Why Modular Matters

Three main industrial revolutions have significantly transformed the way we live, interact, and create the spaces we call home. While each region and country proceeds at its own pace of industrial advancement and urbanization, developed countries currently hover around 80% urbanization. Globally, urbanization as of 2022 has reached 56%, and is expected to reach 70% by 2050.

 Accelerated urbanization has been a primary driver for increased dwelling density. While all cities are shaped by their unique geography, culture, and financial means, the shape of the dwellings we live in, as well as of our communities and cities, has been directly affected by both smaller family sizes and greater migration to urban areas.

 According to a 2018 study, 4.5 babies are born every second worldwide. Practically speaking, we can say that every second, a new family is born, which, in due course, will create its own demand-and-supply chain cycle. A large part of this growing demand will be the need for shelter and services for individuals and families, and our need for urban dwellings is both growing and just beginning.

 Currently, on-site construction builds approximately 1.2 million dwellings each year. Each second, 0.04 new dwellings are completed. If a new family is born every second, there is clearly a gap between the two variables - not to mention we already need to build 96,000 new houses every day (!) to supply housing for an estimated 3 billion people who will need affordable and adequate housing by 2030.

 The task ahead is challenging; the solutions are not simple and will require a multi-level, multi-faceted approach, with an honest and open discussion of the realities of our current situation.

In my view, there are two fundamental questions we should ask in the construction industry, particularly regarding residential on-site construction:

1. Can we speed up conventional on-site construction from a technical standpoint any more than we already have?

2. Do we have the labour supply and/or influx available to us for this scale-up of production?

 Unfortunately, the answer to both questions is no.

Conventional on-site construction remains profoundly inefficient and is strongly influenced by the site setting and local factors. Moreover, the construction industry has yet to fully embrace and leverage the enormous technical progress, automation, digitization, and efficiency gains made in almost every other industry, such as aerospace, automotive, and communications.

 Happily, it is important to note that the lack of innovation in “on-site” construction to date creates a great opportunity for the industry to recognize the untapped potential and growth opportunities within this space.

 In terms of supply of excess labour, as Charles Goodhart and Manoj Pradhan emphasized in their book, “The Great Demographic Reversal”, our world has enjoyed an abundant workforce over the last forty years, but is now at a tipping point with respect to its “dependency ratio”. Simply put, as our population lives longer, the ratio between productive adults and dependents is shifting, and for the first time in human history, the dependency ratio is increasing towards dependence due to the longevity of our modern society.

 Certain regions and countries are at different stages of demographic reversal: Japan is leading the trend, and Europe and China are close behind, also shifting toward dependence. Even though North America was expected to enter the reversal stage by 2030, Covid 19 has significantly accelerated the shift.

 When we look at the current situation, it is easy to see why off-site manufacturing of modular units should offer a viable solution to our housing shortage. However, it would be naive to assume that modular manufacturing, as currently practiced, is ready to take on the challenge.

 For modular manufacturing to reliably deliver the output the demand requires, it needs to build a business and production model that is scalable and affordable, compared to conventional on-site construction. Only then will it be a worthy contender to close the gap stemming from the fundamental shortcomings of on-site construction and the demographic traps of our aging society.

 If we circle back to our main question: Why Modular Now? could also be phrased Why Modular Matters Now?

 Among the many exchanges and discussions I have had with colleagues, friends and other stakeholders involved in the construction or modular industry, the question of why Modular and why Modular now arises again and again. While modular construction has existed for decades in various forms, it remains a distant second to on-site construction and has experienced less-than-impressive growth. Some feel that this is just another wave coming and it eventually will pass, but many more believe that this time is different, that for various reasons the time for modular has arrived, and we must embrace the change with enthusiasm.

 If I were to make an argument on the side of modular manufacturing believers, among whom I number, I would argue: “modular design/manufacturing/assembly is here to stay. and it will increase its market share exponentially over the next 10 years.” The reasoning for this statement lies within the principle of:

 “Shear Force of Demand”

 Sometimes, when certain forces align in the same direction, creating an unavoidable force for change to solve pressing problems, an industry subject to this pressure finds itself with no choice but to develop a solution at a drastically accelerated pace. This was very much the case for modular 40 years ago: neither were all pressure points there, nor was technology ready to transform the industry in some key production areas that would create dramatic advances or economies of scale.

 Most of all, there was an abundant, readily available workforce, so the construction industry never had to adapt to mass-production techniques on the scale of Ford or Toyota assembly lines.

 So, where are there examples of “shear force of demand” leading to breakthroughs or new processes? One can find examples where countries shift and repurpose their existing resources to tackle emerging domestic or external threats: Franklin D. Roosevelt’s mobilization of his country in response to joining World War II, or more recently, the extraordinary public health, financial and quarantine measures taken all over the world to deal with the pandemic. But perhaps the most analogous case would be the initiative to lower global carbon emissions by 2030 to a level 40-45% below 2005 levels. In these cases, issues at hand and pressure that came from within caused a shift in general approach, a rethinking of “what’s possible”, and a coordinated effort started to unfold.

 The forces of demographic change, coupled with a shortage of skilled labour, are reshaping and reprioritizing stakeholders’ interests. While free enterprise is working to address the commercial viability of modular manufacturing, the US and Canadian federal governments are engaged in multifaceted discussions on housing shortages, particularly affordability and rapid delivery. Recently, the Canadian Federal Government announced a $10 billion investment in its budget over the next 10 years to begin addressing these issues.

 It should be well understood by all parties: the solution to these problems needs to take into account the benefits of rapid deployment, which is only possible by utilizing off-site construction approaches, in my opinion, particularly volumetric modular methods. Even though the modular industry may not yet be where it needs to be, the mounting pressures to solve this problem and the societal and financial benefits of succeeding make the challenge worthwhile, attainable, and, hopefully, inevitable.

 We should also embrace the last 20 years of technological advancements in Artificial Intelligence, robotics, software engineering, 5G internet, and the astonishing connectedness of our society, with easy, fast access to all sorts of information within milliseconds.

 All these elements will push the manufacturing and construction industries past the tipping point toward realizing efficient, mass-production and scalable production lines for rapid volumetric modular manufacturing.