Wednesday, August 21, 2019

Can Using Modular Construction Save You 20%?

When someone asks if modular will save them a lot of money over site building, most people in the know will say “not really” but it is faster from the foundation to finish.


Now you ask what that savings will be if I go modular. If your project is huge you could save a ton of money in carrying costs over site building but that doesn’t get you anywhere near the magical 20% total savings modular people say it could be.

One of the biggest problems facing the current modular industry is a reluctance to adopt new production processes.

Another is the failure to adapt to a logistics system network of organizations, people, activities, information, and resources involved in the physical flow of products from supplier to customer.

Along with the savings from carrying cost and correcting the two above problems, savings of 20% is now a real possibility. This savings could be achieved from what is already available to us today.

Adding more vertical integration into the process along with more automation will surely be the next steps but only after those first two problems are corrected.

As more processes are added to modular’s toolbox in the future, that 20% savings may even be higher.

But there is a darker side that many industry leaders don’t want to discuss in public. If these processes are not put into the US modular construction industry in the near future we will soon be the nation where Europe and Asia sends their modules simply because they are adopting these processes now and are eager to add even more to insure a better built and less expensive product.
The modular housing industry in particular builds their product for particular customers each time which naturally raises costs. That is why new home builders doing custom modular homes see little or no monetary savings over site building the home. Builders that sell from their factories approved plan sets will see savings because the factory can use a manufacturing mindset rather than a builder mindset.

Modular construction truly is the next logical step in construction and as the labor market tightens up we will have to adopt and adapt to new procedures, processes and products or we will become a market for foreign competitors and let me tell you. “They want our business!”

Gary Fleisher (the Modcoach) is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant. modcoach@gmail.com

3 comments:

Anonymous said...

Coach

Good luck convincing factory; sales/account reps; builders and their sales team adjusting to a manufacturing mind set for delivery of more than 5-10 homes a year. Visit any of the national developer sales centers to understand the value of repetitive build process with minor adjustments. There is a reason the manufactured side of the home building business can mirror the national developers in units delivered.

Bill Hart said...

Was it not Churchill who said in essence..something about "learn from history or be domed to repeating their same mistakes"..ie. National, Inland and Kingsberry did the cost effective drill..saying to the Mr/Mrs Jones, model home visitors after their tour..Good for you good choice! we call this the Thunderbird model. do you want the brown roof like the model or the green roof? Sales person continues says.."We have just one brown roof home to be built, then were are out of lots;the one you and your wonderful wife like then is lot 214, do you want to make your deposit in cash or check? Shella here then will make an appointment for you to pickout your interiors, next week OK?" Gary..We sold 1000 s/f homes lot and all for 9,270 no down VA 75 a month..my Inland Mid-west division completed more than a thousand Inlands each and every year for three-four years running. We ie the big three exhausted by then most of the 30's Depression bank repo inventory lots in most of my 1st class cities by then. So then some folks decided the Don Scholz bent wing house on a rural lot was the only way to go next.triple the price of course, and the industry shifted and ..the Economy of Scales went to hell in a hand basket. What do you said Gary? History surly tells us what to do..To me it's crystal clear! and Buffett certainly comprendos!

Anonymous said...

With the new FHA Advantage program coupled with their simple repetitive designs and features buyers want manufactured producers will continue to outsell the modular business side except in commercial applications.