S.3 Ep.35 TMH Gerry McCaughey Offsite Construction
We've had on a few guests with leading views about integrating more manufacturing practices with construction. It seems like a relatively new trend to most, but to people like our guest Gerry McCaughey, offsite construction is how things have been for a long time.
Gerry has been building offsite for over 30 years between Europe and the US, and he joins the show to tell us why any other method is a mistake. Join us to hear from a true veteran in a construction space that is gaining traction.
Transcript:
00:01
Speaker 1
All right, morning huddle time.
00:02
Speaker 2
Good morning.
00:03
Speaker 1
I'm not saying it works. I wish you Godspeed with all of that. I think that's really nice. You know, I'm not sure what kind of success you're gonna have with that today because the world, my friend, has changed. Right.
00:17
Speaker 2
A lot of American construction workers, they have different needs. They have completely different needs.
00:22
Speaker 3
These awards have a huge like, criteria that you have to fill out. And they usually have a community service or community.
00:32
Speaker 2
You know, the most productive.
00:34
Speaker 3
With a high performance value. And you know, sometimes it's 11 o' clock at night.
00:40
Speaker 1
Funny, isn't that? Yeah, not for me.
00:43
Speaker 3
Not for me.
00:44
Speaker 1
At 11 o' clock, I am guaranteed to be snoring.
00:47
Speaker 2
So.
00:48
Speaker 3
So.
00:57
Speaker 1
Good morning. Morning huddle time. I'm Chad Prinkley here with Stacy Holzinger and our guest, Jerry McCaughey with Off Site tech. Jerry, thank you so much for joining us this morning.
01:09
Speaker 2
Thank you very much. Although when you said the morning huddle, I didn't realize that you meant this early in the morning. Right.
01:15
Speaker 1
So when we invited Jerry, we said, hey, it starts at nine. He said, perfect. And we said on the east coast. And he was already signed up. There was no kicking out.
01:25
Speaker 2
Early start this morning, boys. Early smart. I already start.
01:28
Speaker 1
You're joining us from California by way of Ireland.
01:32
Speaker 2
That is correct. Well, and it's raining outside in California, which they told me it never rains in Southern California, but not today.
01:40
Speaker 1
Feels like. Yeah, so it's, it's election day here in the, you know, November 8th. My kids schools are closed. I never had off when I was a kid either. During election Day, my kids can't vote. So I'm not sure why they're off. But you know, it's, hey, get out and vote if you haven't done it already. If you're watching us live, make sure that you get out and vote. Use, use the opportunity to do that. So today we're going to be having a conversation about the, you know, about off site construction.
02:22
Speaker 1
We're going to be having a, you know, we've had that conversation, I think in two different ways as I look at past episodes and in both of those conversations, really interesting, but in both those conversations were talking about it really from the standpoint of people who aren't, haven't done it, you know, personally and lived in it over the course of time. There were some, you know, people who've been consulting in it, some people who are, you know, in their engineers or think, you know, who are trying to influence more off site construction. But Jerry's lived it and not just recently. Jerry's lived it over the long haul. And that's something that I really want to hear from Jerry about is not only, you know, offsite construction. Okay, we've heard it, we've been talking about it. It's a pretty hot topic right now.
03:20
Speaker 1
But, but you've got a long history with this. Not just like, you know, trying it in the past 10 years. What's it like, you know, to really run an offsite construction based company? And so that's going to be the nature of our conversation. Stacey, make sure that we get really cool questions from the audience and we'll bring you back here toward the end of the show. Good?
03:45
Speaker 3
Yep, sounds good.
03:46
Speaker 1
See you in a bit. So. So Jerry, I want to start off by just kind of hearing your story. We say you're in California now by way of Ireland, but kind of weave it together for us. What, what's the, what's your story in the construction industry?
04:01
Speaker 2
Well, I mean, you're right. I mean my history in off site construction spans close on 40 years. But my family's involvement in offsite construction literally goes back 60 years. So when people talk about it here, they sort of not talk about, but when people get the impression that it's something that's relatively new, it's far from it, especially on the other side of the world. But there's an interesting story about the connects up the dots between Ireland, the United States and my involvement in offsite construction, which was that my dad was originally a carpenter. And back in the late 50s he left Ireland to emigrate to the US took a boat from Cork and ended up in New York. And that's where he first discovered homes built, you know, houses being built out of wood frame.
04:49
Speaker 2
Because in those days everything in Ireland was built out of concrete blocks one block on top of another. But he was a carpenter primarily. He was actually a roofer and a finished carpenter. That's what he did. So he goes to America and he discovers these guys building homes out of wood. And as a carpenter, he thought, oh, this is a great idea. And so a couple of years later he emigrated back to Ireland and decided this is what he wanted to do. But it never dawned on him when he went back to stick frame, although that's what he learned. Now don't ask me why I never asked him.
05:24
Speaker 2
He passed away two years ago why that was the reason Maybe it was the weather, but I think it was more to do with the cultural upbringing of a European is that you would automatically think that if you're going to manufacture or build anything, you'll try and do it indoors under factory controlled conditions. So when he went back, he literally rented a small building and started making wall panels and plywood gusseted roof trusses and designing homes, little single story buildings and going out at the weekend with his brothers and his friends and erecting these. And that effectively became Ireland's and pretty much Ireland and the UK's first off site construction company. And that went on to become very successful in his time.
06:09
Speaker 2
By 1985 I think he was the largest because he sort of, when you say started a company at that point in time he really started an industry and so other people entered it. And by 1985 he was doing relatively well. I think he had three or four hundred employees and he was the largest offset manufacturer in Britain and Ireland. And I was in college at that point in time doing a marketing degree and I had to write various different reports to get my degree. And I picked the off site industry not because of any particular interest in it, but because, hey, my dad worked on it and I knew you could access the information relatively easy, right? And so I wrote a number of these reports.
06:53
Speaker 2
I wrote my first report in 1982 and when I went to University College Dublin, I wrote a report which was basically how to set up a international B or an Irish based international off site construction company is as strange as that sounds, and handed it in, got my degree. Apparently I got first in the class for that report, but I mean I had access to colossal amount of information. I went off at that point in time to live in California after I graduated. And unknown to me, my dad was, and I spent a couple of years here. My dad sold out of his business in Ireland and he had been out of it for a couple of years and I think he got bored.
07:37
Speaker 2
And one day I got a phone call from him saying, would you remember that report you wrote when you were in college about building an international offset company out of Ireland? Did you believe it? And I can remember saying to my dad, I can't barely remember writing the report, let alone what was in it. I was more interested in chasing girls around California at that point in time than remembering what I'd written in college. And anyway, he said, I'm going to send it to you. So he sent it to me and he said, you read it and if you think it's true, Come back here. Those exact words were, put your money where your mouth is and let's have a go at this. And three months later, I got on a plane on December 8, December 9, 1989, and flew back to Ireland.
08:19
Speaker 2
And myself and my brother and my dad and another guy by the Name of Jim McBride set up a small company in Monaghan town, which is 6,000 population, 6,000 people in 80 miles north of Dublin. We set up a company called Century Homes out of a building that was 5,000 square feet and proud to say 15 years later, that was the largest offset company in Europe. And we had five factories, three in Ireland, two in the uk. We were shipping as far away as Japan and we had 650 to 700 employees. And we had done the world's first six story wood frame building. We had done the UK's first zero carbon, not zero net energy, way past that, we did zero carbon. So we basically pushed the limits of engineering and we pushed the limits of thermal performance in buildings.
09:04
Speaker 2
And that sort of took up to 2005. And in 2005 we sold that business to Kingspan, which is a large buildings material company based out of Ireland. And I stayed on a CEO in that till 2008 and then I moved to the US and that point in time, 2008, the world was in free fall, the financial markets were in crisis and basically the housing market was in devastation. And housing had gone from 2.2 million at its peak at that point in time down to about 550,000. But I kept looking at how Americans were building homes basically the same way as my dad had seen it pretty much 40, 50, 60 years ago and going, this is crazy, there has to be a better not, there has to be a better way. There is a better way.
09:52
Speaker 2
And then waited for the market to turn around. And when the market turned around and went out and pulled together a team of people that had worked with in Ireland before and set up a company in California called Entecra. And we raised 45 million from Louisiana Pacific and set that business up and then got it up to a significant scale. And I mean I've been traveling up and down from Northern California, Southern California for five, six years, said, no, it's time for me to step back from that role. And then now, I then went into consultancy, basically helping, because now I think we help to light the fire under people to look at offsite as being a serious alternative to traditional construction methods.
10:33
Speaker 2
And now I'm helping companies to transition to the offsite Industry, but not in the, not on answer is not in the sense of the way people here think of component manufacturers. My, that's never been my view of life. Off site companies and component manufacturers are two different entities. And also in that sense, I'm also pretty much at the technological side of things. I like to push technology and that's the way I've always done it. So everything that we do is digital and it's a high tech on the manufacturer from the manufacturing perspective. So that sort of brought us up to today. So that's how I got here. I love it.
11:09
Speaker 1
That's great. That's, it's a fascinating, impressive story and I think it's got to be loaded with lessons and that's what. Oh, God.
11:25
Speaker 2
Right.
11:26
Speaker 1
An immense amount of lessons.
11:27
Speaker 2
Right.
11:28
Speaker 1
And so I think I want to explore one thing briefly before we get into lessons, and that is you talked about not being a component manufacturer in our very first conversation several months back. What really jumped out to. One of the things that jumped out to me in that discussion was that you were sort of saying, you know, look, there are a lot of people who claim to be doing off site and they're not really, they're just bringing one piece to the table and that might be a good choice for their little piece of the puzzle, but it's not actually correct, you know, solving the, the problems that true off site can solve. So talk a little bit about, you know, the differentiation.
12:15
Speaker 2
Yeah, this is an important point because it actually does go to why off site, as a European understands off site, why it hasn't taken off up to now to the extent that it has in say, other parts of the world. But there is. So when I let me just start again, clearly says a component manufacturing company is not an off site company. That's absolutely. And actually by definition just anybody there go on Google the word component and you'll see that it's an element, a part of something. But on the other hand, off site is a system by definition. A component is part of a system, but the system is a totality of it. I mean, and as you know, Aristotle said 3,000 years ago, the whole is greater than the sum of the parts. And that's the problem. That's not to criticize component manufacturers.
13:13
Speaker 2
That's their business. The problem that I have with it is when they go around masquerading as if they are an off site company. They're not, but they do a service for People who want that particular service. But true, offsite is technologically driven. It's a holistic view of the building where you take full responsibility of the building and that includes getting invol with the concrete slab, getting involved with the plumbers, with the electricians, with all the trades. You're effectively trying to coordinate because you're trying to coordinate with everybody that actually touches off or connects us to that connects to that frame with. Your objective is to make that building help that building. And it's not so not one component of it. The whole building get built as efficiently as possible. And so the key words in off site construction are process improvement and process optimization.
14:04
Speaker 2
And that really does involve a granular level of input into the totality of the building, not one item. So what you have with component manufacturers or with framers who use component manufacturers going around and they buy the wall panels off this guy and they might buy the floor, either the floor trusses or the I joists off another guy and then maybe the roof trusses off somebody else if they happen to get them cheaper. So it's all about driving down the cost. And in the process of doing that, they end up with these bits and parts that have not come from one supplier, where one supplier has total responsibility for focusing on the total efficiency of the building.
14:46
Speaker 2
And I mean, I'd take far greater amount of time to explain this in detail, but if you looked at an offset company and you looked at the technology that's employed, and the fact that a good starting point is I would look and say if you don't start with a full 3D model of the whole building, then you're not an off site company. Because what you do with that is we take the drawings in and assume that the drawings are incorrect, that the building has been designed wrong, and we go back to first principles and start to rebuild it with the whole purpose of process optimization and process improvement. And then only after we've done that do we start to look at the elements. But then when we start to look at those elements, I mean it's a total view of the building.
15:29
Speaker 2
And again, when it comes to component manufacturers, Chad, one important point I want to say is that there's a lot of guys in the United States. I mean, I get this thing said back to me, oh, I've used wall panels before and they don't work. And I really want, I mean my head starts to explode when I hear that. I mean, I really, I mean I want to grab them and shake them and go like, what the heck has that got to do with me? What is a wall panel got to do with what I'm talking about? Because it's nothing to do with it. Because using a wall panel on a job, substituting a wall panel for six framing walls, all really means is that you're running fast to stand still.
16:05
Speaker 2
Because what happens when you get to your floor and you're back to loose joisting again? Loose joisting it again. Whereas true offset companies would prefabricate the walls, the floors, on the roof or the roof. If the roof's a flat roof, they'll use trusses. If it's, if it's a regular picture, but it's a totality. Prefabricated stairs, everything's been designed to fit and to work as fast as possible to get that building up. And so when people talk about components and they say, oh, that proves offsite doesn't work. It doesn't, it bears no relationship, no relation to it. It's like going out to buy the engine of a car and then sitting in your front yard saying, like, I can't get the car to go. Yeah, because you don't have the rest of it. You know, it's not, there's off site is a complete solution.
16:47
Speaker 2
It's not a part solution.
16:50
Speaker 1
How many, how many companies in the US Right now? And you may not have this data, but you know, if you, if you don't wonder if you have a guess, but how many companies in the US Right now do you think fit the definition? You've laid it out?
17:05
Speaker 2
Yeah. Less than 10. Wow. Less than 10. I have done that analysis myself.
17:12
Speaker 1
And so you mentioned that you're consulting right now. Right. You're, you're helping companies to make the transition. So what's first off? What's motivating people to want to make the move?
17:29
Speaker 2
Well, I think at the, I mean, there's probably been a lot of false starts in the United States over the last 30, 40, 50 years. You hear this. Well, you'll hear people say, oh, it was tried before and it didn't work. But again, it was tried when with components, they're misunderstanding what they're saying. But this time it is different. And I think this time it's the labor issue that's the primary driver this time. Because I think previous times, the way the US residential housing industry has worked up to now is you needed to build more houses. You just brought more people across the border. Sure. Simple as that. I mean, even let's call a spade. That's how it worked.
18:12
Speaker 2
And in many cases a lot of those people were undocumented and maybe not have been treated all that well and they were willing to work for, for very low wages and. But that's how it was done.
18:21
Speaker 1
Yeah. And that's, and depending on what era we're talking about, depends on what border and from where.
18:29
Speaker 2
Yeah, yeah, that's correct.
18:30
Speaker 1
I mean we've been doing it forever.
18:31
Speaker 2
Yeah, the Irish were part of that too.
18:33
Speaker 1
That's exactly right.
18:34
Speaker 2
They were coming over and doing, and I'm talking about as early, like as late as the 1980s and coming over and doing it. So. But that's the way.
18:43
Speaker 1
Canadians are coming over and doing it. I mean it's.
18:45
Speaker 2
Yeah, that's the way it has been done. But I think the realization is now occurring that's no longer really possible and it's not going to happen. So you're now looking at, I think current estimates are that there's a 400,000 thousand person shortage in the construction industry of people. So there's 400 more thousand more jobs than there are people available. Then add to that the rate of attrition is for every one person who joins the industry, five are leaving. Right. So when you put those two things together and people think there's a labor crisis, there isn't. This is only the beginning. Literally, this is only the beginning. If were to fast forward 10 years from now, this problem is going to be an awful lot greater than it is currently.
19:35
Speaker 2
And I think some of the more far seeing companies are actually starting to see that and say we need to prepare for this. I mean I am and I am working for numbers of companies who actually that's what they're doing. They're saying we've got to take a longer view of this. This is not going away. And even if it was going away, you have to overlay the other fact on this is, and if you look at the last McKinsey report on the U.S. residential construction industry, over the last 60 years, U.S. residential construction productivity has been flat at best to declining at worst. Now that's a shocking indictment of an industry.
20:14
Speaker 2
When you think of the technology that has been brought into existence in the last 60 years and you think of the productivity gains that have, say occurred in agriculture which is up 1,750%, or manufacturing which is up 400% and construction is flat to Negative. And then people wonder why there's a housing affordability issue and why there's a housing crisis in terms of a shortage. The answers are clearly there. If you're not increasing your productivity in the 21st century and you're not using technology, then costs are going to increase. The number of homes getting built is not going to match the demand, and people are not going to be able for them. And you end up then with a social crisis that will occur, which you could argue we probably are seeing that with all the homelessness in the, That.
21:40
Speaker 3
It.
21:56
Speaker 2
Okay, I believe we lost. Chad. I'll ask that question that somebody's asked there about do we see multifamily as being the biggest opportunity to grow off site? And I would say absolutely. I mean, I think it's the biggest opportunity, but it's not the only opportunity. But I think it's the biggest opportunity because it's the easiest one to. Not that the economics don't work on single family and in hospitality and other types of construction, but in multifamily, it's very easy to make the, it's very easy to prove the economics behind off site construction. Particularly when you look at that, you can, on average, you can take the framing time down by over 50%. I would actually say that when it's properly organized, you can actually reduce the framing time by about 66% back. Chad.
22:54
Speaker 1
Oh, my Lord. My power got knocked out. We had a big gust and all of a sudden I heard sirens outside. I don't know what happened, but guessing that there was some issue that affected my whole area. I apologize for that. If there was anybody that I'm confident could carry the conversation, it's an Irishman. Jerry.
23:15
Speaker 2
I was trying to, there, Chad. I was trying to, I was trying.
23:17
Speaker 1
To go on and do it for you to help.
23:21
Speaker 3
I was struggling.
23:22
Speaker 1
I'm sorry. Yeah. Hey, you know what? I can't believe it hasn't happened before now.
23:28
Speaker 2
It would happen with me. Yeah.
23:30
Speaker 1
Gary, I appreciate your, your, your help moving us through it. So, so here's the biggest question. I'm sorry to interrupt you. I, I want to, but I, I, I, if you've already gotten to it, skip it. But the biggest question that I have is what is the, the mindset shift and the real business challenges? What are those two things that we really have to confront if we're making the jump from running a more traditional, you know, building company to an off site company?
24:02
Speaker 2
Well, it depends. I Mean, are you asking me from the perspective of the builder who's going to use the system or are you asking me from the perspective of somebody who wants to set up an off site company to manufacture and provide the off site solution?
24:16
Speaker 1
See, you know what, you should talk about that to our group.
24:20
Speaker 2
Right.
24:21
Speaker 1
Just by itself. So the builder is the, in this case, the, you know, general contractor, if you will, that's driving the project. The off site construction company is going to be the system manufacturer.
24:36
Speaker 2
Correct.
24:37
Speaker 1
That does the entire structure is what you're saying?
24:39
Speaker 2
Yes, yes.
24:40
Speaker 1
So start with the, start with a builder. What's the biggest shift the building.
24:45
Speaker 2
Okay, great question. The biggest mindset shift is to get the builder to understand that first cost is not irrelevant. But I don't know if you're familiar with, there's a gentleman there over in the east coast called Scott cdam, he runs a company called True North Consulting. And Scott's an absolute expert in this whole area. But Scott has a great expression that says if you only ever look at first cost, you'll never know your total cost. And one of the problems that, that you face with production homebuilders in particular is the fact that they only ever look at first cost. And the way they're set up is only ever to look at first cost.
25:26
Speaker 2
So if you put a buyer in that role and that person is out to decide, you know, the various different products that they're going to buy to build that particular home, they're basically, they're motivated, they're incentivized to buy whatever widget they use at a half a cent cheaper this year than they bought it last year. That's their drive, that's their motivation, but they really don't have an incentive to look at, well, maybe it's going to cost me a cent more to actually install that. Because they're only incentivized to look at the first cost of what is the purchase of that particular item. And this is where with off site construction it comes into.
26:00
Speaker 2
There's a bit, there's a bit of an issue because if you take it that cycle time on a job site is a critical element and there's a value associated with time. And we've all grown up being told time is money. So it's been in us from our little kids, your parents tell you time is money. Yet when it comes to looking at the value of cycle time reduction on a job site, the buyer who's not incentivized to look at it. So I'm not Saying it's their fault, the buyer does not consider cycle time or the cost of it. And in most cases, when you ask that buyer, what is the value, what is every day on site costing your company, they can't tell you. How can you make a purchase decision if you don't know what every day on site is costing you?
26:54
Speaker 2
So in other words, if the focus from a builder was on reducing cycle time, that was their primary objective, as opposed to let me reduce the cost of the item, because you can actually have the opposite around. You can reduce the cost of the item and increase the cycle time because it takes longer to install, but you bought it cheaper, whereas it should be. You need to look at it holistically and say, if my objective was to increase, was to decrease cycle time, how much is every day on site going to save me in terms of costs? And that's where offset.
27:24
Speaker 2
So if you go along and you're an offset company and you say it's going to cost $40,000 to frame that particular building, stick framing it, but it's going to cost $42,000 to frame it from off site and say, oh no, I'm not going to use the off site solution, it's $2,000 more expensive. But if the off site solution is saving you 10, 12 days on site, what are those 1012 days worth? I mean, are they worth $200 a day, $500 a day, $600 a day, what are they worth? They don't know. So but by anybody's estimate, and we've done a lot of research on this, even in the relatively lower cost areas, you're looking at around between 4 and $500 per day of site cost each day. So if you take it that you save 10 days, there's $4,000 there alone.
28:15
Speaker 2
So it means that $2,000 that they're saying are more expensive, you are actually $2,000 cheaper than it. But the buyer doesn't care because the buyer is not incentivized to look at that. The buyers just said, no, you've got a quote at first cost is 42,000 versus first cost at 40,000. Buy the 40,000. It actually costs the builder money. So there's a problem in a mindset change that needs to occur. The first thing builders should do is make sure that every single one of their buyers understands what the cost of a day on site is worth. And then what they should do is make sure that they involve their operations team on the purchase decision when it comes to framing. Not Just the buyer.
29:00
Speaker 2
Because in many cases the buyer has never actually even worked on a job site, but the operations people are doing it every single day. The other thing that they don't even consider in first cost versus total cost is if you look at the amount of dumpsters that are on a site with off site construction, you're gonna, you're gonna at least save two dumpsters on that job site. So there's a whole load of other things that just don't get included in the cost. So it's back to this thing of you need to look at total cost, but everything here is set up for first cost. And I think that is of a reflection on the fact that everything was basically set up for sick framing in the first place. So it was never really a consideration.
29:39
Speaker 2
But if you're looking at maximum efficiency, you should be actually using cycle time reduction as being one of the qualitative decisions that you look at when you're quality of the items that you look at when you're making a purchase decision with regard to framing. So that's one part of it that's.
29:58
Speaker 1
A major mindset shift and it's not complicated, but definitely shifting the focus from first cost total cost.
30:08
Speaker 2
Yeah. Let me give you an example. I mean, somebody asked me questions in. These are multifamily distance. So I'm going to give you a real world situation. Now it's multi family because it's easier to shorten this. But it's, this is, these are real numbers from a real builder on a real job site that has been completed. So we price the job, a multi family job of 270 units in Northern California. And the stick framer who had framed for this developer previously on his previous multifamily development came in at $100,000 cheaper than the off site solution. Okay. So the developer said, listen guys, I love the technology, I love what you're doing. I love the fact that you're 3D modeling this. I love that I can see the problems.
30:55
Speaker 2
I love the fact that there's going to be reduced waste on site and there's going to reduce manpower on site. Just, I love the whole concept. But you're $100,000 more expensive. Yeah, I just, I can't go there. And went back to this discussion of first cost versus total cost. So we asked them. Now this was again the difference of the attitude of the person you're talking to because I mean, I love this expression that an Irish newspaper says that you Know, before you make up your mind, open it. So you know, come into an, come into the discussion with an open mind. So the builder said, or the developer said, we said to him, so how long is it going to take your stick framer to frame this?
31:31
Speaker 2
So he went off and he got the framer to give him a commitment as to how long it was going to take, which was 46 weeks. And we said, okay, our view is we can do this in 14. That's 46 weeks versus 14. Then we said to him, how much is that reduction worth to you? I said, because if we're going to talk about this, we need to know this. And he went off again and he came back. It was about 10 days later he came back and he said, and I think it was actually more than this, but this is what he said. He came back and said he reckons that there's $600,000 of savings if he can bring that job in 14 weeks as opposed to 46.
32:14
Speaker 2
So we put a proposal to him which was, tell you what, if you award us the job and we bring it in 14 weeks, let's split the $600,000, you keep $300,000 of the savings and you write us a check for $300,000, which means you're going to pay us $200,000 more than we had originally bid. But you're up $300,000.
32:36
Speaker 1
So just like your dad asked you to do back in the 80s, you put your money where the money.
32:41
Speaker 2
Right? Yeah. So the developer agreed and the developer wrote the check. Fact, not made up fact.
32:53
Speaker 1
Bet you never writes that check again.
32:55
Speaker 2
Well, actually. So the second part of that project, which was 170 units was awarded and it was never competitively bid, right?
33:05
Speaker 1
Yeah. Well, because the proof.
33:10
Speaker 2
That is the proof was there. He did not need any more than that. Right. So that's what I mean about cycle time and understanding and being opening your mind to understandings. In many ways, the way things are priced and the way construction operates in the United States is at such a simplistic level. I mean, yeah, oh yeah, give me the price for that widget and then nobody considers anything else. Why are the operations people not involved in that decision making process? Do you think, do you think that the buyer knows better than the guys who actually operate on the job site of what really goes on and what the real costs are? Because at the end of the day they know about all the extra over costs that have to occur. They know about the injuries that occur in the site.
33:54
Speaker 2
They know about the delays that occur in the site. They know about the quality issues, that delay in the site.
33:59
Speaker 1
Absolutely.
34:00
Speaker 2
The buyer doesn't. But, but that buyer is getting that, getting the right to make the final decision on what actually happens. But again, it starts with the fact that if you don't know what your daily cost is on site, you can't make an informed purchase decision. That's a fact. That's a simple economic fact. I mean, if you explain that to a four year old, they'll get it. They will, they will get it.
34:28
Speaker 1
I'm gonna go bring you a three year old. You think it'll work on the third hour? All right, so. So because of time here, and I want to make sure that we hit on some of the stuff that the audience may be coming up with. Stacy, what questions do you have that we can funnel to Jerry before we have to jump?
34:51
Speaker 3
All right, let's start with Bill Wilson. He has two questions for you. I think you were answering the first one when we got cut off here, to reiterate. So he said, do you see multifamily construction as the biggest opportunity to grow off site?
35:08
Speaker 2
Any other markets, it is the lowest hanging fruit. And because again, that example that I gave you of that particular development developer, because I think especially specialist multifamily developers, they actually do understand the time value of money. There is a major distinction between production home builders, even the production home builders who do multifamily, and dedicated multifamily developers. Dedicated multifamily developers really know the time value of money. And so they are, they're a better target market initially. But also I think that multifamily itself, by its nature and regardless of who you're selling it to, it's. They, it's much clearer where the benefits are. But the benefits are equally. The benefits are clear with single family, but with multifamily, because you get such large buildings, you can see the speed and the benefit and the cleanliness on the site.
35:59
Speaker 2
Much easier than you can with maybe with single family.
36:02
Speaker 3
But.
36:03
Speaker 2
So yes, the answer is multifamily is definitely an easier target.
36:06
Speaker 3
Okay, and then how does the design community embrace this off site construction?
36:13
Speaker 2
Remarkably well. I mean, there was a lot of talk at the very beginning when we came into this market that, oh, the architects and the engineers won't buy into this. That's actually not been the case. In fact, I'd go as far as to say is that again, I'm speaking more now from Northern California, some of the largest architectural companies in Businesses in Northern California are fully embracing this and actually are now sitting down with their clients in advance and actually saying to them, do you think that you might be using offset? And are actually contacting the offset companies and looking for insights and in advance of them completing the design.
36:49
Speaker 2
So I think there's a much more willingness among the architectural and design community to look at new ways of doing this because in many ways the off site company is a, which is a facilitator or an additional arm for that, for the, for the design community because they work together. But the off site company does an awful lot of work that maybe would not have done until later that maybe the design community would have had to suck up. But when you bring in the offset company into it, they do it for them and particularly down to 3D modeling the building. So I think there's a lot of opportunity there. And actually we've certainly had very positive interactions with the design community. So it hasn't been a pushback, it has been the other way around.
37:39
Speaker 3
Nice. Mark asked, what do you think about transforming high school tech school construction malls into off site construction manufacturing facilities?
37:52
Speaker 2
I love this question. I mean, I think this is where there's a lot of, where there's a lot of misunderstanding but a lot of opportunity. And I'll say you hear at the moment lots of discussions about our reasons given for the fact that the reason why we don't have more young people coming into the construction industry is because we don't have shop classes in schools anymore. Right. I want to say quite clearly that is false. The reason why we don't have shop classes is because young people don't want to go to them. The reason why we don't have people in the construction is not because there aren't shop classes, it's because they don't want to come into the industry. And there's more and more research and proof of that in existence. So people saying that don't know what they're talking about.
38:44
Speaker 2
The reflection of the fact that there's no tech schools is because people don't want to go to them. Because if you look at a young person coming out of school now and they figure that they're getting paid 15, 16, 70, 18, $90 an hour on a job site and they can go and work in an air conditioned building for Amazon, that's where they're going. And they can get to push buttons on computers and so forth and so on. That's where they're going and they can go to the same location rather than have to drive around all different places knowing where their next job is. That's why they're going there. If you want to bring young people into the construction industry, then you need to modernize the construction industry. Bring it into the 21st century.
39:23
Speaker 2
I mean, I put a post up yesterday said we're now, the world is now in the fourth industrial revolution. That's a fact that's been agreed by the World Economic Forum. We're now in the fourth industrial revolution. Stick framing is still in the first industrial. It actually has even been through, it hasn't even been through the first industrial revolution. And you're looking at kids that are using iPads in one hand and an iPhone in the other coming home and watching flat screen TVs, going into their high tech cars, so forth and so on. And then you want them to go onto a job site and do stuff that hasn't changed in 200 years. In reality, in their heads they're going, how does this even, how do I even relate to this?
40:09
Speaker 2
So, you know, if you want to attract, think about this, think about your own kids. If you want to attract young people into the construction industry, then you need to modernize the construction industry. It's, I mean it's, this is, it's not rocket science. Every single other thing that we have used or buy or produce or touch is, has dramatically changed because of technology in the last 10 years. And yet we want young people, and I keep emphasizing the word young people, to go onto a job site to basically say technology doesn't exist. Yeah, it doesn't make sense. So training people and that question, that person's question, I think that's so true. Start moving it towards technology and construction. Let's move it forward. Let's increase the productivity of the industry through the use of modern technology.
41:08
Speaker 2
That's what every other developed nation, by the way, on the planet is doing. That is what every other, like I'm going off on a trip that's been organized now by various different US government departments in December to the UK to look at the technology that's being applied there and at the training programs that are being put in place to actually bring the industry into the 21st century. That's what we need to do. Stop resisting change. That's what young people want. They want to do things in a modern way, the things that they can relate to.
41:44
Speaker 3
So to piggyback off what you're just saying. And Sean made a comment about, he's seeing a lot of the drywall companies move to this type of model. Is there other trades that you see are on the forefront like electrical, mechanical, that are really trying to embrace this over other terms?
42:03
Speaker 2
Yes. And there are lots of technologies out there that are being designed for those industries. I mean, whether it's. I mean if you even take the modular industry and you look at the way they do their wiring and the wiring looms that are now available. I mean there's technology moving on to improve wiring. You look at even from H VAC systems. There's technology has been improved there. You look at the plumbers now using 3D modeling of the plumbing systems before they ever go into the building and then been able to prefabricate many of those items before they ever go out to the job site. There's a whole load of things that are actually out there and some very good companies are actually trying to push that thing forward and hopefully they will benefit in the long run because they're pioneering the way.
42:47
Speaker 2
But the problem is you have so much resistance from other people who still, you know that expression that says the seven most dangerous words in the English language are that's the way we've always done it. Where do you hear that most? The construction industry. That's the way we've always done it. So. But there are opportunities there and there are companies who are actually certainly starting to push that envelope.
43:07
Speaker 1
I'll say one quick thing on this. Where I've been, it seems to me that to reach the maximum value off site across different systems manufacturers.
43:25
Speaker 2
Right.
43:25
Speaker 1
Not just component manufacturers, but different systems manufacturers. There, there has got to be. Soon as you talk about H Vac, you talk about plumbing, you talk about the other folks that have opportunities to. To be doing this type off site construction. Seems to me the maximum value is going to be those entities working together off site and finding ways to, you know, eliminate the possibility of rework.
43:59
Speaker 2
You touch on another very important point. Chad is as crazy as this sounds, the lowest level of digitization in any industry in the United States is in the construction industry.
44:10
Speaker 1
Yeah.
44:11
Speaker 2
Which is probably the one you would think would have the most.
44:15
Speaker 1
But it has the, has one of the greatest needs for it.
44:17
Speaker 2
This is correct. But now just to take your point, you said is, can you imagine now if everybody was digitized and was actually properly using technology that's out there so that you could actually coordinate in advance with the plumber, the electrician, the hitch fact, the off site company that everybody was actually using the same model and could interact with each other before you ever got to the job site to figure out how much money you would save. Yeah. How much more efficiency you would have. I mean, it's a very simple thing to do, but nobody does it. Nobody. I mean, try getting drawings from a, from the average plumber electrician in advance of them. Going on the job site is what's going to happen. Can't get them, don't.
44:58
Speaker 1
I, I, and man, I would love to continue this conversation. We're Now a full 15 minutes past and I, so I should, I should draw it to a close. But I want to say that I think I'm hopeful coming away from this conversation. And I'm hopeful because I, I think what you have shared with us today is a story that to some extent is kind of, you know, if you build it, you know, they will come in, you know, type of thing. So, so if you're someone right now that is, you know, doesn't, I mean, there, I'm sure, limitations. Right.
45:34
Speaker 1
But if you're running a construction company today and you have your, you're in a space that has the potential to, to have an off site system, to manufacture an off site system, there's evidence that the market has a willingness to take this on. And if you have the proof that in your ability to beat traditional methods of manufacturing and installation, then you, I mean, that's, you'll not only benefit from, you know, being on the leading edge of it, but you'll, you know, help to usher in, you know, positive change, which is, you know, Jerry, the decision you've made, right. Which is to be in this role now of coaching and leading other companies into embracing this change.
46:30
Speaker 1
So I've got to ask you if people want to contact you and if somebody's, you know, watching or listening to this, if somebody wants to contact you and get help, how do they do that?
46:41
Speaker 2
Well, they can get me on my office, on my website, offsitetech.com or it's very easy. Just email. It's very easy. My email is just Jerry with a.
46:48
Speaker 1
G@Offsitetech.Com it's just T E K. Correct.
46:54
Speaker 2
Yeah, TK that's correct. But I also want to say, Chad, I think there's an important point. I'm not, and you said this at the very beginning, but I said I'm not speaking from a point of, it's hypothetical. Right. I've been at this. All of my life, my family has built successful offset companies. I can give you a list offset companies around Europe that are doing this. And I've been doing this for 30, 40, 50 years. This works. You just have to approach it the correct way.
47:29
Speaker 1
Love it. All right, thank you so much for joining us, Jerry. I'm sorry for the mishap in the middle of the show, but it's. I. I was amazed to come back and find that you were still here and that everything was still rolling. Hanging my head.
47:46
Speaker 2
Maybe. Maybe I missed my. Maybe I missed my calling in life. Maybe I should be a. A podcast host or something.
47:52
Speaker 1
Well, you are a hell of a storyteller, my friend.
47:55
Speaker 3
Yeah.
47:55
Speaker 1
And, you know, it's been. It's been a lot of fun having.
47:59
Speaker 2
Thank you very much. Thank you very much. Even though you got me up in, you know, the middle of the night, but I returned the favor. Someday I'll have one.
48:07
Speaker 1
I look forward to it. Yeah, I look forward to it. Yeah, you'll have me on at midnight Eastern.
48:12
Speaker 3
Yeah.
48:14
Speaker 1
Jerry, thank you so much. Stacy, let's wrap up a couple loose ends here.
48:17
Speaker 2
So.
48:19
Speaker 1
So next week we have our 36th episode, and we've got Tom Hughes coming on who's going to be talking about practical applications of lean in construction, which is probably something that, you know, Jerry could talk about as well, you know, in. In taking Apple, you know, concepts from the manufacturing, you know, space and applying it to the construction space. Although I think Jerry would argue that construction is by definition, manufacturing, which I think is, you know, a really, a valid way of thinking. So I look forward to that. Stacy, do you have a marketing tip of the week for us from Steeltoe Communications?
49:02
Speaker 3
Yeah. So real quick, when you're doing your marketing, try to think about your customer and their pain points and use the word you or your instead of me and I. And we'll keep it short because this was a long episode. Great episode.
49:18
Speaker 2
It was. Yeah.
49:20
Speaker 1
Thank you. That's. It's. Customers care about them, not you. Yeah, I think. I think that's right. People like to hear about themselves, so. So good advice. All right, folks, as always, we thank you for joining us. Please spread the word, do us a favor, and just this week, try to find somebody that you know and tell them about the morning huddle and encourage them to check it out, whether that's live or whether it's however you get your podcasts or on YouTube, however you want to engage. And then lastly, if you or anybody that you know is creating positive change in the construction industry. Please join us. Be a part of our platform and spread the word.
50:01
Speaker 2
Thank you.
50:01
Speaker 3
Have a great day.
50:03
Speaker 1
Thanks. ACU too.
