The Future of Modular Construction

by | Aug 23, 2022 | Modular Construction

For decades, construction has lagged other sectors in productivity.  Modular construction offers the industry and opportunity to make a change:  shifting many aspects if building activity away from traditional construction sites and into factories with off-site, manufacturing- style production.

Modular (or prefabrication) construction is not a new concept, but technological improvements, economic demands, and changing mind-sets mean it is attracting and unprecedented wave of interest and investment.  If it takes hold, it will give this industry a huge productivity boost, and help solve building crises in many markets, and significantly reshape the way we build today.

In broad terms, modular construction involves producing standardized components of a structure in an off-site factory, then assembling them on-site. Terms such as “off-site construction,” “prefabrication,” and “modular construction” are used interchangeably. These terms cover a range of different approaches and systems, from walls that are clipped together to pre-built offices spaces that are driven to site, all saving precious time, resources and budget.

Today, modular construction is experiencing a new wave of attention and investment, and several factors suggest it may have renewed staying power. The maturing of digital tools has radically changed the modular-construction proposition—for instance, by facilitating the design of modules and optimizing delivery logistics. Consumer perceptions of prefab construction is beginning to change, particularly as new, more varied material choices improve the visual appeal of prefab buildings.

Capturing the full cost and productivity benefits of modular construction is not a straightforward proposition. It requires carefully optimizing the choice of materials; finding the right mix of 2-D panels, 3-D modules, and hybrid designs; and mastering challenges in design, manufacturing, technology, logistics, and assembly. It also depends on whether builders operate in a market where they can achieve scale and repeatability.

In many countries, modular construction is still very much an outlier. But there are strong signs of what could be a genuine broad-scale disruption in the making. It is already drawing in new competitors—and it will most likely create new winners and losers across the entire construction ecosystem. Different stakeholders face a series of choices.

Realizing the benefits of modular construction will require different stakeholders to make a series of choices. Developers, for example, need to identify segments of the portfolio that can serve as their “product core”; investors, on the other hand, must focus more on markets likely to be disrupted and trends defining winners and losers.

For example, a good starting point for developers is to identify the segments of a portfolio where volume and repeatability come into play. These can be designed as a “product core” that remains consistent across developments. Developers should assume that successful modularization will require more than merely asking suppliers for tender offers on existing designs; rather, they will need to work with the supply chain to optimize for manufacturability and make the right trade-offs among quality, cost savings, and time savings.

Meanwhile, for investors, the anticipated disruption will create a very different-looking landscape. This makes it a particularly interesting sector for smart investors seeking alpha at this time. They should look to understand the markets that will most likely be disrupted and the detailed trends, strategies, and capabilities that will set the winners and losers apart.

Materials suppliers will face a shift in the choice of materials available to customers and prefabricators. For instance, Millwork companies will be affected if raw materials are in short supply. Materials suppliers may also face an entirely different go-to-market landscape. Their customers may no longer be fragmented installers or traditional distributors but rather larger manufacturers that are optimizing for different objectives. However, these suppliers may be well positioned to enter the prefabrication space, given their knowledge both of traditional construction and of efficient manufacturing and supply-chain environments.

Xenali specializes in Supply Chain Optimization and has spent years in the business cementing relationships with Global Partners to minimize client risk, resulting in continued growth of our client base repeat orders.  We understand the value of our clients be able to get what they need, when they need it.

If you are sourcing for a new Project, schedule a consult.  A Xenali expert will be happy to guide you through the process.  We help businesses create inspirational spaces that elevate the performance of your workforce or Project.

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