This commentary was written by Rose Morrison, managing editor at Renovated. The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
By Rose Morrison
In many ways, the freight sector is the backbone of nearly all other industries. That’s promising for the future of logistics companies, but it also places tremendous responsibility on supply chains. Shortcomings in supply chains ripple throughout the companies and industries that rely on them.
Some recent trends in other sectors place even more trust in the freight industry. As construction companies have adjusted to COVID-19 delays and shortages, many have turned to modular construction. This system gives freight companies an enticing opportunity, but supply chain issues limit growth.
Here’s a closer look at how the freight industry impacts modular construction.
What is modular construction?
Modular construction is when companies build structures in an off-site facility before shipping them to the worksite to put together. Since most of the work happens in controlled, indoor environments, project completion times can be much shorter. Modular construction also requires fewer skilled employees and reduces waste.
These advantages have led to a considerable increase in modular construction projects over the past few years. In 2018, 85% of new houses in Sweden resulted from this method, and the pandemic will likely accelerate adoption further. This trend means increased pressure on construction companies’ supply chains, though.
In traditional construction, logistics companies need to transport raw materials and equipment to worksites. Modular companies deliver these items to prefabrication facilities and then send completed modules to construction sites. This method relies more heavily on supply chains, so freight challenges impact construction crews to a higher degree.
One of the most prominent supply chain concerns with modular construction is the safety of modules during transport. Since up to 90% of modular construction happens inside a factory, logistics companies have to ship most of an entire building. Transporting that much cargo is a challenging undertaking.
A high-rise apartment building can have 20 units per floor and 20 or more floors. That means supply chains could have to move 400 or more modules for one project. That increases the possibility for something to go wrong, especially considering how large these units are.
Oversized cargo like building modules is more prone to damage. If a unit incurs enough harm, construction workers must take time and money to repair it. Since one of the leading arguments in modular construction’s favor is less rework, these possibilities are troubling.
From 2019 to 2020, trucking rates rose 12% and will likely remain high for some time. The pandemic, which is behind much of this trend, has demonstrated that shipping rates can be volatile. This is an issue for companies that might want to move into modular construction.
Flatbed spot rates over the past year
The cost-efficiency of modular construction is a driving factor behind its recent adoption trends. High freight rates could jeopardize that affordability since this method involves more and larger shipments. If rates show too much volatility, construction companies will be less enthusiastic about relying so heavily on supply chains.
On the positive side, this relationship also means lower rates will provide more opportunities for freight companies in construction. Recent trends have primarily gone in the other direction, though.
Another lesson the pandemic taught the world is how disruptions can come out of anywhere. Uneven lockdown regulations across different locations caused global and domestic supply chains to slow down or stop. While the pandemic seems to be coming to a close, businesses won’t forget about these disruptions anytime soon.
Companies are now keenly aware that their supply chain partners are unprepared to deal with unexpected eventualities. The construction industry already has a reputation for finishing far behind schedule, and modular construction is supposed to help. Since shipping disruptions have a bigger impact on modular projects, these delays could hinder adoption.
Extensive disruption gets in the way of modular construction’s stance as a more efficient alternative. If freight companies can’t instill more confidence in their ability to work around disruptions, they’ll limit modular construction’s growth.
Lack of visibility
Modular construction also requires a higher level of visibility from supply chains. Since these projects are supposed to improve efficiency, they must adjust to any changes sooner. This requires transparency on the part of shipping partners, yet supply chain visibility remains a stumbling point.
Despite disruptions in the COVID-19 pandemic, just 40% of supply chains plan to invest more in real-time visibility. More than half of the industry isn’t capitalizing on these technologies, which isn’t a good sign for modular construction. A lack of visibility means a higher chance that disruptions will lead to lengthy delays.
Since most of the work happens away from the construction site in modular projects, optimized shipping is integral is their success. If these companies can’t see where shipments are and what’s affecting them, their projects could easily run behind schedule and go over budget.
Mitigating these challenges
Freight companies need to overcome several challenges for modular construction to be a viable business plan. Thankfully, none of these issues are unsolvable. Adopting new technologies can mitigate many of these problems.
IoT devices in shipments can provide real-time visibility that will help modular construction crews adapt to any disruptions. This data will also help companies predict any upcoming changes, so they can adjust before any significant problems occur. Telematics services can improve truck maintenance schedules, making them more reliable and improving transport safety.
More intensive driver training and shipment insurance can help reduce safety-related concerns. As trucking companies start to recover from the pandemic, they can also lower their rates, making them more appealing to clients.
Modular construction needs a reliable supply chain
Modular construction represents a potentially profitable endeavor for the freight transport and logistics industry. To capitalize on this trend, though, supply chains must overcome several widespread challenges. If they can mitigate these issues, they stand to gain much from this new construction trend.
The building industry relies on the supply chain, and modular construction takes that to a new level. With the right recovery strategy and careful digital transformation, shipping companies can enable this trend. Both industries will profit as a result.
Rose Morrison, the managing editor of Renovated, is most interested in sharing home projects and inspiration for the most novice of DIY-ers, values she developed growing up in a family of contractors.