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noun: tipping point; plural noun: tipping points
the point at which a series of small changes or incidents becomes significant enough to cause a larger, more important change.
Residential construction in the U.S. has changed. While getting skilled and trained labor in many industries is hard, getting it in the construction industry has gotten more difficult than ever with no end in sight. Material prices continue to go up. Taxes and tariffs are adding to the cost of construction. Updates to building codes are adding requirements which are adding even more mandatory costs to every home. And… we have a housing shortage in the U.S. The old way of building a home isn’t the future way we are going to build a home. Are we about to reach the modular tipping point?
The U.S. Auto Industry: 1970 versus 1990
In 1950 the U.S. auto industry produced three-fourths of the world’s automobiles. Going into 1970 the big three automakers were building bigger cars and developing lots of options. And then there were the Japanese cars. In the 1970’s they were thought about as cheap, flimsy, low quality automobiles… but consumers started buying them. They didn’t have many options, they were boxy with very little design details and they weren’t very big. But each year, the Japanese car companies were selling more. Every year their cars got better and better.
They got better gas mileage and their designs continuously improved. Because they were small, buyers were concerned about safety. With their smaller size, safety had to be engineered into each car. The Japanese car makers were chipping away at the Big Three Automakers market. The oil embargo and the subsequent rise in gas prices made the Japanese cars an even better, more cost effective option for the American car buyer.
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It took time but over a period of about 20 years what was the inferior, cheap product in 1970 became the industry leader by 1990. Japanese car companies led in design, safety, durability, and manufacturing efficiency. That last item was critical in Japans success. By building a car more efficiently it could deliver quality-built, well designed, and safe cars at a value that the U.S. automakers just couldn’t compete with. It was the process that created the better product.
The Case for Modular
Home builders today are struggling to build homes the old way. Imagine building a car in your driveway. That is exactly how most homes are built today, outside in the weather. All of the tools and the people that are needed to build a home have to go to the home site every day. Building materials that are increasing in cost can be stolen or damaged by being left outdoors. The few construction workers that are left cost more to hire. It takes skilled tradesman and carpenters to build a home. When they just aren’t available, unskilled labor ends up doing the work because the work still has to get done.
Marriott, one of the best known hospitality brands in America, has taken the plunge. They have reviewed the process and the method and have decided to go full speed ahead with their modular construction initiative and build 50 new modular hotels this year. Production home builders, the biggest builders building in communities across the country, are being driven to use modular by economic necessity. They build houses to sell their land. Modular construction offers them a method to produce more homes more efficiently and at the best value. The builders that succeed with modular can sell their homes at a lower price and beat their competitors that don’t adopt the more efficient building method.
Modular construction allows home construction to be turned into a manufacturing process. Just like with the Japanese, the secret was in the process. By turning the construction of homes into a manufacturing process, quality can be enhanced. It is much easier to hire labor that is working indoors with steady, non-weather driven employment and that comes to the same workplace each day. Building in a factory also allows unskilled labor to be trained and supervised in an environment that readily lends itself to continuous and managed improvement.
Modular Means More
Marriott and many other hotel chains have found the value in modular. Good, custom home builders are discovering that modular homes can not only offer great value but also a great design. The design was one of the things that held back Japanese car sales growth in the beginning. They were small and all looked the same. They just didn’t compete with the larger, more stylish U.S. made cars. By 1990 they had award winning designs along with better quality, better performance, and better durability. Much like modular homes of today, design flexibility is a key attribute.
Home performance is another area of growing importance. Not only are building codes requiring more from the homes we live in, customers are demanding homes that are better for the environment and better for their budget. The tighter tolerances, the quality construction, and a better insulated home means energy bills are lower for most home owners that build with modular. All of this comes at a value that can only be offered because of the efficiencies that come from building in a factory.
The Future is Modular
The future is in off-site construction. Commercial construction has embraced it for years. Hotels, office building, medical facilities, assisted living homes, etc. All of these projects are being completed with modular construction. Most custom builders have struggled for years to embrace the rise of modular construction. However, the internet has become a tremendous resource for home buyers building a new home. Today’s home buyers are doing the research. They are learning about the advantages that modular construction provides. They are learning about the difficulties the construction industry is having with labor and the resulting issues it is causing in new home building. Today’s home buyers want more. It may be that the growing home buyer demand for the modular advantage is the last change necessary for modular to takes its place as the preferred way to build all new homes.
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