Monday, May 2, 2011

"RIGHT-SIZING" THE MODULAR HOME FACTORY


When times were good, it was easy to mask ineffective management decisions but now that the modular housing industry is its fourth year of depression, those poor decisions are rearing their ugly heads.  And management still isn’t aware that they are doing anything wrong. 

So here again are a list of things that need management to be honest about if they are to turn their companies around and stay in business:

Develop and Execute a Business Plan.  You all heard this a million times from me but if you don’t have a strategic direction, an understanding of your builder’s and their customers needs, an understanding of your competition’s strengths and weaknesses and a way to execute the plan, you will continue to be in that downward spiral.

Communicate Effectively. Factory owners need to identify and develop strong leaders and communicate the factory’s strategic directions internally so that everybody can be rowing in the same direction.  They need to have clear lines of authority and accountability.

Create and Use a Marketing Plan.  Establish a sales process that builds repeat business and brings in new builders by using the latest technology such as Face Book, Twitter, etc.  Management must create a system to measure their marketing efforts and be ready to adapt to changing market conditions.

Measure Performance and Manage Reporting.  Factory owners and management need to define key indicators that can be read quickly by all management and sales personnel.  The use of accurate financial and project information in a timely manner is the life blood of a successful factory operation.

Modular Factories need to Right-Size their Operations.  Even the biggest companies have been forced to “right-size” their business to stay in business, so why not the modular home factory? 

Owners and management must make realistic assessments of their financial conditions such as under and overbilling their builders, receivables, estimated costs to complete and tangible working capital.
They also need to take a hard look at their Business and Marketing Plans and decide which markets they want to continue to serve and which to drop.  Dropping a market can actually be more profitable than anything a factory can do in today’s tough housing market.

Right-Size your Cost Structure.  Make it match your company’s projected revenue and desired level of income.  There has to be timely reporting of the key indicators and should contain “trigger points” that prompt management into action. 

Keep a close eye on the risk areas that worsen during these tough times, including builder prequalification and mortgage verification, subcontractor and vendor default risks and any contractual risks.

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