Have we hit a tipping point for residential construction where the cost and quality of a factory-built home always compares favorably to the cost and quality of a conventionally-built home? Are Silicon Valley entrepreneurs and venture capitalists beginning to train their sights on this mammoth industry? In the sixth and final episode of a series on the future of homebuilding, Andrew discusses how entrepreneurs eager to disrupt this space might conceive of building and financing a modern homebuilding factory.

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Interviewees

Episode Excerpt

SCG Heim – The Factory of the Future

If you’re interested in what the process looks like to build a house in a factory, you can get a pretty good idea just by searching on YouTube for the company that owns the factory. Most companies engaged in this type of manufacturing are proud to display their factories’ capabilities in videos. Amazingly, most of the factories in the United States are not what you would typically associate with the image of a modern factory. Inside of a huge hangar, you can see lots of people manually moving house components from one location to another with relatively few machines in sight. There’s an assembly line, for sure, but it looks more like what you’d expect to see in a factory from 100 years ago than something you’d associate with a modern factory operated primarily by robots.

If you look outside of the United States, you can find much more advanced homebuilding factories that are more evocative of the robotics-driven future that automotive factories like Tesla and Toyota have already made into a reality. The factory that most impressed me was the SCG Heim factory in the province of Saraburi in Central Thailand, northeast of Bangkok.

SCG Heim is a joint venture between The Siam Cement Public Company and Sekisui Chemical Group. SCG is the fourth largest company in Thailand, making chemicals, paper, cement, and building materials. Sekisui is a Japanese chemical company that also has a housing division. While I couldn’t get anyone from SCG Heim to speak with me for this podcast, the robotics visible in their video reflected as impressive a manufacturing process as any I had seen. They use light gauge steel for framing homes with fully-automated robotics supplied by Kawasaki. I read online that the factory has the ability to produce 1,000 homes per year.

In a factory run by SCG Heim, or even Tesla, you see giant machines with arms moving parts that are welded together by other giant machines with arms. So it’s easy to imagine if someone were going to literally copy this kind of automated factory for producing housing modules, the materials they would be using to frame the homes would be steel or aluminum.

Except, here in the United States, we have a long history of building our homes from wood. And with good reason. Unlike many other parts of the world, North America has a relative abundance of forests that can be harvested for wood. You can also generally expect the cost of labor to be cheaper if you’re framing a home with wood, as compared to bricks, for example, which is much more labor-intensive. So what would a factory with robots look like that makes housing modules out of wood?

Weinmann

Weinmann, located in St. Johann, Germany, sells more machinery worldwide for this type of homebuilding factory than anyone else. There are currently 5,000 Weinmann machines operating in 150 homebuilding factories worldwide. Weinmann won’t just sell me the machines for my factory. They’ll design the entire factory for me. Hansbert Ott is Managing Director for Weinmann and has worked at the company for 25 years.

Hansbert Ott: “We are building not only the machines. We produce the machines [here], install the machines in our company, make the test runs with the materials with the customer, and then the customer signs and says, ‘That’s fine, that’s OK.’ And then we are shipping the machine to the customer. And with our guys, we install the machines. Also, very important, we make the training, the education for the operators on the machines, and we are doing more . . . to be there during the production, to help and educate people for the customer . . . so that they have our support, so that they learn how to prefabricate elements and to deliver this high quality on-site.”

If I were going to build a factory, and I had no experience whatsoever in designing and outfitting a factory, I’d hire a consultant who had deep expertise in this area. And as it turns out, Weinmann is more than happy to play that role for me for a fee of between $50,000 and $100,000. The result? Depending upon how much automation I want, the cost would be between $3 million and $10 million, with the ability to produce 1,000 homes a year.

I shared with Hansbert my research about automotive factories and lean production, as I wanted to understand how his approach was different from Toyota’s. Hansbert believed the level of customization necessary to satisfy American homebuyers was greater than what a typical automobile manufacturer was accustomed to.

Hansbert Ott: “They have different types of cars, 10 different types, and then you can select the color, you can select this, this, and this. If I think about our machines, what our machines are doing, it doesn’t matter how the houses look like. . . . It’s customized houses, and each house can be different. Each wall, each element can be different from the other ones. So that’s the main [difference between us and] Toyota. . . . It’s a totally flexible system, and you can produce totally flexible house elements.”

Me: “Are you saying that your machinery is flexible enough that I can put into the CAD program that I want to build a 2,000 foot house with a 600 foot kitchen, and then immediately thereafter, I can change the programming to say, now I want a 4,000 foot house with a with an 800 foot kitchen? . . . Unlike in an automobile factory where you really have to do a run, and for the given run, all of the chassis need to be the same, are you saying that each individual product that moves through the transfer line is able to be different?”

Hansbert Ott: “Yes, absolutely correct.”

A number of the people I interviewed expressed to me the need to be able to customize every home they sold in order to meet consumers’ demands. And yet, all the single-family home manufacturers in the United States that I interviewed approached the market by selling a number of models that would then allow for slight deviations, such as customizing cabinetry, windows, or wall colors. Aside from these types of details, I wasn’t so sure that American consumers would choose custom homes when presented with substantial cost savings and a modern design.