Modular offsite construction has been around for many years, but is it about to really take-off?
There has been a lot of activity over the last 12 months that suggests this evolution may become a revolution, one that will drastically transform the construction industry.
Key challenges and opportunities for the construction industry
November 21-22, 2017, I attended the Construction News Summit event in London where I participated in a roundtable discussion on the modular manufacturing trend. With participants from Lendlease, Laing O’Rourke, Skanska, BAM Construct UK, HS2, Bryden Wood, Nu Living, IFS, UK Department of Education, Weston Williamson and Partners and the Education and Skills Funding Agency, we debated some of the key challenges and opportunities that the industry faces.
For example, we debated the following:
- Does the modular business case stack up?
- Is the industry skills shortage going to be the catalyst that will force the industry to rapidly accelerate the adoption of modular offsite construction methods?
- What are the benefits and disadvantages of this approach?
- Will the increased adoption of modular manufacturing make the industry more global and give companies the opportunity to enter new foreign markets?
- What sectors of the construction industry will be most affected?
- Will this solve the UK house-building crisis?
- How should clients & Government influence behavior?
- What effect will this have on the adoption of building information modeling (BIM)?
- Where will the modular construction capacity come from?
- Will this result in a flattening of the traditional contractor/sub-contractor project delivery organization?
- What impact will an expanding modular approach have on traditional contractors?
- How will the business processes and systems need to change to support this new way of working?
- Why is there still resistance to this change?
While there were certainly differing views in this lively debate, the one thing we all agreed on was that modular and offsite construction is an accelerating trend. The construction industry is certainly undergoing a significant transformation. The discussion only reinforced that, but also unearthed several insights that industry leaders will need to consider as we move into 2018, for example:
The skills shortage is stifling growth
In many countries, the skills shortage in on-site trades is a major constraint and there is simply not enough resource to meet the growing demand from infrastructure, building and house building projects. So, we need to find a way of doing more with less resource.
The traditional construction model is not sustainable
A rapid increase in modular and offsite manufacturing will be essential if we are to meet demands. In essence, construction sites will become more like a final assembly process. That means it will accelerate construction possibilities across most industry segments including house building, schools, hospitals, prisons, hotels, commercial buildings, transport infrastructure, energy infrastructure, etc. And this change is going to flatten the traditional construction main contractor, sub-contractor structure and cause major disruption to the industry.
This shift will have to start with education. As many still believe that modular means unattractive or poor quality, when in fact it means the opposite. Some countries, like Germany, are using this method as a way of improving quality, the speed of delivery and reducing cost.
Unlocking manufacturing capacity needs to be a priority
Existing modular manufacturing companies will have the opportunity to grow as demand increases, however, various speakers at the event observed that this segment is a bit like a cottage industry today and needs to become more professional in how it operates. It is not uncommon for these companies to have come from a traditional contractor background. Therefore, many do not know how to run a lean professional manufacturing plant. Simple things like having a manufacturing bill of material and routing and controlling inventory are often missing from their processes.
Existing construction companies or public bodies such as housing associations are starting to invest in new factories, to be in strong place to capitalize on this accelerating trend. They’re also challenged by the fact that they rarely have the manufacturing skills and knowledge of how to run a manufacturing plant so need to invest, not just in building a factory but in skills, processes and systems, to support this production and the logistics-centric world.
New entrants are starting to enter the construction industry from companies outside the industry such as finance, supply chain and manufacturing companies. It was also suggested that perhaps companies like Amazon and Google may be tempted to enter the market. Like many other industries, competition is likely to appear from some unlikely sectors─ and they will be the ones to challenge the traditional business practices of the construction industry.
This trend will also help to accelerate digital transformation in the industry, and in particular, the use of BIM models. Offsite and modular manufacturing forces the design to be firmed up at a much earlier stage in the project as it is very difficult to have changes to design after a module is built or shipped.
The government will play a major role in driving transformational change
Government bodies will have a major influence on how fast this trend is adopted in a country. They can force a change by mandating that their assets are built using modular methods of construction. For example, they can dictate that all schools are built using standard modular designs. That also means the traditional bidding process that happens on every construction project needs to be challenged, whether it’s public or private. Long-term demand predictability can perhaps be improved by changing the industry to have preferred long-term suppliers, like other industries that work as an extension of the main contractor or client. JVs and Alliances are one way of achieving this. The traditional bidding and procurement processes need to change for the industry to get away from short-term, lumpy, unpredictable project demand.
Will modular and offsite construction be a revolution or an evolution?
The reality is the industry is at a tipping point and it is going to be forced to change. We are going to see the convergence of construction, manufacturing, supply chain and service. This will result in major disruption to the industry. Some traditional contractors will disappear and be replaced with new entrants from outside the construction industry. The ones that survive will need to be agile and change the way they think, change their culture, skills and processes and implement more integrated best practice software solutions.
The level of disruption ahead won’t be an evolution, but a revolution─ changing the face of the construction industry as we know it.
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