Saturday, June 27, 2020

What Defines the “Capacity” of a Modular Factory?

One of the words most often heard when talking about the modular construction industry is ‘capacity’. Webster defines it as “the amount that something can produce.” Somehow that just doesn’t seem like the right definition for modular construction.


Z Modular Production Line

One of my standard questions I ask when visiting a modular factory is “How many line moves can you do in a week?” and this is where the idea of exactly what capacity means changes.


Some factories can produce almost 50 line moves a week while others barely do three. Both of these factories are talking about their maximum capacity but in reality, that number might have only been obtained a couple of times in the company’s history.


There are many factors affecting a factory’s capacity including who the factory is supplying, what they are supplying as well as how they supply it.


"Who" is buying modular today?


Starting with the “who” they supply can have a tremendous influence on capacity. Today’s modular construction buyer ranges from the single family home builder to hotels wanting the speed of using modular and all the way to medical care units for COVID -19.


Looking at the factories from coast to coast you will find the East Coast modular factories began decades ago building single family homes. I talked with one factory that supplied 350 ranch and cape cod homes in one year for a developer in PA. That may seem like a lot of line moves but in actuality it was 700 or just 14 a week and that capacity has never been reached since. 


In addition to those 700 modules, the factory also delivered, set and completely finished each home. Now that 700 capacity takes on an entirely new perspective. 


The East Coast factories were and still are “Kings of the Custom Single Family Modular Home”, relying on an army of small to medium custom modular home builders. But multifamily and commercial is creeping into those older factories and the new ones planned for the East will probably never produce a single family home. 


The Middle of the country is a mixed bag of solid single family IRC homes, manufactured HUD homes and commercial project modular factories. Their legacy of building affordable housing for mid-America is legend. A majority of the capacity for these factories is being sold to dealers that stock manufactured homes and also take orders for modular homes.


But here again, the new modular factories being planned for and built are either for manufactured housing or commercial projects like affordable housing and medical units.


Which brings us to the Western third of the country. The “who” that buys from the modular factories from Colorado to the Pacific Ocean are mostly project investors and developers. The new modular factories planned for and being built there are designed for buyers that want 100, 200 and even up to 500 modules per project, all very similar in design.


There are a few custom single family modular factories in the West but their numbers are small compared to the total number of modular factories, both established and new, producing projects only.


The “Who” has and will be the limiting factor for a factory’s capacity with the East still selling primarily to single family home builders, the Mid-America factory building both HUD and IRC modules in the same factory and the West with its huge projects. If each region had a 70,000 sq ft factory, capacity could range from one to two line moves a day to 10 or more a day depending on “Who” is buying them.


"What" are modular factories building?


As mentioned above, the “Who” determines what the modular factory builds but the “What” determines the factory’s capacity. 


Looking at the “What” closer we once again see the three regions of the US playing a big part in a factory’s capacity. It’s obvious that the East is the lowest in average capacity simply because of the diversity of products put on the production line each week. A factory could start an 8 module total custom home followed by a simple ranch with a 40 module hotel following that to the production line. 


It’s almost like driving your car on a highway but having to hit the brakes one minute and speeding up the next because the traffic is erratic and unpredictable. Fortunately, Eastern factories have been doing this for so long they have it down to a science.


The “What” for the Mid-America modular factories is more like a car driving on a one way street. Nice and steady. Single family “plan book” style home after home with few major projects to slow them down. These factories that serve the HUD/IRC builder/dealer are building at their plants’ capacity just about every week as long as the economy is good and as one builder/dealer told me a while back, “business is always good along the Mississippi!”


The Western market is the race car going flat out. The “What” for the West is affordable housing projects, multi-story apartments and public housing. It seems like the West can’t build capacity fast enough. Every week seems to bring another story of a 100,000 sq ft modular factory popping up to feed the West’s “What” monster.


Soon look for some of these factories to break the 100 modules a week mark, something that would have been considered an impossible goal just a couple of years ago. With what seems like an never ending supply of investment money and an almost unquenchable thirst for new housing, the West just has to keep their race car tuned and on the track.


"How" we build modules effects capacity


If the “Who” and “What” determines the capacity needed at any given time, it’s the “How” that can strangle the crap out of that needed capacity.


In a perfect world a factory would receive an order for a house or project to be built and delivered to the jobsite by a specific date. Engineering would be completed when promised, all the materials would arrive in time for production to begin, the labor force would build the modules and the transportation service would deliver the modules at the time needed.


The “How” or Logistics part of the process is where the rubber meets the road and it doesn’t matter in what region of the US you build those modules, the “How” will bite you in the butt every time.


Let’s start with actually getting the order. Projects are especially hard to nail down, so let’s see how logistics can make or break the capacity of a factory. When a developer is ready to begin designing the project, there is a lot of engineering of all kinds needed from the design aspect to production.


And if you think for one minute the developer is only approaching one factory for quotes on a $10,000,000 project, “you don’t know Jack” as my father used to say. 


A factory quoting the project will try to see when it could go online if they get the project to build and begin preparing for that contingency. To not plan ahead on the chance you get it would be foolish.


After quoting, you win the project which means engineering begins in earnest. A deposit is paid by the developer and materials are ordered. Slots are created on the production schedule and supervisors are instructed to prepare for this project in 90 days. Perfection. 


That has never happened in the entire existence of the modular construction industry.


First, engineering has found several problems that may not allow the project to be approved by the state where it’s being built. Those have to be corrected. While that is happening, all those special order products the developer requires for the project can only be sourced from one place and they are in a country that just had their tariffs raised. And you just signed the contract.


You already have a big project on the production line due to be finished just days before this new project begins which has come to a screeching halt because of a holdup at the jobsite by city inspectors.


You have no room to store a 300 module project on site and they aren’t allowed to be shipped to the jobsite which means your production line is stopped for 2 weeks. That is zero capacity for two full weeks.


Once the project gets back on track with a green light, your next project is already two weeks behind and you haven’t even put one of its modules on the line. 


And have you seen all the help wanted signs by factories and warehouses in your area offering starting wages of $18 an hour to start? It seems everyone is paying what you’re paying and you need more labor on the production now!


All these things have a negative impact on your capacity. Slowdowns in engineering and approvals, shortages of material, work stoppage at the jobsite and lack of labor are now your constant companions.


Sure, you may have designed your factory for a capacity of 50 modules a week but be prepared to not even get close most of the time.


Looking back at those custom modular home builders that can only get one line move a day, they just might know something that’s lost on many other factories. 


A lot of factories are designed to work at less capacity simply because they have found the right balance to keep their lines moving every day and make maximum profit by charging for the quality one line move a day brings.


So the next time you hear someone says their factory capacity is 50 line moves a week, just take a minute and realize the amazing amount of work needed to do that on a consistent basis.


Talented people working together with everyone doing their job right the first time and on time. 


Simply Amazing!


Gary Fleisher is a housing veteran, editor/writer of the ModcoachNews blog and Modular Construction Industry Observer and Information Gatherer


Contact modcoach@gmail.com


2 comments:

  1. Coach - In a few paragraphs you described accurately the entire US modular industry. Well done! If we look at capacity as a combination of all three - the who, what and how, then to increase capacity we must decide which of those we have the most immediate control over, and begin working on that. For most, it will be the 'how'. Increasing effectiveness in planning, execution and communication pays off in greater capacity and higher profits right off the bat. Thanks for the clarity of your post, and for your continued commitment and support of this great industry.

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  2. Coach—Good article touching on the obvious considerations when determining or trying to project manufacturing capacity of a modular manufacturing facility. All are credible factors (among others) but i would contend there is another extremely important variable when attempting to determine production capacity and that consideration is an attitudinal one. Yes I said attitude has a major role in determing the output of any facility. Over my 35+ years in this industry, most of it in General Management, I have been a part of small plant operations, start ups, turn arounds etc. I have seen 45,000 square foot plants turn out 20 floors/modules a week and 100,000+ plants that struggle to produce 15 a week. The 45k plants never questioned the goal of 20 a week, week in and week out. It was a given. Upper management didn’t offer the 20 a week goal as an option. The attitude from the top down was 20 a week (and it was single family high end custom). The challenge we had at the 100k plant wasn’t sales, or lack of equipment or space it was an attitudinal adjustment. They were convinced they could not do 20 or 30 or 40 floors a week. Long story short we did turn that around attitudinally. The physical attributes of a facility are of major importance as are the parameters of the product being built BUT…..the attitude from top management down through supervisors will ultimately determine the production capacity of any facility.
    Bill Murray

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