Wednesday, September 11, 2013

Adding an Option is Tough for the Modular Factory

There are two types of modular home factories. The first type is the custom modular factory that will do anything for the builder’s customer. It may not be priced at what the home buyer is willing to pay but they will do it. Adding a non-authorized option will probably impact the lead time, sometimes by months.

The other type of modular factory is looking to keep the line full and moving efficiently so adding a new option has to fit the overall plan to meet that need. These are the factories that are reluctant to give Carte blanche options to their builders.

Have you ever wondered what happens before a product can be added to the standard option list from a factory?  Don’t feel alone, hardly anyone does.

Let’s say that Acme Insulation Company introduces an R-30 batt for sidewalls made out of compressed dog hair. It’s environmentally safe and fire resistant but costs 50% more than standard insulation.

First, Acme sends their rep to the factory and sells the buyer on the idea of dog hair insulation. That is just the beginning of the process. Now it has to go to several other people to get their thoughts. First it goes to engineering to see if it creates any problems when used with other products or construction.  Don’t forget that the third party inspectors have to sign off on it and also make sure that it meets all national, state and local building codes.

Next it goes to operations where they must calculate what to charge for dog hair by determining if will require special storage conditions, extra work on the line, etc. After passing through this hoop, it heads off to the training department to have procedures written as to how to install it. The QA department will have to know the procedure for determining if it was installed properly.  Safety will look at employee allergies because of the dog hair.

Then the inventory control person will have to establish initial stock points, reorder points and anticipated usage.

Now it has to go to the Sales Manager who puts together presentations to be used by the sales staff. One copy goes for the builder and another for the builder’s customer. This is the “make or break” step. If the sales rep does not convince the builder to talk to their buyer about it and the buyer doesn’t see the benefit of it, the whole thing will fall flat on its dog hair face.  Nobody wins.

Attention Management: If you want something to succeed, the people that need to buy into it are the BUILDERS! Getting them to on board involves every step mentioned above.

Now the BIG question….How many modular factories in the US actually do this? Maybe one or two. Some use a few of the steps and there are some that just buy the dog hair and hope someone will order it if they see it on the factory's options list.

So the next time you ask your factory to carry something like dog hair insulation, think about what should happen before they add it to their standard option list.


Anonymous said...

tired to add a brushed nickel faucet to an Excel order. It priced out at over $600 for a standard non chrome faucet.

Coach your a genius.

Harris said...

@ Anonymous... you are spot on. Excel runs itself like a business. If it has to accommodate something new it builds it into the price.

Coach: I'm preaching to the choir here but I am compelled to swipe at my keyboard out of pure frustration:

Other factories suck it up (give away the brushed nickel finish faucet) as the cost of doing business but never actually quantify the "cost of doing business" including all of the overhead and liability for installing a one-shot fixture.

THIS IS WHY CUSTOM HOME BUILDING COMMANDS CUSTOM PRICING. And this is also why the modular industry continues to bottom feed.*

This also explains the direction Method Homes and Blu Homes are going. They understand the trends better than conventional modular factories. And that is this:

If the builder/buyer wants something not normally stocked (like a brushed nickel faucet) the factory should charge a nominal fee to:

1. NOT provide it – the builder should get off his ass and source it from a big box store or lean on his plumber if the client wants custom faucets (this is a Sales process),
2. Provide stubbed plumbing and vent stacks at the vanity cabinet,
3. Provide GFI recap
4. Indicate on the Prints “Plumbing Fixture provide by Builder” to protect itself should the builder's plumber screw up the custom faucet install and try to pin blame on the factory and 3rd party (eg. PFS) approvals.

The total cost of the above 4 items is cheap and manageable. It's hard to screw up accountability if you have your modular order software and purchasing folks in line.

At the end of the day, adding options is as simple as contracting: put it in writing.

Stick builders have been doing this for years. I can only hope that modular/systems building/manufactured homes makers AND THEIR BUILDERS get it:

Quit bitching: assuming the financing still works, GIVE CUSTOMERS WHAT THEY WANT

* “Bottom Feeding" is necessary to a point. But in order to break out, our industry must come the fuck up for air.

Anonymous said...

The conversation sums up so much of the built in challenges of the modular home business model.

A good share of independent builders in this industry want the simplicity that comes from ordering a home from manufacturer, yet also want access to any option a customer can request. These two concepts often don't blend together well. They usually result in a angry builder or an unprofitable manufacturer.

The solution to this is fairly simple, yet incredibly difficult to implement: builder and manufacturer having aligned business systems and common target markets. These are two areas that are almost never discussed between builder and manufacturer.

Anonymous said...

Most modular companies say they are custom, but that is far from the truth.
One mod company wouldn't use the marine grade plywood on the roof that architect prescribed and cried like a little girl until another application was agreed on.

Brand x wouldn't work with a large builder in Ct. because they were not comfortable a heating system designed for the project. They could only install mobile home furnaces and lost 51 units.

And still another shut their plant down for 3 weeks because the truly custom project was over their heads.

Custom means custom! A real Master Carpenter can do it all but a glorified mobile home modular company should not say custom when its not able to do it all.

How I do wish the old Haven was back in business, they were truly a custom home modular builder before the new group ran it into the ground.