Who doesn’t remember the good old days when you simply put a module onto the production line and everything after that simply fell into place like a well-choreographed dance routine. Routine was the keyword back then.
And back then was only 2 years ago! Pre-Covid.
Well, things have certainly gone awry lately with at least 5 major factors contributing to a perfect storm for the modular construction industry. But most of you are surviving and learning skills you didn’t even know you needed until now.
The definition of a perfect storm is a particularly bad or critical state of affairs, arising from a number of negative and unpredictable factors.
Here are the five major negative and unpredictable factors we are currently facing:
Shortage of Basic Materials:
There are many stories of factories shipping incomplete modules to builders and asking them to source the missing products (not lumber obviously) like siding, lights, exterior doors and windows. Then the factory has to reimburse the builder at a rate two or three times what it would cost if the work had been done in the factory.
That’s what some factories have to do today in order for builders and developers to keep on track for completing projects.
The unsung heroes today are the Inventory Control and Materials Buyer folk. Challenged at every turn to not only find enough material to build today’s modules, they are scrambling to look for new sources of supply while competing with every other modular factory in the US.
A recent Modcoach poll of modular factory owners showed that customization is becoming something builders may have a hard time finding in the future. One owner said, “if it isn’t on our standard options list, don’t even ask for it.”
The best way many factories have found to combat the shortages is to do bigger projects of repetitive modules which allows the buyers to source a standard set of SKUs and not worry about special orders and one-off items.
The first storm cloud appeared.
Rising Costs:
It started with lumber and everyone watched it skyrocket out of sight. When it reached the stratosphere and everybody in construction was ready to grab the pitchforks, lumber suddenly dropped.
But that was just the first shot fired. Today it seems every single piece of building material, parts and pieces, is rising in price. And the law of supply and demand isn’t even part of the equation.
Even if there is plenty of product to be had, the price continues to go up with everyone in the supply chain blaming each other with nobody really knowing the entire answer.
So how does a modular factory that already has production space committed for the next 12-18 months quote a price for a project that can’t go onto the line for 16 months?
Offsite Construction About To Enter Another Whac-A-Mole Stage
Another recent Modcoach poll said that factory management is beginning to look at new products to replace some of the basic material we’ve used for a hundred years. Hemp, cross-laminated timber and other materials may be expensive now but as their production capacity increases, many hope the pricing will drop enough to allow them to change.
The second storm cloud appeared.
Labor Shortage:
This is a quagmire that every factory is trying to figure out. How did it happen? When will people want to work again? How do I keep my current employees? How do I recruit new hires? How much should I pay?
This horse has almost been beaten to death and still we’re not much further on finding the answers than we were 2 years ago. One thing that I found amazing was that in my small city of 29,000 people, Amazon opened 4 warehouses and hired over 600 people away from other factories and businesses in the area.
Those 600 people were already working for other local businesses and now the need for more employees throughout the county is critical and the people that weren’t working before Amazon showed up still aren’t looking for jobs.
So how does a modular factory compete for labor? Pay higher wages? That might get you more people but what does that do to your overall cost and how much do you pass off to your builders and developers?
The storm cloud appeared!
Trucking and Set Crews:
Some factories may have their own trucks and set crews. Good for them, but the vast majority of modular factories do not. Instead, they have to rely on trucking companies that are not only having a hard time finding truck drivers, finding long haul drivers capable of driving extra-wide loads is becoming even more scarce.
I also heard that escort drivers are getting hard to find in some regions. In many instances, the truck driver’s spouse or friend is driving the car.
And let’s not forget about all those blown tires every time a 60,000-pound module is loaded on a converted HUD frame and trucked 600-1,000 miles. I live at the crossroads of two major Interstates used by modular factories in the mid-Atlantic area and it’s not usual to see a truck with a module sitting on the side of the road or in a rest area getting their carrier or tires repaired.
And that brings us to what happens when the module is delivered to the job site. Has the builder or developer found a set crew? That didn’t even raise an eyebrow 3 years ago. Today is a different story.
There is so much activity in the modular industry that set crews are in demand more than ever. And while the factories are finding it hard to find labor, so are set crew owners. I learned of one set crew that was sent out to put up a 2 story home in Virginia that only had one person with more than two weeks of experience.
As many people in our industry have been saying for years, where do we find people for set crews and who trains them? It continues to be one of those things we just keep talking about without any answers being found.
The fourth cloud appeared.
Customers:
Customers aren’t any different today than they were 10 years ago. Believe that and I have a bridge I’ll sell you.
I am talking about the factory’s customers in this article, not the builder’s or developer’s customers. It doesn’t matter if the customer is a single-family home builder, a hotel or an affordable housing developer, they have all gone from being appreciative for the time and money saved by going modular to downright nasty that you had to raise your price, delay delivery because of material shortages or the set crew didn’t show up.
The big advantages of time and money saved have all but evaporated since the pandemic began but your customers don’t fully understand that having a project done on-site with everything being shipped to the job site is even worse.
Add in the developer that has run out of money, permits delayed and infrastructure not completed in time and who does the customer blame? You guessed it, the modular factory.
Even with all the automation beginning to show up in modular factories, modules can only be produced if all the materials arrive on time, there are enough people to run the factory effectively, truck the modules to the site and people to assemble the modules.
The fifth storm cloud arrived.
Some of the bravest people I know have started a modular factory in the past 2 years. I hope they and everyone in the modular industry, as well as other industries, can continue to ride out this storm long enough to find the calm waters ahead.
Gary Fleisher, recognized Internationally as the “MODCOACH”, is the Editor-in-Chief of all publications of iMedia Group, LLC featuring Modular Home Source, the soon-to-be-released Offsite Builder website and Offsite Builder magazines.
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