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.


Anonymous said...

Coach. Great read. And I have a simple solution (or thread). Vertical Integration. Let the Modular Co. run the entire thing. . . . you said it, builders are relying more and more on the manufacturers. Where's the tipping point where the manufacturers just say enough is enough? I'll do it myself.

I Am Home said...

Coach, I think a lot of you writing is spot on. One of the main points I would make is that a Modular Home Seller needs to do business with a factory that does at least 60% of it's business building Modular homes. The factories that build mostly manufactured homes does not have the Modular business people best interest.

Even though the work force seems to be diminishing in the factory built business, I actually think it's a cop-out and the quality of the supervisors and managers are the main reason for the lack of quality control and the building of good homes.

audree grubesic said...

I really enjoyed reading both sides of the equation for building a modular home. Great perspective
Audree Grubesic
Modular Sure Site
Denver, CO

Anonymous said...

Every house brings a fresh set of surprises. Receiving a home as ordered should be the norm.

Anonymous said...

We, as the builder, no matter how big or small and as important we are to the “food chain” of the cycle, are not treated or looked at that way. We are looked at as more of a problem then the reason that the factories are building homes. Scheduling, quality etc is at the discretion of the factory and not of the entity that is actually completing it on site and has to deal with the end user. The factory is paid upon delivery and is “DONE” with the project while the builder has to live with the customer for months through completion and with warranty for years to come. In many situations problems caused by the factory starts off each project with undue stress for the customer and builder which makes the balance of the process and payments extremely difficult.

Anonymous said...

After the second Excel bankruptcy I began buying from 3 factories and all of them have delivered homes that shouldn't have ever left the production line. When I call about the problems I am treated like a child that broke his toy and wants them to fix it. This is their fault but they blame me. Getting close to going back to stick building. At least if something is messed up I caused it and will fix it myself.

JC said...

The wonderful thing about this "airing out our dirty laundry" article is that it's so deeply informed by REALITY. Everything Coach says is true.....sometimes. But sometimes it's not, which means we CAN do better. We already do.... but only sometimes.

I teach factory delivery (prefab) at the Yestermorrow School and tonight I will be handing a copy of this article - with ALL comments - to the students. I can't imagine a better peek into the industry that they are all so committed to. Each enrolled with the specific goal of designing a home that can be factory delivered.

Anonymous said...

The Factories really need to examine what they are capable of and decide what they can supply to the builder and meet their expectation additionally the options they are being asked to supply. Some things are not production friendly and really should be left to be done on site by the builder. The factories are so afraid of loosing a deal they can't look at things objectively. You can't blame the builder if you decided to say yes when you should have said no.When this happens the factory does an injustice to the customer. The bottom line is if the factories had the guts to say no to some requests the overall quality would go up because they wouldn't be hung up trying to figure out all of the one off things they being asked to do and could concentrate on delivering a crisp home.

Anonymous said...

Communication IS key! Great article Gary!