New Modular Factory Shopping? 7 Questions You Need to Ask

One of these days you will probably be looking for a new factory and the need to find one that’s compatible with your business is more important than ever. The day of lowball pricing is finally over. What you need now is stability and a good working relationship with a factory’s team.

Here are the 7 key questions you need to ask every factory you talk with: 1. What are the payment terms and are they negotiable? The modular housing industry is unique in how payment for product is made. Cash on delivery, certified check, prepay, assignment of funds and EFT are all common methods. What is not happening is any kind of delayed payment. Don’t be afraid to ask what their terms are. 2. What will my total costs be? Just because you’ve been a modular home builder for many years with a factory and completely understand how they work does not mean that every factory works the same. I have seen a lot of builders handed invoices after delivery, sometimes adding thousands to the total cost, that they never knew they owed. Talk to the factory’s CFO and nail down final cost and late invoices. 3. How do you work with their Service/Transportation department? Oh boy, this is one area that department where the gloves come off. If the factory delivers a product that has defects or shortages, many factory service managers try to minimize their costs by either dragging their feet or simply denying the chargeback. Why? Because their department is a cost to the factory rather than a profit center. Ask to speak to the service manager and ask the tough questions. 4. Who is the factory selling to in your area? If you're a builder buying their homes, you want to make sure they don’t sell it directly to the end user or to a competing builder in your market area. However if your area is Boston, Philadelphia or DC, then you should not expect to be able to handle 4 million people. Or even want to. Expect competition with builders buying from your new factory. 5. What happens if materials don't arrive? It's inevitable that materials will sometimes arrive late to the production line. But what happens then? You want to find out whether your new factory will hold the modules until the materials arrive and complete them in the yard or will they ship the house to you and then (hopefully) send a service truck to complete the module on site. 6. Under what circumstance might prices change? You need to be prepared for the factory to spring price increases on you. Ask them what determines a change in price. Is it tied to inflation or an industry index? If prices go up, how much notice will you receive? Conversely, if a supplier's own costs go down, will your price go down, too? 7. Do you have a volume discount or rebate? Often factories offer incentives. You want to ask about discounts you could be eligible for. If you agree on a certain purchasing goal and reach it, find out if you can receive a discount or a rebate.

Virginia Homes Sold to PA Modular Company

After 50 years of building homes in Boydton, Virginia Homes officially ceased production last week. Speaking on Friday, Virginia Homes Building Systems CEO Phil Hickman confirmed that the company has been obtained by what he described as “one of the leading modular manufacturers” on the East Coast.

Due to confidentiality agreements, Hickman said that he was unable to provide the name of the new owner but did say that the terms of the agreement allow the company to produce the full line of Virginia Homes Building Systems products at the current specifications and through the existing line of dealers. Hickman said the company has obtained the rights to manufacture, market, and sell Virginia Homes Building Systems brands, as well as rights to the name, designs, and drawings.

Modcoach Note: I've just learned that Virginia Homes Building Systems has been sold to Professional Building Systems in Middleburg, PA. No word yet if they are ever going to reopen the factory.

Hickman said that the impact on the firm’s employees had been the prime concern when the deal was being discussed.

Phil Hickman

“We’ve been working with another local manufacturer, and they agreed to offer employment to any of our employees who wanted to come there,” said Hickman. “That means all employees, including office workers, plant workers, whatever. They had jobs the next day if they wanted them. We feel really good about that. This plant has been open for over 50 years, and we have people who have been here almost since the start.”

“Our next goal was to take care of our customers,” said Hickman. “The fact that this manufacturer agreed to continue to build homes to our specs and work with our dealers made a big difference. Our customers will get the same product they were getting out of Boydton. The only difference is that our builders and customers will know that it’s built on the East Coast but not in Boydton.”

According to Hickman, the sale of smaller modular home manufacturers to larger ones is largely due to the way the industry has shifted in recent years.

“When Virginia Homes started, they were building single-wide mobiles. Then they moved up to double-wide modular. Then they started getting into more custom modular. After the housing downturn,” said Hickman, “there was a lot of consolidation and a lot of ‘mom and pop’ operations were bought out. The bigger companies had more automation and lower overhead. The other driving factor for us was that custom has gotten a lot more custom,” said Hickman with a laugh. “To survive, you have to do multi-family units and commercial units. This plant just isn't large enough or have the capacity for those larger projects.”

According to Hickman, demand for modular buildings today stands at about 65 percent single family use, with the remaining 35 percent multi-residential or commercial.

“Here, we just can’t accommodate those large projects,” Hickman said.

Customers will also notice, said Hickman, a much faster turnaround time from ordering their home to final delivery

“The new company is large enough to produce a home from start to finish within ten days,” Hickman said.

Does Anyone Know What is Happening with Virginia Homes

For the past 2 weeks I've been hearing conflicting reports about the health of Virginia Homes Building Systems in Boydton, VA.

The rumors include the factory is closed or closing, another factory bought all their customer contracts and yet another said they are being purchased by a PA modular home factory.

I've tried leaving messages with top management but no response to my requests.

If any of you know whether Virginia Homes is still up and running or if it has or is about to close, please comment below as I don't want these rumors flying around about a company if it is in fact doing quite well. 

Apex Homes Hires ex-Wood-Mode Employees

Apex Homes of Pennsylvania President Lynn Kuhns is keenly aware of the shock and fear being felt among Wood-Mode officials and former employees in the wake of the Kreamer, PA company's abrupt closure on Monday.

"We went through this several years ago," he said of the financially troubled time endured by the Middleburg company known in 2012 as Apex Homes Inc. "It was on a smaller scale than Wood-Mode, which is a much bigger company."

It was 2012 and Apex, a modular home manufacturer located along Route 522 not far from the Wood-Mode plant, had fallen into bankruptcy just 22 years after it was founded.

A group of Apex managers, including Kuhns, worked with an outside investor and purchased the company in 2014. With the aid of the state Department of Community and Economic Development, the company now operates under the name of Apex Homes of PA and continues to make modular homes and some cabinetry while employing about 130.

In the years leading up to the purchase, Kuhns said, "I never gave the employees false hope. I always gave them the facts; good, bad and indifferent. I did the same thing with builders and vendors."

Keeping an open communication helped weather the storm, he said.

Only one vendor and one builder left for good and on Aug. 1, the company will celebrate five years under the new name.

By maintaining an open dialogue about the difficulties the company was facing, Kuhns said, many of the employees felt they were a part of the process even as the company cut employee pay, eliminated fringe benefits, company picnics and monthly luncheons.

It paid off for the employees who stayed and today Kuhns said he has already hired seven displaced Wood-Mode workers this week and is looking to hire up to a total of 30.

"We've been trying our best to meet with each (of the 100 or so) applicants. We are trying to hire enough to increase our production. We have a backlog right now," he said.

Read the entire The Daily Item article

Vallejo California's “Factory_OS” Plans Expansion

A year after a Factory_OS opened its hulking modular housing factory on Vallejo’s Mare Island, the company has turned out hundreds of units and has orders for 1,000 more.

The startup was recognized at the National Press Club in Washington, D.C., last month for Ivory Homes’ first Ivory Prize for Housing Affordability.

Factory_OS was one of four winners this year, out of about 30 modular builders and 125 applicants. The company stood out in the Construction and Design category, which garnered 46% of the nominations, and around 90% considered for the category were factory builders, according to Ivory Homes.

Related Article: Factory OS Makes Some Bold Predictions

“Factory_OS is transforming the construction industry by vertically integrating 21st century off-site building technologies, software operating systems, lean manufacturing, and workforce development. They are striving to deliver multifamily housing more than 40% faster and at 20% lower cost,” the announcement said

The company has produced about 300 units in the past 12 months and has $200 million in orders on the books, equivalent to around 1,000 apartments, according to Rick Holliday, CEO. That includes employee housing to be delivered to Google on the San Francisco Peninsula in September, four projects for San Francisco public-private ventures and an affordable-housing project in Truckee for a Sacramento-area builder.

“We’ve been hearing from people who want us to build more factories and work 24/7 with more shifts,” he said.

The company now employs 175, half of whom weren’t working in the trades a year ago, Holliday said. Many moved from minimum-wage jobs to wages totaling $50,000-$60,000 a year, he said. Factory_OS worked out a deal with the United Brotherhood of Carpenters and Jointers of America to train and manage workers for the plant.

About 50,000 units’ worth of projects along the West Coast have been pitched to Factory_OS, Holliday said. Proposals include master-planned communities and a piece of the $1.2 billion eyed for supportive housing for homelessness in the Los Angeles area.

In the works now and set to close soon is additional funding to take the company to the next level, Holliday said. That would allow for an additional shift of roughly 100 more employees, better technology such as programmers for software that will increase factory efficiency, and more financial industry backing.

“Because we’re getting bigger customers, we need certain financial bonds to get projects,” Holliday said.

an article from the Northbay Business Journal

Funny But Also Very Sad

This cartoon could just as easily be describing the modular factory/modular home builder/customer relationship.

Kevin Clayton Discusses the Future Strategy of Clayton Homes

I watched this video a couple of times and there's a lot to learn not only about Clayton Homes itself but also what Warren Buffet's Berkshire Hathaway is planning for the its future in the affordable housing market.

Wood Mode Kitchens Surprisingly Closes Its Doors

Employees shocked by suddenness of Wood-Mode closure.

A May 13th article from The Daily Item

Tim and Penny Benner somberly walked out of the Wood-Mode Inc cabinet factory in Kreamer, PA Monday afternoon after being abruptly notified along with nearly 1,000 other employees that the 77-year-old business was closing immediately.

“I’m not surprised because we’ve known for months that something was happening, but I’m shocked that it happened this fast and we didn’t at least get a 60-day notice,” said Tim Benner, a 61-year-old final inspector who has worked at the plant for 41 1/2 years.

Wood-Mode spokesman David Scarr said in a statement that after a deal to sell the company to another firm fell through early last week, officials were notified on Friday that its prime lender was “unwilling to provide normal funding” that would have allowed the custom wood cabinet manufacturing business to continue operating, leaving “no choice but to make the difficult decision to wind down its operations.”

In one instant, Benner and his wife, a 10-year employee, lost both incomes.

“I don’t know what we’re going to do,” he said as they stood outside the plant consoling other employees who received word at about 2:45 p.m. that they were being permanently laid off.

“I expected to retire here,” said Tammy Heeter, 59, who was employed at Wood-Mode for nearly 20 years. “Now I’m thinking about paying bills and the lack of insurance.”

Six state police troopers, three Snyder County sheriff deputies and Middleburg Borough police were stationed at the plant as employees walked to their cars, many carrying boxes of personal items.

CLICK HERE to read the entire The Daily Item article

Skyline Champion Homes Treats Drug-Free Students to Barbecue

The 200-some members of the New Philadelphia, OH chapter of Drug Free Clubs of America are already ahead of their peers at Buckeye Career Center, literally.

“They get some preferred parking. They get to dismiss five minutes ahead of everyone else so they beat traffic. That’s one that they really like,” said Superintendent Bob Alsept.

Bernard Sweeney, a senior computer technology student from Carrollton, said he appreciated the benefits the school offered to those who joined the club, including early dismissal.

“Seeing as I don’t do drugs, it was a great thing to do,” he said. “It also helps with employment opportunities. We can show them our card. We’ve stayed drug-free.”

He staffed a cornhole game at a barbecue held Friday to recognize the commitment made by members of the drug-free club.

Modular home manufacturer Skyline Champion Homes of Sugarcreek sponsored the cookout.

Dave Moreland, who has human resources, environmental and safety responsibilities at Skyline Champion Homes in Sugarcreek, served the hamburgers at midday Friday. He said that sponsoring the barbecue fit with Skyline’s core beliefs.

“It’s the right thing to do,” Moreland said. “We try to give to the community. Really, this benefits us all, not just Skyline, but everyone in the community because these kids have taken a pledge to remain drug-free.

“We just want to see these kids have the opportunity to be the best they can be. And it starts with being drug-free. Unfortunately, nobody will tell these kids that they’re not going to be able to get a job if they’re not going to be able to pass a drug test.

“These kids already have a step up because they’re going to be able to prove to future employers that they were a member of the drug-free club.

“This is a tremendous thing that Buckeye has started. We had no doubt that we wanted to support that.”

James Johnson, division manager of Skyline, was instrumental in setting up the company’s support of the club.

“These kids need to be congratulated,” Moreland said. “This is a tremendous commitment on their part. We’re extremely proud of them.”

“We knew we wanted to do something to reward and acknowledge good behavior instead of always being on the punishment side of bad behavior,” Alsept said. “We were hoping at the time that we started that we would have 100 students because it was new and they didn’t know what it was going to be. We ended up with 200 members.”

Members need to pass a drug test to join and agree to submit to another random drug test during the school year to remain in the club. They pay $20 to join. The program is seeking more sponsors to cover costs, which include roughly $70 per person per test.

Modular Factories May Weather the Next Housing Recession Quite Well

A number of market analysts have pointed to signs of weakness in the U.S. housing market as an indicator of a possible economic recession ahead.

Many factors are contributing to their predictions including a slowdown in new home permits, increasing material costs and a shortage of skilled construction labor.

There is nothing the modular housing industry can do about people getting building permits or the rising cost of materials but we can start planning right now to exploit the other main factor, skilled labor.

After the 2008 housing recession many modular home factories began adding more commercial projects to keep production lines running to provide at least minimal profits and keeping the doors open.

This time those factories are already doing commercial and have strong builder networks in place. They also have a skilled labor force that is ready, willing and able to complete both homes and projects without much additional manpower.

When, and that is still a big question the next recession hits, our site built siblings will take it on the chin one more time. When their source of new home buyers begins to dry up they will have few options to choose from to stay in business.

Modular factories and their builders should be able to leverage that into maintaining their current levels of production simply because we exist. And we exist with a huge infrastructure of builders and developers as well as a labor force to complete the work.

The same can’t be said for site builders.

The modular housing industry needs to realize just how advantageous this next recession could actually be to securing our future and expanding our percentage of new home starts.

Wouldn’t it be great if suddenly we were the only constant in new home building.

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