offer will be made pursuant to an exempt take-over bid. The Offer will be subject to a number of conditions including, among others, there being validly deposited under the Offer and not withdrawn such number of Shelter Shares that represents at least 90% of the outstanding Shelter Shares calculated on a fully-diluted basis. Certain conditions may be waived by Horizon North at any time both before and after the time of expiry of the Offer. Shelter Modular has agreed not to solicit further offers or initiate discussion or negotiations with any third party with respect to an alternative transaction involving Shelter Modular until closing of the transaction.

"The strategic acquisition of Shelter Modular immediately provides Horizon North with additional manufacturing capacity to meet increasing demand in our Modular Solutions division," says Rod Graham, President and Chief Executive Officer of Horizon North. "Along with exposure to future opportunities to grow the modular business and gain additional market share, this acquisition provides for improved access to lower mainland British Columbia. This lowers transportation costs and increases labour efficiency to provide best in class service for our existing municipal and provincial government clients."

In addition to several contracts being executed to provide modular housing solutions for the Vancouver Affordable Housing Agency ("VAHA"), the Corporation is also working closely with the BC Housing Management Commission ("BC Housing") as they execute on a commitment from the Government of British Columbia (the "Province") to build supportive homes for people struggling with homelessness. In addition to $291 million allocated in 2017 to support the construction of 2,000 modular housing units across various centres in British Columbia, the Province's Budget 2018 provides substantial additional funding over the next three years to continue building affordable and student housing infrastructure across the province.

"Building on our current successful construction projects with VAHA and BC Housing, Horizon North is committed, through this new property and our Center of Excellence facility on traditional Tk'eml├║ps te Secwe'pemc land in Kamloops, to providing a made-in-British-Columbia solution to support the work of these government agencies in introducing critically needed housing for vulnerable BC citizens," adds Rod Graham.

Horizon North continues to add certainty to its Modular Solutions project portfolio for the remainder of 2018 and beyond. As of February 28, 2018, backlog in the Modular Solutions division sits at $46.2 million with high probability line of sight to an additional $131.4 million of projects. This compares to $43.9 million and $148.0 million respectively at December 31, 2017.

In the first two months of 2018, several high probability opportunities converted into backlog and more than offset the projects executed in the same timeframe. The backlog and high probability opportunities at February 28, 2018 consist of a variety of development projects, including government sponsored affordable housing, multi-phased condominiums, hotels, hostels, Aboriginal housing and commercial infrastructure, and Karoleena residential homes.

"We are encouraged by the growth of our Modular Solutions portfolio and its increasing profile as a percentage of our overall revenues," says Rod Graham, President and Chief Executive Officer of Horizon North. "We are also pleased to see a growing diversification in our projects, including a recently signed contract with Hostelling International Canada to construct a new purpose-built hostel in Jasper, Alberta."

About Horizon North

Horizon North is a publicly listed corporation (TSX: HNL.TO) providing a full range of industrial, commercial, and residential products and services. Our Industrial Services division supplies workforce accommodations, camp management services, access solutions, maintenance and utilities. Our Modular Construction division integrates modern design concepts and technology with state of the art, off-site manufacturing processes; producing high quality building solutions for commercial and residential offerings including offices, hotels, and retail buildings, as well as distinctive single detached dwellings and multi-family residential structures. As a result of our diverse product and service offerings, Horizon North is uniquely positioned to meet the needs of our customers in numerous sectors, anywhere in Canada.

San Francisco's North Bay Seeing New Modular Factories Delivering Homes

In four hours Wednesday, a 1,300-square-foot house in Napa went from slab to completion.

No, it wasn’t an all-hands-to-hammer benefit workbee that put up the three-bedroom, two-bathroom home on Dealy Lane in hours instead of months. Instead, it was done by a California startup that’s part of a growing move into factory-built housing.

One of the firms building homes in a factory instead of onsite is Factory_OS which is ramping up this spring in a 275,000-square-foot factory on Vallejo’s Mare Island. That company already has orders for thousands of factory-built dwellings for Google and municipal housing authorities.

Napa-based Healthy Buildings USA has its much smaller factory turning out panels for installation at a 48-unit development under construction in the city.

The Napa home on Dealy Lane is the first in the North Bay for nearly 2-year-old Plant Prefab, which also last week installed over two days a custom 16-unit dormitory in Berkeley for educational farm and community center Urban Adamah. It is said to be the first prefabricated multifamily project in the East Bay city.

In the past year, Plant Prefab opened its own factory, secured $3.4 million in series A funding led by Obvious Ventures and shipped six other housing units throughout California. The 62,000-square-foot facility is located in Rialto, located midway between Los Angeles and Palm Springs.

The single-story Napa home was built there in three dwelling modules plus a roof unit. The sections were then shipped to a staging area near the construction site, where crews were finishing preparation of the foundation. With construction in the factory occurring concurrently with build-site preparation, the total time to get the home from dirt to dining room can be reduced by as much as half, and neighborhood disruption can be lessened, not to mention potential for less waste in construction materials, according to founder and CEO Steve Glenn.

CLICK HERE to read the entire North Bay Business Journal article

Vermont’s Low Unemployment Rate Hurting Construction

Vermont's unemployment rate continues to remain low while employers across the state report they can't find enough workers to fill open jobs.

The state Department of Labor on Monday released the January unemployment statistics that showed 2.9 percent of the state's workforce is unemployed. The figure is unchanged from the December figure. 2.9% is about what the lowest the Fed says an area can go as many in the percentage want to remain unemployed until their weekly benefits end or are signed up as unemployed but have taken ‘cash’ jobs.

The state unemployment rate is tied for the fourth lowest rate in the country.

This is hurting not only builders in VT but also in the surrounding states as workers realize driving about an hour to work in VT means higher wages.

Wednesday, March 14, 2018

Modular Factory Sales Rep Explains Their Newest Options

If this doesn't sound like your factory sales rep, all I can say is "you're extremely lucky!"

"And remember, we are the only factory to offer this option."

Tuesday, March 13, 2018

"Custom" Modular Housing Industry Facing Problems

Although most of the time a builder receives a home built just as ordered from the factory without major problems, there are some cases where a new builder takes delivery of a home that probably should have never left the factory gates. Is it a matter of quality, miscommunication between parties, or the lack of a good order processing policy? The question of quality control from the modular home factory comes up with every new home delivered to a builder starting with a new builders first modular home delivery.

Gary Fleisher, The Modcoach
A previous article mentioned just a couple of the problems facing the builder when their home is delivered. A lot of the problems could have been avoided prior to the home being released for production with a proper order process and communication between the customer and the builder, the builder and the factory sales rep, the factory sales rep and order processing, order processing and the engineering department and ultimately the engineering dept with purchasing and production.

This communication process varies from factory to factory and builder to builder.

Everyone has an excuse and tries to pass the blame off onto someone else not doing their job properly. This takes a toll on both the factory and the builder. Meanwhile the builder may have to stop work on the house which upsets his schedule with subcontractors and upsets the customer that is already anxious about everything.

The process starts with the builder and their customer. Today, it is extremely rare that a customer chooses a standard design out of a catalog, has their financing in place along with lot approvals in a town where permits only take a few days.

Working with a new home buyer before getting them to sign a contract to build a home is a long and strenuous journey through design, redraw, pricing options, redraw, requote, lot survey and engineering, zoning, mortgage application, requote, redline drawings, sign off of final plans, collecting the drawing deposit and the home deposit. Not something for the faint of heart.

Let’s face it, modular is no longer production housing……customers are no longer taking product out of a catalog without making dramatic changes. The modular business has changed to custom housing but the processes in place have not changed from production housing.

These problems are the source of arguments between the builder and the sales rep, the sales rep and their Sales Manager, the Sales Manager and the production department, the production department with both the engineering department and the purchasing department and so on.

Almost every step of this journey involved working with someone at the factory. If the builder uses several factories it becomes an even longer process trying to figure out which one can give them the best price, be able to deliver it when needed and finally the builder deciding if a particular factory is really worth all the problems that were shipped in the last house they bought from them.

On the factory side, sometimes the builder becomes one of the biggest obstacles in the building process. They want a ‘real’ quote quickly for a plan drawn on a piece of paper by the customer knowing the factory will have to redraw it just to find the beginning number to quote. And there may be 10 new builder drawings and 8 redraws ahead of them. If the quote can be done by the sales rep without the engineering department doing a drawing it might speed up the process but that assumes your sales rep isn’t backed up with other quotes, visits to job sites, on vacation or sitting with other sales reps working on their March Madness picks.

At times, all this works goes into the quote only to find out that the builder did not qualify the customer well enough and is finding out for the first time that they can’t afford the home he designed.

Then the builder’s customer wants it redrawn, requoted, price on special order options, requoted, redrawn and finally if everything goes well, a signed contract arrives with a deposit check. To top it all off, once the order for plans is placed with the factory, the customer decides to make a dozen more changes as the order is being engineered, leading to more time delays and confusion. If only we didn’t have those pesky customers to deal with!

This is where things for the factory become complicated. At any point in time the factory may have 50-100 quotes being processed and 10-25 houses waiting for signed contracts and deposits and 15-30 houses waiting to go to the production line. If a factory can turn out 13 floors (modules) a week and the average house has 3 modules, just those 15-30 homes waiting for a slot could take up to 7 weeks to finish. Some factories today are seeing 10-15 week backlogs.

With so many people involved in the process of building even the simplest 2 module ranch, it’s a wonder that the time to build a home doesn’t take even longer. Quite frankly, the quickest part of this whole process is the actual manufacturing of the home which may take as little as 5 working days.

From the builder, a house with a signed contract and a deposit passes through the sales rep to either the sales manager and/or the engineering department for review and final drawings. The third party inspection service is involved to sign off on the plans so the builder can get a building permit which isn’t easy especially if you are in one of the most over-regulated areas of the nation, the Mid-Atlantic through New England states. Due to the custom nature of the product today along with ever increasing and stringent code requirements, the plans submitted to the third party for approvals are much more extensive including structural calculations and manufacturers making sure that their builder is going to be able to pass on site energy requirements (blower door and duct blaster testing along with air exchange requirements).

Purchasing, must then decipher exactly what the customer ultimately wants after filtering through the multitude of change orders generated after the order was placed while at the same time keeping track of the lead time that varies among different options ordered by the builder. The days of pulling materials from stock have dwindled as the options offered to builders and customers due to the demand for custom options has increased. Purchasing, that had already priced 3 different faucets, 2 different upgrade window styles and an elaborate entry door needs to order them but ‘when’ is the big question and also which option that they priced is on the order form. Plus will it be ordered and delivered in time to be installed in the house while it’s on the production line?

A member of one factory’s top management told me that tile work is becoming more prevalent in the homes they build to the point that the tile work that normally requires a week’s worth of work at the job site is being given to the factory (who willingly accepted the task) who is expected to do the same work in just a few hours while the house is on the production line and slowing down the line. It has become something that is being assessed as to whether it should be continued or curtailed drastically.

Every factory has a Quality Assurance person looking at each home both while the home is on the line and just before it leaves for the builder. Some are full time while others do something else in the factory when not looking at the modules on the line.

The question a builder has to ask is how did something so obviously messed up get past the factory’s QA checklist?

How can a kitchen ship with 3 cabinets missing or windows or a slider not installed? Were they not ordered in time? Sometimes these things happen because the builder sends in a change order while the house is being produced because someone did not review the plans, order form and change requests before it got released for production. OR, the vendor shipped damaged goods that could not be installed.

What about doors in the wrong locations or my personal favorite from a house I ordered for a builder where the door into the Master Bedroom was on a vaulted wall in the ‘C’ box instead of at the end of the hallway in the ‘D’ box. Nothing like being at the set with the builder when the customer walked into the house and threatened to shut down the job when he saw the door hanging in mid-air. By the way, the plan clearly showed the door at the end of the hallway.

Is there a solution to correcting this? If you think of someone sewing a quilt, the one thing that holds everything together ensuring a good looking and sturdy quilt is the ‘thread’. Using this analogy for building a home in the factory, we have to work on creating the ‘thread’ that can run through all phases of the building process from the beginning stages when the customer enters the builder’s life, through the buying process, into the production of the home in the factory and finally back to the builder’s finishing process.

Designing such a thread could be the most disruptive and positive thing to ever happen to the modular housing industry. It will take time to figure out all the nuances and gain acceptance by both parties but in all honesty it’s already being done in other industries.

I like to call this thread the “Total Inspection Process” (TIP). The investment could be hefty and it could take a long, long time to both implement and gain favor with everyone but it could be the one thing that sets modular housing apart from site building and begins our climb into the 10-20% market share. OMG!

Two new technologies that could work together to make this happen are BIM and Watson. Check them out. You can take it to the bank that Toyota, IKEA and the European modular factories will be using them when they begin the new modular home invasion of the US.

Bottom line is we need to become better at what we do if we are going to reach the next level in the evolution of modular housing. I hate to say this but the builders are not going to be any help here as they rely more and more on the manufacturer to deal with the detail and take less responsibility for the information on an order that they have signed off on it.

The factory is at the center of this entire process and if builders are ever going to see positive change when it comes to custom modular home production, they will have to step up and become an integral part of making the process better.

Transparency by both sides is going to be necessary for this happen.

It is up to our industry to begin the ‘change’ and then show the builder which pitfalls to avoid in production process. At the same time, builders need to be heard by the factories about issues that continue to come up which costs them time and profit. Communication and training can shield everyone from a bad experience.

Cover, a Los Angeles, CA Prefab Company, Introduces Innovative ADU App

New state rules have made it easier for California homeowners to add accessory dwelling units (otherwise known as back houses or granny flats) to their properties. But many interested homeowners don’t know where to start. Local prefab company Cover has built a new tool that tells LA homeowners what, exactly, they can build in their backyards.

According to Cover CEO Alexis Rivas, the new tool is designed to get homeowners over the first few hurdles for adding an ADU, which otherwise might require hiring an architect to navigate local zoning regulations and property laws.

“We’ve taken the zoning logic and translated it into software for every parcel in LA,” says Rivas.

After homeowners input an address and answer a few questions about how the unit would be used, the tool crunches a wealth of city data and lets users know what, where, and how big they can build. After that, should homeowners want to start the process of buying one of Cover’s prefab units, users pay a $250 fee to begin the consultation, which includes 50 to 100 questions and a site visit.

CLICK HERE to read the entire CURB article

Monday, March 12, 2018

EcoCraft Homes Earns MHBA’s March “House of the Month”

EcoCraft Homes, Pittsburgh, PA working in collaboration with local architects Rothschild Doyno Collaborative brought together energy efficiency with modern urban design to maximize performance and beauty in this three-story custom modular home, located in Sewickley, PA. It is the MHBA’s March “Home of the Month”

The home was built by Structural Modular, Inc. in their Strattanville, PA facility.

The design solution responded to a steep slope hillside condition with limited access and considerable zoning setback requirements to ultimately maximize views and connections to the outdoors, all while being fully tailored to the unique needs of its owners.

The design creatively solved challenges faced by working with the wedge shape buildable area and identifying the opportunity to create a site entry sequence that harmoniously marries the house with its' setting. The home features an open floor plan with well positioned windows to optimize natural light throughout. Additionally, the dwelling boasts 10' ceilings, exposed floor joists, hardwood floor, an open staircase, workout studio, small brewery, and large entertainment/yoga room. As you move up through the home, there are three wrap-around decks. The sequence of spaces is completed with a breathtaking view to the Ohio River valley. The experience is uniquely enhanced with two operable garage doors that open the home to the outdoors.