Modular housing factories are facing a dire mix of supply-chain shortages, higher costs for energy, labor shortages, higher wages and shipping costs which means a continuing hit to profitability and that means their pain passes to builders and developers and their customers.
Economists are looking for at least another 12 months of inflation, not only in the US but worldwide.
As the supply chain tightens, building materials and the raw materials that go into making our commodities will continue to grow worse. As stated by one industry vendor at the MHBA’s Annual Meeting last month, when vendors can’t supply enough products to modular factories to meet demand, they will begin allocating products to their bigger customers first.
It was a brave vendor that said publicly what every vendor has already been doing for months. Inventory buyers at our factories will continue spending more time sourcing supplies of some of the most basic things like kitchen sinks, hardware and other essential items. They will find themselves competing for products with major onsite developers, manufactured housing companies and even their own builders, all of whom are scrambling to find those same rare sources of basic building materials.
U.S. inflation has accelerated rapidly this year to the strongest since 2008. Across developed economies, the post-pandemic supply-demand imbalances have pushed the rate above 4% for only the second time in the past two decades.
President Biden’s Infrastructure package has a goal of putting 400,000 people ‘back to work’ in the energy business and road and bridge repair. The enormous amount of money in this program earmarked for those industries to attract workers to those new jobs will force many modular factories to pay more just to keep production line employees from jumping ship to those higher-paying jobs.
Upon completion of the modules in the factory, they must be shipped to the job site. With our country’s leaders demanding a cleaner environment, oil and coal prices have increased because pipelines and coal mining are being curtailed to lower carbon emissions. Prices have been steadily going up on fuel for those trucking our modules and along with a shortage of truck drivers and increased insurance rates, some modular factories that rely on third-party trucking companies to ship their output are seeing modules backing up in their yards.
Every industry in the US has been trying to understand the New Normal of the post-pandemic world but while they were just beginning to get a handle on it, along comes these increasing problems to the supply chain and labor which keeps moving that ‘new normal’ further out of reach.
Economists, consultants, soothsayers and fortune-tellers can all explain what has caused our industry’s problems with some even saying it will all begin to settle down in the next 12 months but the truth of it is, nobody knows what is going to happen or when it will begin flattening out.
All any modular construction factory can do is watch its bottom line like a hawk, protect its profit and cash flow like a mother bear protects its cubs and be as transparent to its customers as it can be. That is something many in our industry have never had to face before.
It was humorously suggested that the Modcoach set up a “Ranting HotLine” where I charge $100 for 5 minutes of listening to you rant about all the problems you have and who you think is responsible and at the end of the call, I should say something like “There, there, it will be OK soon.”
I have a hunch those 5-minute slots would fill up quickly!
In the meantime, you must continue to pass on those increased costs along with your legitimate profit to your customers. At some point consumers will begin to cry “UNCLE!” but nobody really knows when that could happen.
Related Articles:
- Innovation, Automation And The ‘New Normal’
- Construction Industry Has Not Seen The Last Of Higher Costs
- Modular Factories Need To Talk About Innovation’s Problems
Gary Fleisher is Editor in Chief of Modular Home Source. Email at [email protected]
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