Secrets of the West and East Coast Modular Factories

Trying to convert a site builder, developer or investor to modular construction used to be one of the most frustrating things a factory ever encountered. Being told "no" over and over or having your phone calls stopped by the gatekeeper and generally being ignored is slowly becoming a thing of the past.

Almost every single conference, seminar, podcast and webinar talking about construction has modular and prefab as the answer to housing’s future. Government Housing Agencies especially in Europe are pushing their modular industries to increase production.

New modular factories are being opened all over Europe to meet the demand with some projecting 2,000 or more units a year. Modular and Prefab housing factories in Some Asian modular factories are running at or near capacity 24/7, 365 days a year.

Related Article: Britain's “Flying Factories” Could Help Solve US Affordability Problem

But the US seems to lagging behind a little. The only new modular factories opened or planned recently are West of the Mississippi River where investors are eager to partner with just about anyone that knows how to spell “modular”. The jury is still out how many of these super-funded new ventures will survive if we have more than just a mild downturn.

Investors and activists that know little or nothing about modular and prefab make huge headlines when they fail. Check out what happened to Brad Pitt after Hurricane Katrina in New Orleans.

The West Coast is a desert when it comes to true modular home builders. It’s not that contractors don’t want to become modular home builders, it’s simply that there aren’t very many residential modular home factories to choose from. Most manufactured homes are sold by dealer networks and few if any even offer true modular homes.

What the West Coast does have are big investors bringing modular and prefab factories on line to serve huge developers and government agencies. Katerra and factory OS would not successful if they decided to abandon those big developers and began trying to build a builder network in California, Oregon and Washington.

Entreka sells most of their FIOSS branded prefab walls, floors and trusses to major tract developers and would face a tough future if they turned away from that market and courted the small custom home market selling builders 2 or 3 homes a year.

However the East Coast has been doing just that for decades. Small and regional home builders are the bread and butter of most New England and Mid-Atlantic modular home factories.

But there is still a reluctance to go modular from many site builders. The East Coast factories have some of the best modular sales reps in the business and after trying to convert builders to modular for 5 decades the reluctance by site builders to convert to modular is still there.

Most site builders are unaware of the way modular homes are built in a factory. When they build a house in the dirt, they work from the outside in. Modular homes are built from the inside out giving them superior fit and finish, a better insulation system and ease of wiring and plumbing. Most site builders are not aware of the this real benefit. This is where a factory tour is important.

We're all reluctant to change. Trying to hit them over the head with why modular is so great might make them even more reluctant to that change. If East Coast modular factories have been fighting this for decades, trying to flip West Coast builders to modular is going to be downright brutal.

Site builders will point to their homes and say they doubt a factory home could ever measure up to the quality they build into every home. They are probably right about their quality but those same things are inherently built into modular homes.

Prospecting, converting a site builder to modular and getting that first order is a long process. If anyone tells you it’s not, they have not been in the industry for very long.

And this, my friends, is why custom modular housing has been, is now and will be a really tough concept to bring to the builders and factories West of the Mississippi and even on the East Coast.

9 Reasons a Modular Home Builder’s Marketing Efforts Will Fail

Marketing is not sales. Marketing is not budgeting. Marketing is a unique beast that you can tame and use to increase your sales leads and bring fresh new home buyers into your office for that important first meeting. Too many modular home builders don't have a Marketing Strategy and some can't even imagine wanting one.

Most modular home factories and builders don’t think much about marketing until business takes a downturn but by that time it’s too late to start. The time to begin marketing is right now.

For the modular home builders that are already dabbling in marketing on social media here are 10 reasons that it might fail. Avoiding them is not easy but success is very rewarding.

1. No Written Marketing Plan. This one is obvious - if you don’t take the time to create a marketing plan for your modular home business, you are doomed to repeat history instead of creating it.

2. Goals Are Poorly Defined. Every good plan starts with goal definition. If you don’t define the goals for the plan, there’s no point in preparing a marketing plan. Make sure marketing goals are aligned with the business plan and with key business objectives. I’m assuming here that you have a business plan for your modular home business.

3. Unattainable Goals. Nothing is worse than working a plan where the goals are not even possible. Set realistic marketing goals that can be achieved if the marketing plan is executed well. If you built 6 homes last year, do you really think that a goal of 50 new homes this year is attainable?

4. No Buy-In. Who executes a marketing plan? Everybody in the company does. As such, the plan needs to be created with buy-in from key employees who ultimately will own the execution of the plan. Everybody must be aware of it and have a part to play including your clean-up people.

5. No Clear Responsibilities or Accountability. Marketing plans fail because tasks are not assigned to individuals and there is no accountability. Be sure to define who is doing what when as part of your marketing plan.

6. Wrong People Working the Plan. Even the best laid plans fail if the people who are in charge of execution don’t have the skills and attributes needed for successful plan implementation. If you have never done a marketing plan before, ask for help.

7. No Discipline to Execute the Plan. Some modular home builders and even modular factories talk a good game on planning but lack the discipline required to implement a plan. The ball gets dropped before the game even gets started.

8. Lack of Commitment. In order for a marketing plan to be executed successfully, you’ll need to motivate your team, both with carrots and with sticks. If they are not committed to improving sales through marketing even the best plan will fail.

9. Lack of Time or Lack of Money. Nothing is more frustrating than writing a marketing plan and then finding out that there’s no budget to cover it and everybody is too busy to execute the plan. Be sure to include your marketing budget and available resources before you finalize your plan.

Modular Home Factories Should Start Using Labor Problems to Their Advantage

Last evening I talked with a friend about his adventure in building a new home and to say he and his wife were disappointed would be an understatement.

John and Anne decided about 18 months ago their beautiful ‘gentleman’s farm’ was too much for them to maintain in their second decade of retirement. They bought a lot in an upscale gated retirement community five miles from the farm and contracted with the exclusive builder for a nice ranch home built to their specifications. Whthin 2 days of putting their farm on the market it sold at 120% of asking price.

Here it is, a year and half later, and they still won’t be in their home for a least another 2 months. All this time they’ve been renting a home within the community and watching the slow progress of their new home.

The builder will build about 30 homes in his community this year but is facing a huge labor problem. He is down to two electricians and one plumber all of whom are about to retire and he can’t find anyone to fill their positions. There simply aren't enough skilled trades around to complete the work within the time frame promised to his buyers.

Nearly 200,000 construction jobs each month go unfilled, according to the Bureau of Labor Statistics.

The labor shortage is so acute that 91 percent of more than 2,700 contractors, construction managers, builders and trade contractors surveyed in the latest Commercial Construction Index reported having a difficult or moderately difficult time finding skilled workers.

Those new home builders that are struggling to find those elusive plumbers and electricians to finish their homes might want to take another hard look at becoming modular home builders.

Modular homes are delivered to the jobsite with approximately 80% of all electrical and plumbing installed, tested and approved. Each individual module is finished almost to completion and the thermal integrity of a modular home is inherently built into each home. They are also greener and more energy efficient than almost any other type of site built home.

I simply can’t believe there are still independent and regional site builders that would rather risk losing and irritating customers rather than even give modular housing a chance.

Just doesn’t make sense to me.

Adding Commercial Projects Could Put Your Factory at a Disadvantage

As more and more modular home factories that once only produced single family homes and some small townhouse projects are adding hotel and other commercial projects to their production lines it brings an entirely new set of problems.

The modular home factory used to be able to look at a module going down the production line knowing they were making a legitimate profit on every one. Pricing was done with a price book that contained every option all priced with a fair markup or by the SWAG method. Inflation was stable. Service after the sale was under control because the quality was built into every module by people that had worked on the line for decades.

The factories knew they didn’t have worry about freight, engineering costs or code approval fees or the required third party warranty since they simply invoiced the builder as a direct pass-through.

But something happened about 10 years ago that has uprooted all that and changed modular housing as we know it.

Prior to this upheaval there were two distinct types of modular production; residential and commercial. There are still a fair number of modular factories that have stayed with what they had been producing and still have very healthy bottom lines, few service calls and profits still at historical levels.

However some residential modular factories have added commercial projects to their line bringing in projects of 40, 60 and even 100 modules onto their once exclusive residential production line.

Those factories that embraced commercial projects were once able to absorb a few percentage points of lost profit on a house are now facing investors and developers negotiating the factory profit down to pennies instead of dollars?

Before, during and after a sale is made on a huge commercial project, the factory’s ability to operate efficiently determines whether margins are made or lost.

This pricing pressure forces factories to manage all costs including after-completion service and performance penalties to help avoid reactive cost cutting. This happens only when there is a well-defined cost structure that is tied to the business plan. An accurate cost structure will make it possible to set proper prices, forecast performance, and isolate areas that impact cash flow.

Modular factories that do not understand their cost structure are at a competitive disadvantage. Gone are the good old days of saying “we don’t put anything on the line we don’t make at least 24% gross.” That’s because in a lot of factories the same management team that was used to building high profit single family homes now has to look at the cost of labor, fixed and variable costs, direct and indirect expenses, overhead, and costs by market segment, customer, geography, and product of the commercial project. Those are things they never had to be concerned with when a home brought in 24% gross but now that the hotel, apartment project or other major commercial project is seeing a max of 10% gross profit, those ugly things are going to be rearing their ugly head every minute of every day.

A commodity-based business must be a low-cost producer. Hotel chains aren’t going to pay more than their lowest bidder simply because you build a great modular house. New resources should be devoted to determining an accurate cost structure of every part of every step of the sale from bidding to production to freight, set and after delivery service calls.

We see new prefab and modular factories coming on line across the country that are funded by high tech investors and developers. These people don’t know what it’s like to have built modular houses for decades. They do know how to use the latest high tech financial tools to accurately forecast accountability of all stages of the project, measure and report the results quickly, and how data from all areas of the business are transformed into information. This information pertains to the financial health of the business, where controls are need to be established, how investments are evaluated and audits are performed.

Related article: Long Range Planning and the Modular Home Factory

Katerra, factory OS, Blueprint Robotics and several other newly launched prefab and modular factories had these measures in place before they even started to design their factories.

The lesson is that changing from what you have been doing as a modular factory for the past 30 years may involve more than just adding a couple of new people in the accounting department. It may require a factory to add an entirely new department just to ride roughshod over every single cost center to ensure when a commercial project is complete that the factory made as close as possible to the gross margin it needs to survive to do another commercial project as well as the residential modular homes they built for decades.

If your factory doesn’t already have at least some of these new processes in place and everyone is on board with it you and your factory may be forced to go back to what you had done before or worse, forced to close your doors sometime in the near future.

Guerdon Providing Sonoma County’s North Bay with Two Modular Hotels

The North Bay is set to make a big entry into the world of permanent modular construction this summer, as the first of two Guerdon Modular Building five-story hotels are set to start rising like stacked blocks in a process that can shave nearly a year off the build.

It’s part of a national trend where developers are turning to manufacturers to help with soaring construction labor costs and lengthening project-approval times.

Crews started digging up a parking lot between Davis Street and Highway 101 in Santa Rosa’s Railroad Square district in January for an AC Hotel location, one of Marriott International’s new upscale lifestyle brands. But over 12 hours by heavy truck and a few states away, the 142 guest rooms for that hotel have been rolling of construction lines in Guerdon Modular’s sprawling Boise, Idaho, factory since fall.

 CLICK HERE to read the entire North Bay Business Journal article

Modular Home Builder blog Awarded "All Star" by Constant Contact

I am humbled once again to have been awarded ALL STAR recognition for my efforts to inform the modular housing industry throughout the world of the latest news along with articles discussing the changes happening in our industry for 10 straight years.

from The Constant Contact Team

"For another year, you demonstrated unmatched engagement with your audience. Once again, you set the standard of excellence. We are thrilled to present you with your 10th All Star Award!"

"Every year, the bar to All Star status gets higher and higher. Only 10% of Constant Contact customers receive it and you have been awarded the ALL STAR every year since 2009. Only 65% of All Stars, like yourself, are multiple-year recipients."

Tiny Houses on Wheels Now Legal in California City

San Luis Obispo homeowners with qualifying backyards could legally bring in a tiny house on wheels for additional housing on their lot.

The city will soon be receiving applications for people to apply for tiny homes within their backyard of a single-family residence.

The first applicant will be visiting city planners tomorrow to get his permit started.

This is big news for affordable housing in San Luis Obispo.

The tiny house on wheel fans hope the city ordinance is going to be a model for the ordinance that the county is going to be writing.

To get a Tiny home the hopeful owner must live in a single-family home on the lot the tiny house will be on. The tiny house will also have to go through DMV regulations.

Because they are on wheels they are actually classified as a recreational vehicle instead of having to adhere to the new modified IRC put in place last year. Still no word if a tiny house without wheels will be allowed on the property.

The benefit of having wheels is the cost of not having to comply with state and city building code requirements.

A tiny house on wheels is roughly 1/3rd of the cost of putting it on a foundation.

Set Crew Has Several Openings for the Last Two Weeks of March

Maximum Advantage Building Solutions, an experienced commercial and residential modular home set crew have several openings the last two weeks of March.

With business booming, you may want to contact them ASAP to make sure your home is set when it arrives at your jobsite. They cover everyone from the Mid-Atlantic region through New England. Contact Heather at heatherb.mabs@gmail.com to have your job quoted and get on their schedule. Only a few slots open.

Spring is Here Along with New Job Listings for the Modular Housing Industry

LGA Recruiters just sent Modcoach their latest list of Job Openings and Active Candidates looking to work within the modular housing industry.

Contact Lynn Gromann at 888-831-0327 or Lynn.Gromann@LGARecruiters.com if you would like further information on an available candidate or on an open position.

The Active Candidates section below represents candidates looking for new career opportunities.

The Open Positions section represents companies, who are looking for candidates to fill their open positions.

Active Candidates

CONSULTANTS

I have had a number of industry veterans express an interest in a consulting role. If you have an interest in such an engagement, and have not already notified me, contact me via the email address or phone number listed above.

EXECUTIVE

• CFO - 7 years in industry + additional experience, CMA, warmer climates
• VP Operations / General Manager - extensive MOD / HUD experience
• VP Operations / COO - 15+ years MOD, wants Northeast, Mid-Atlantic

SALES

• Sales Rep - 3 years Commercial MOD, wants Dallas / Fort Worth
• Sales Manager - 12+ years HUD / MOD, will relocate to big market states
• Sales Manager - 22 years HUD / MOD, wants Southeast
• Sales Rep - 8+ years HUD / MOD, wants GA, AL,TN market, no relocation
• Sales Rep - 19+ years HUD / MOD, open to relocation, LA to the Carolinas
• Sales Rep - 4 years MOD, wants CO or Sunbelt region
• Sales Rep - MOD experience, wants CO market

PRODUCTION / OPERATIONS / PURCHASING

• Pre-Construction Director - 35+ years construction, Commercial MOD
• Production Manager - 34+ years MOD, wants East coast, Mid-Atlantic, CO
• Assistant Production Manager / Supervisor - 30+ years MOD, will relocate
• Production Manager - 35+ years, HUD / MOD, wants Elkhart area
• Assistant Production Manager - 20+ years HUD / MOD, wants East coast
• VP of Manufacturing - 26 years Commercial MOD - relo for the right company

ENGINEERING / QUALITY

• Engineering Manager - 30+years Single / Multi-Family MOD
• Engineering Manager - 11 years HUD / MOD, wants PA or commute

MATERIALS

• Assistant Materials Manager - 6 years HUD / MOD, wants TX

Open Positions

START-UPS

If you have an interest in start-ups, send me your resume at Lynn.Gromann@LGARecruiters.com with start-up as the subject.

EXECUTIVE / FINANCIAL

• Plant Controller / HUD-MOD / South

MATERIALS / PURCHASING

• Estimator - Hospitality / Multi-Family - South
• Materials Manager - Commercial MOD - South
• Materials Manager - MOD - Rocky Mountain Region
• Inside Sales / Estimator - Commercial MOD - Midwest
• Materials Manager - MOD - Pacific NW

PRODUCTION / OPERATIONS

• Project Manager - Hospitality / Multi-Family - South
• Production Manager - Multi-Family MOD Start-up - Southeast
• Production Manager - Southeast - HUD / MOD
• Production Manager - HUD / MOD - Midwest
• Production Manager - MOD - Rocky Mountain Region
• Production Supervisors - HUD / MOD - South
• Production Supervisors - HUD / MOD - Midwest
• Plant Manager - Residential MOD - Upper Midwest

ENGINEERING / QUALITY

• Engineering Manager - Multi-Family MOD Start-up - Southeast
• Engineering Manager- HUD / MOD - Midwest
• Drafter - Multi-Family MOD - Northeast
• Engineering Manager - MOD - Pacific NW
• Drafters - HUD / MOD - Southeast
• Quality Assurance Manager - Multi-Family MOD Start-up - Southeast
• Quality Assurance Manager - HUD / MOD - Southeast
• Quality Assurance Manager - HUD / MOD - South

SALES

• Sales Rep - HUD / MOD - Midwest
• Sales Manager - HUD / MOD - Midwest
• Sales Rep - HUD / MOD - Southeast
• Sales Rep - MOD - Pacific NW

State Code Officials Unprepared for Next Wave of Modular

After attending many meetings where state manufactured housing code officials told how their current systems work and more importantly how they are understaffed for the amount of work thrown on their desks every day it’s a miracle some state code officials don’t look for less stressful jobs like crash test dummy.

In most states the modular home factory must have their plans approved by third party inspectors and state and local code enforcement agencies. With the onslaught of modular housing plans crossing their desks to be reviewed to verify they meet all the building codes it’s no wonder what was once a good working relationship between third party inspection services, the factory and the state code people has been now become in many instances an adversarial relationship.

Many state legislatures fund their housing code offices like it was 1999. Until recently NJ’s manufactured housing department was also in charge of inspecting and reviewing amusement park rides. MA used to have a great modular housing code review system until it imploded a few years ago.

Maryland has seen an almost 90% drop in modular homes coming into the state mostly due to the super restrictive enforcement of IRC codes while site builders are practically given a rubber stamp approval by local code officials.

But instead of seeing improvement happening in these agencies there is a new problem headed their way in the form of tiny houses, 3D printing, modular ADU housing as well as new affordable and homeless modular housing projects.

Has staffing been added? Has over-regulation been addressed? Has zoning and code regulations been updated to meet these new modular projects? In most cases the answer is a resounding “NO!”

Reviewing modular home plans is not a ‘lick and stick’ process for state building code officials. It takes time to make sure all components of a house meets the state’s current building codes and rejections and refiling are becoming commonplace. That means the same number of state staff are now looking at plans two or more times before they approve them.

Many states look at housing code enforcement agencies as just one of those things that needs almost no attention from year to year and funding for them is always lacking. Fewer staff to handle an ever increasing amount of new modular home applications means that someday soon something has to give. What that will look like is anyone’s guess.

Personally you couldn’t pay me enough to sit at a desk reviewing modular home plan after modular home plan looking for the smallest missing notation or wrong code being applied to a roof section day after day after day for 30 years. Then you go to work one bright sunny morning and learn that your state just adopted the new IRC Tiny House code and there is already a 200 plan backlog in your ‘INBOX”.

By the way your state also adopted IRC regulations for the newest zoning change, the Auxiliary Housing Unit, for cities across the state. This will be another playground for the modular housing industry.

That crash test dummy job is probably looking pretty good about now.