For years, I’ve been interested in why the residential building industry has been so slow to innovate. Other industries constantly innovate. The U.S. automobile industry, arguably pushed along by Japan and European car makers, continues to advance its products and production methods. Consumer electronics advance so fast year over year that I’ve almost given up trying to follow the trends. Airplanes? Unrecognizable from their early forms, using materials that didn’t even exist 20 years ago. But housing – not so much.
The top 10 home builders sold $74 Billion dollars worth of homes in 2018, the majority of them still stick-built, on site, the same way houses were built when the “innovation” known as western platform framing replaced balloon framing. Sure, most builders now recognize the efficacy of roof trusses, and some are adding basic prefabricated wall panels, but that’s as far as most go when it comes to innovation – if you can even call it that.
To be clear, by “innovation,” I’m not talking about 3D printed houses (a sure bet a decade out, in my opinion) or the use of exotic self-replicating materials or AI-driven robots. Rather, I’m talking about companies like yours adding additional value to the parts you are already fabricating in your factories.
Adding Value with Innovation
Today, panel manufacturers all over the U.S. efficiently turn out extremely accurate panels and ship them numbered and stacked for frictionless, scheduled installation. And their customers are progressive builders who are learning, or have already mastered, the scheduling and trade skills necessary to weave factory-built panels into a time-saving, cost-effective building process.
It seems to me that the “basic” panel fabricators are in a constant race to the bottom, delivering a commodity, dependent on commodity-priced lumber and OSB, and reactive to how far their competition is willing to cut margins. Simply stated, panel manufacturers make money when they add value to commodity-priced studs and OSB – by assembling and delivering panels better, faster, and cheaper than can be done by crews on site. But as I see it, that leaves money on the table. Why not go a step (or steps) further by adding additional value in the factory, and take a slice of that value to the bank – while giving the customer the other slice of value?
Consider the case of West Coast SIPS (WCS), a startup structural insulated panel manufacturer in Wasco, CA. WCS is a forward-thinking company that is actively exploring adding additional value to a commodity SIP panel. The president of WCS, Chris Johnston, also runs Terina Homes, a medium-sized homebuilding company in Bakersfield. In fact, Chris’ appreciation of SIP panels is why he decided to start a SIP company, and now he is beginning to build his homes with them.
Building Cottages After the Sonoma Fire
As part of a Sonoma Habitat for Humanity project to build homes for victims of the massive Tubbs Fire that destroyed 5,500+ structures, WCS built three Sonoma Fire Cottages designed by famed Katrina Cottage designer, Marianne Cusato. When compared to OSB/stud panels, SIP panels arrive on site with the added value of built-in insulation and reduced air leakage, but Chris added even more value in the plant. When the panels came off the Hundegger machine, they moved to an unused section of the plant where carpenters from his subdivisions went to work on the panels. They carefully flashed openings, installed and sealed windows and doors, applied rainscreen weather resistive barriers, and covered the assembly with HardiePanel® cementitious siding. Moreover, on the inside, they nailed drywall to the interior of the panels. Then the completed panels – some up to 24 ft. in length – were stacked vertically on a rack specially designed to fit on a low-boy trailer and transported to the Santa Rosa jobsite 150 miles away.
On site, three carpenters with experience in SIP construction assembled the floor cassettes, walls, and ceiling panels. Of the three cottages, their best time to complete a building shell was three days. Keeping in mind that this was the first time WCS tried to build and ship such very complete panels, everyone agreed that their combined experience should be able to shorten the time to install by half.
Naturally, being the first attempt at such a complete package, there were many lessons learned along the way, but none of them were showstoppers, and all of the lessons could and will be ironed out in the future. Nonetheless, the effort paid off. Considerable on-site labor was eliminated or reduced, work on mechanicals could proceed as soon as the roof was dried in, and on-site waste was almost zero.
Examining the Value Proposition
Let’s take a look at the value proposition from the perspective of first the panel supplier and then the builder. For the Habitat project, WCS could have fabricated the panels, delivered them in the typical way, and then simply moved on to the next job. This could have been a typical project among many, in which WCS competes with other regional panel producers in what I call a “race to the bottom,” turning their product into a commodity by only competing on price, and maybe highlighting quality, service, and quick turnaround to grab a little premium on price.
Now let’s consider the builder who pencils out the costs and advantages of the basic panel vs. a more finished piece. First of all, we’ll assume that builder has already been sold on the advantages of basic panelization. His team is comfortable using prefab components. They know how to schedule and store panels, and their framing subs know how to work with them. What happens when panels arrive with the added complexity of windows, doors, and siding? Almost nothing changes from the framing subcontractor’s point of view – no upcharges, no speedbumps thrown at his/her schedule – but they will need to use a little more care and finesse when they muscle these panels into their final places.
And, the good news for the builder is: at a minimum, three subcontractors have been completely eliminated from the jobsite – flashing and window/door installation crews, WRB installation, and siding crews. Perhaps more importantly, the quality control and inspection issues vital to proper moisture management have been moved to a factory setting, meaning every component will be examined, rather than the hurried and slapdash effort that inevitably occurs in the field.
None of these innovations is new, of course. Homes in Sweden, for instance, have used advanced panelized techniques for more than 30 years, and there have been several attempts over the years in the U.S. too. I once asked Frank Baker from Insulspan why they hadn’t tried to add windows to their SIP panels. He told me they “tried it once” and had some damaged windows. Really, Once? Did they try a second time, perhaps with a different method of shipping? Anyway, my point is that the industry is at a transition point. Tech money is pouring into technologies to try to fix an industry that has survived despite innovation going on all around it. It’s time to offer customers more options than OSB nailed to 2x4’s.
With a 50+ year construction-focused work history that includes carpentry, contracting, writing, education and training, tradeshows, marketing, and sales, Craig Savage is Cypress CDC’s expert on sustainable building, best practices in residential construction, and building technology. He works closely with clients and builders on site to streamline the construction process and ensure homes operate at peak performance.