The Construction Opportunity Australia Must Not Let Pass By 2

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Tuesday, June 30th, 2015
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We don’t need reminding that the construction industry shows little evidence of advancement compared to the impressive advances that have been made in almost every other industry over the past decade or two.

And let’s not dwell on why that may the case – since until recently we weren’t much worse than our developed counterparts around the world.

But things have changed in a way that should be very confronting to an industry that has operated in something of an industrial sanctuary. By breaking the nexus between site location and the place of construction, prefabrication of complete buildings means that construction is now a global rather than localised industry.

It is now possible to have a building constructed in another country and delivered to site for assembly into its final form. Here we are not just talking about the impressive German manufactured homes seen on Grand Designs made to the client’s design and shipped to site in the UK for rapid assembly by the expert installation team from the factory.

Student housing, apartment buildings, hotels and detached homes are increasingly being supplied in this way, including into Australia. Specialised modules for Australian hospital rooms and residential aged care are also being sourced from modular manufacturers, though it seems from within Australia so far.

What does this mean for Australia’s construction industry? First, international competition is now a reality. Of particular note is that¬† Australia’s prefabrication and off-site manufacturers are typically innovative small-medium enterprises.

This is not the case elsewhere, where industrial conglomerates have deployed their financial and organisational resources and infrastructure to modular construction. Toyota, for example, is a major player in prefabricated housing in the Japan, and the positive ownership life cycle experience that has helped Toyota in the automotive industry has been applied to the houses they supply. Their extended warranty program over a 25-year period is designed not only to reassure customers and entrench the company’s good reputation, but to ensure that lessons learned from any longer term defects and maintenance issues are incorporated into future products.

At first look then, the Australian prefabrication/off-site/modular construction industry is confronting some pretty formidable international modular building competition. Practically speaking, seeking to close Australia off to this international competition is not an option, and even if it were, it would not be the best option.

In my view, we should be confident that our best modular players will be able to mix it with the international competition. However, the bigger question is how much of the potential market will the Australian industry be able to secure? Beyond that, how can we best position the industry to maximise the market position it secures? And because time is not on our side, just how quickly can we do it?  None of these questions have ready-made answers.

But remarkably and quite fortuitously, the prospects are better than we might have expected, though this is only due to a convenient coincidence. Right now in Australia, we have an unparalleled opportunity to fast-track the kind of advances in construction that we desperately need to address the cost of housing and building more generally, and to equip our local prefabrication manufacturing industry to compete in the increasingly competitive marketplace.

The kind of advances I am referring to include virtual engineering, Design for Manufacturing and Assembly (DfMA), adoption of advanced materials and  manufacturing processes, and sophisticated supply chain management. These capabilities are an integral part of the Australian automotive sector. As the automotive manufacturing industry winds down in Australia, these skills are being released. To allow these skills to dissipate into lower productivity roles would not only be a huge waste of economic potential, but it would miss the opportunity I am highlighting.

Of course it would be advantageous for these skilled workers to be productively employed elsewhere, but the opportunity is much more than that – it represents a magnificent chance to introduce a ready-made capability into the prefabrication industry. Though there would be some adaptation required, this could be an important enabler of the faster adoption of the manufacturing technologies and processes than would otherwise be possible now or at any other time.

By comparison, the alternative of slower, incremental improvements over an extended time frame would allow the competition more time to establish their market positions and further restrict the share of the market that the Australian players can carve out.

The potential for implanting these skills into prefabrication has already been demonstrated over recent years with ex-auto workers becoming part of the modular construction industry.

At the same time, the world class expertise that exists in our auto component manufacturers is a largely untapped but extremely valuable resource. Many of these component suppliers retain their international clients but must diversify to fill the gap left by the closure of their local customers. These suppliers are accustomed to being provided technical and performance specifications for a component and left to devise the best design, materials and production solution. Recognising that the construction industry is not accustomed to working with its suppliers in this way, some of these parts suppliers have made their own forays into the construction sector by utilising their materials and manufacturing knowledge to devise new products.

Two of these firms are based in Victoria: Hella, which has applied its automotive headlights expertise to develop new industrial and residential lighting products, and CME, which has drawn on its materials know-how to create a range of construction products, including an acrylic alternative to glass splashbacks which can easily be cut to size on site.

I have no doubt that this is a one-off opportunity to fast track the development of off-site construction in this country. It is an opportunity that we must take up. In recognition of this, the transitioning of auto industry skills into prefabrication and off-site construction is one of the key themes to be addressed at the PrefabAUS Conference in September.

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2
  1. Paul Bonaccorsi

    Well said Warren and a great article. We have completed 2 assignments in Australia and would say that the potential for offsite on a larger scale is certainly apparent. The key is to continue innovating like we did in Europe to get the products cost neutral.

  2. Ron Jee

    Having been a student of building systems which include prefabrication and modularization for many years now, our firm is now involved in designing of many hotels, single dwellings and multi-residential apartments projects in Perth, Australia utilising modular and prefabricated systems. We are encouraged by the increasing number of stakeholders who believe in the potential of these systems to deliver better buildings and at lower cost. We have had to overcome the initial hurdles of acceptance from many quarters and it has taken many years, however we do believe that the day will come very soon when some of these projects are successfully delivered when the market will quickly embrace these as the new ways of building.