Manufacturing Excellence

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The Housing Forum

Innovation

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Best Practice

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Productivity

Manufacturing Excellence

UK capacity in offsite manufacturing

Innovation Studies Centre

Tanaka Business School

Imperial College London

January 2004

Tim Venables

James Barlow

David Gann

Constructing Excellence 108-110 Judd Street London WC1H 9PX T 0845 605 5556 E [email protected] www.constructingexcellence.org.uk Northern Ireland 02890 366086 South West 07813 140 034 Scotland 01923 664830 North West 0161 295 5076 West Midlands 07949 243283 East Midlands 0116 221 7859 Wales 02920 646155 East of England 07766 757337 North East 0191 383 3182

Yorkshire & Humber 0113 283 1714

South East 0118 967 5542

London 01923 664830

HFCE-LG-O104-v.1

Innovation

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Best Practice

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Productivity

Innovation

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Best Practice

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Productivity

Designed by Lillington Green 01 18 9 2 7 2 4 74

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Manufacturing Excellence UK capacity in offsite manufacturing

The Housing Forum Modern Methods of

Construction Group

(Chair) Simon Dow Guinness Trust Keith Blanshard Yorkon Ruth Bloomfield O.D.P.M. Chris Blundell Amicus Group Mehban Chowdery N.H.B.C.

Clive Clowes The Housing Corporation Mark Cousens O.D.P.M.

Alex Ely C.A.B.E.

Judith Harrison The Housing Forum

Andrew Heywood Council of Mortgage Lenders Andy Hill Hill Partnerships Ltd Peter Jenkins Yorkon

John Johnson-Allen RICS

Dr. Ashley Lane Westbury Homes Dale Meredith Southern Housing Group

John Miles ARUP

John Nicholas Redrow Group Darren Richards Mtech Keith Ross B.R.E. Canda Smith O.D.P.M. Nigel Smith Redrow Group Jon Watson Home Group Ltd. Peter Wilkins The Housing Forum Paul Wornell Building Performance Group

Other contributors

Tim Venables Imperial College London Prof. James Barlow Imperial College London Prof. David Gann Imperial College London Dr Sunday Popo-Ola Imperial College London Mariana Trejo Tinoco Imperial College London Heather Lovell Parliamentary Office of

Science and Technology John Tebbit Construction Products

Association Elanor Warwick C.A.B.E. Ann Alderson Co-construct Sally-Anne Partoon Video Consultant for

Camargue PR Nick Whitehouse Terrapin Ltd Martin Clarke British Pre Cast

The Housing Forum

The following people contributed either directly or indirectly to the production of this report:

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4 Constructing Excellence – The Housing Forum Manufacturing Excellence

Manufacturing Excellence

Manufacturing Excellence is the second report of the Housing Forum Modern

Methods of Construction Group.

In our first report

HOMING IN ON EXCELLENCE

we set out why we believe

modern methods of construction – and in particular off-site manufacture – could

make a major contribution to improving and expanding the nation's housing stock.

Support for this view has grown both inside the house-building industry and also

within government.

To build momentum we decided to look at how far and fast the offsite

manufacturing of new homes has developed. What we found is the subject of this

report. It is the first such snapshot and for that reason it is imperfect.

Even so our research shows that an increasing number of organisations are ready

and willing to respond to the real challenges that off-site manufacture represents.

A preliminary database of potential suppliers is part of our report.

I am very grateful to the large number of distinguished practitioners who freely

contributed to this report. Their interest is a reminder of the growing support for the

modernisation of the house-building industry.

Simon Dow, Chair

The Housing Forum Modern Methods of Construction Group, January 2004

The Guinness Trust, High Wycombe, Buckinghamshire, HP11 2NZ

“The Sustainable Communities Plan that I

published a year ago called for a step change in

the way that housing is delivered in this country.

I firmly believe that modern methods of

construction have an important part to play in

delivering this change. It is clear from this report,

which is the result of a very positive collaboration

between my officials and the Housing Forum,

that the house-building industry has a good story

to tell about the increasing contribution that

modern methods of manufacture is making to

the house-building industry in this country.

It is important that we continue to build on this

good work, so that we are able to provide the

high quality, well-designed homes that people

not only need, but increasingly demand, in the

21st Century.”

Innovation■Best Practice■Productivity 5 Rt Hon John Prescott MP

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Table of contents

Table of Contents

1 Executive summary 9

2 Introduction 14

2.1 Terms of reference and scope of work 14

2.2 Categorisation of OSM 15

2.3 Other definitions 16

2.4How the research was carried out 17

3 Background 19

3.1 Meeting the future demand for new homes 20

3.2 Modernising the house-building industry 21

4OSM producers and their capacity 23

4.1 Current output 23

4.2 Sourcing of raw materials and components 26

4.3 Perceived limitations to expansion 26

5 Factors shaping the uptake of OSM 29

5.1 Housing development – differing business models 29

5.2 OSM vs. ‘traditional’ housing development processes 31

5.3 The cost of OSM 33

5.4The appropriate use of OSM 35

5.5 New regulations 35

6 Labour, skills and OSM 38

6.1 On-site skills issues 38

6.2 Skills in the factory 39

7 Conclusions 41

8 Recommendations 43

Appendix 1: List of Interviewees 46

Appendix 2: Interview checklist 47

Appendix 3: List of Survey Respondents 51

Appendix 4: Survey instrument 52

Appendix 5 Directory of Suppliers 57

References 61

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Innovation■Best Practice■Productivity 9

Capacity of the OSM sector to

respond to future demand

The research suggests that suppliers are currently operating at approximately 70% of maximum plant output. This is predicted to increase to around 80% by 2006. Housing has accounted for around 60% of total output in recent years. This is predicted to increase to over 70% in the near future.

It is not possible to gain a full picture of OSM output in terms of housing units. This is because of problems in relating numbers of systems sold to numbers of completed housing units and because of double counting by suppliers. We estimate that major suppliers currently produce at least 17,000 housing units per annum. Given the right market conditions and the completion of planned new production facilities there may be scope to expand to c.30,000 units in 2004.

Suppliers regard the two main limiting factors as market demand (including public perception) and production capacity. The availability of capital for expanding facilities is not seen as a significant limitation, providing a clear forward order book can be identified, nor are building and planning regulations. None of the manufacturers considered the mortgagability of OSM produced homes to be a barrier despite the fact that strong reservations have been raised by some lenders.

A number of companies are either expanding their own facilities or engaging in joint ventures with other firms to set up new production facilities, and others producing OSM components for other parts of the construction market are keeping a watching brief on market developments. Some overseas firms are monitoring developments in the UK to identify a suitable time to enter the market. These firms could raise overall capacity if the use of OSM in the UK housing market becomes more prevalent.

2 Executive summary

Background

The research investigates the UK’s off-site

manufacturing (OSM) industry in relation to the supply

of OSM components for housing. It evaluates whether

this industry can expand its current production capacity

to suit a future increase in demand and if so, by how

much and what might enable or inhibit such expansion.

It is based on research jointly sponsored by the Housing

Forum, The Housing Corporation and the Office of the

Deputy Prime Minister. It aims to support policy

objectives set out in Sustainable Communities: Building

for the Future and it develops the work started by the

Housing Forum in Homing in on Excellence.

Given the right market conditions and

the completion of planned new

production facilities there may be scope

to expand to c.30,000 units in 2004

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Conclusions

In the short-term the UK’s OSM industry is capable of accommodating any foreseeable increase in the demand for its products by expanding its current production capacity.

A fundamental problem in moving house-building towards OSM is the mismatch between the norms and practices of housing development and those of the OSM suppliers. Both parties need to examine how best to adapt working practices to the new approach.

Current policy initiatives are already addressing some of the more pressing inhibitors to the expansion of OSM, by seeking to expand the supply of land for housing and targeting developments that use modern methods of construction. However, guidance on planning issues relating to OSM may be required to overcome resistance to its use by some planning authorities.

There is a danger in expecting the market to develop too quickly. Developers and manufacturers need the time to develop closer links and identify suitable projects. Sudden shifts in the market may cause disruption that could result in market exit by some manufacturers.

Recommendations

If targets for OSM production are to be set, then accurate figures on the number of dwellings completed by type of construction will be needed to measure performance against these targets. There is a need for more research to be carried out to clarify the relative costs of various construction forms and to identify where cost savings can be achieved.

There is a need for a forum which allows designers, manufacturers and developers to explore how they can best work together and stimulate supply chain integration.

OSM offers the potential to relieve some of the skills shortages in construction; however, this can only take effect if there is a sufficient pool of

manufacturing trained labour available. Steps should be taken to encourage careers in this area.

Planning authorities and consumers need to be informed of the relative merits of OSM to provide assurance that this approach is of a similar quality and longevity to traditional construction. Until certification of systems becomes the norm for manufacturers, lenders will continue to have concerns over the security of their investment. OSM manufacturers will need a clear sign that there is sufficient certainty of return on investment before they are able to commit significant resources to the development of new systems.

Factors shaping the uptake of OSM

The uptake of OSM is partly influenced by the perceptions of developers on its advantages and disadvantages, which are themselves influenced by their business models and processes, and partly by wider market and regulatory factors.

The business drivers and models of housing developers and manufacturers are radically different. There are also significant differences in the business drivers of speculative and social housing developers. These all create tensions which may influence the uptake of OSM.

Manufacturers regard quality of production and finish as the most significant advantage of OSM over traditional construction, along with the reduction in on-site assembly time. The main disadvantage is the interaction between the manufacturing nature of the OSM suppliers and the craft based nature of the house-building industry. Consequently design lead-in time for OSM does not always fit in with the existing construction and procurement schedules of the housebuilders. There are also tensions arising from the way OSM components interface with on-site works. Finally there is a tension between the needs of OSM manufacturers for a degree of

standardisation and the desire of developers or planners to produce variation in dwellings, or the need to respond to site-specific conditions. It is unclear whether OSM construction is more expensive to build than traditional construction. Manufacturers argue that their costs are not being compared in a like-for-like manner and potential on-site time savings are not always taken into account

by developers. Moreover, many OSM suppliers’ systems and components are currently designed around developers’ traditional housing types, rather than to suit the specific characteristics of OSM. OSM at present seems to lend itself more to certain types of construction and client than others. While it can be applied to most forms of construction, with certain limits in some cases on storey height, non technical reasons generally relating to finance and cash flow may make it inappropriate in some cases.

Labour and skills

OSM suppliers tend to look for people with a medium level of training particularly in what are seen as the traditional craft skills. Firms are generally interested in semi skilled or multi skilled operatives rather than specific current trade skills.

The vast majority of manufacturers report that the core skills required in operatives to work in their plant do not exist in the general stock of labour and they would need to provide additional training. Firms are as likely to employ from the construction industry as from manufacturing companies in other sectors.

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3 Introduction

3.1 Terms of reference and scope

of work

The research focused on the development and use of off-site manufacturing in the UK housing market. In early 2003 the term ’modern methods of construction’ started to be used to refer to a range of innovative technical solutions for construction, of which OSM is a subset. For the purposes of this report OSM is defined as panelised and volumetric systems, and major prefabricated components.The research investigated two main areas: producer and capacity issues, and labour supply and skills:

3.1.1 Producer and capacity issues

This aspect of the research sought to identify current levels of production and levels of potential future capacity within the OSM industry. It also considered the current level of imported products and

components as a source of OSM supply.

3.1.2 Labour supply and skills

It is commonly held that house-building is suffering from severe on-site skills shortages. One objective of OSM is said to be its ability to address aspect of this problem. There has, however, been little discussion on the skill requirements of OSM suppliers

themselves, rather than the on-site requirements for assembly. The research therefore explored labour and skills issues faced by OSM suppliers.

This report is based on research carried out by the Innovation Studies Centre

1

jointly sponsored by the

Housing Forum, the Housing Corporation and the Office of the Deputy Prime Minister. The research

was commissioned to support some of the policy objectives set out in Sustainable Communities:

Building for the Future (ODPM 2003) and to follow on from the work started by the Housing Forum

detailed in the report Homing in on Excellence (Housing Forum 2002). It investigates the UK’s off-site

manufacturing (OSM) industry in relation to the supply of OSM components for housing. It evaluates

whether this industry can expand its current production capacity to suit a future increase in demand

and if so, by how much and what might enable or inhibit such expansion.

The research was carried out over the summer 2003

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3.3 Other definitions

Volumetric systems

The most factory-based form of production, volumetric systems involve three dimensional modules that can be used in isolation or in multiples to form the structure of the building. These modules can be pre-finished in the factory to include all fixtures and fittings, requiring a very limited amount of installation work on site.

Open panel systems

The construction of the structural frame for the building using panels assembled in the factory. Open panel systems are typically delivered to the site purely as a structural element with services, insulation, cladding and internal finishes installed in situ.

Closed panel systems

These are similar to open panel systems in that the structural elements of the building are delivered to the site in flat panels. However, closed panel systems typically include more factory based fabrication such as lining materials and insulation and may even include cladding, internal finishes, services, doors and windows.

Hybrid systems

A combination of volumetric and panelised systems where the high value areas (kitchen and bathroom) are typically formed from volumetric units

(sometimes referred to as pods) and the rest of the structure formed from some form of framing system.

Sub-assemblies

Major building elements that are manufactured off site but do not form the primary structure of the building. Foundation systems and cassette panels are typical examples.

Components

Non-structural elements that are assembled off site. Although currently less common than structural elements, components such as mechanical and electrical services infrastructures are being developed with significant assembly work being carried out off site.

This report tends to refer to housing ‘developers’ rather than ‘housebuilders’. We use

the term developer to include both speculative developers, who are responsible for

the production of homes for sale, and registered social landlords (RSLs), who are

generally responsible for the production of affordable homes. The main business

objective of both is not the actual construction of homes – in fact many developers

have no construction capability and sub-contract the entire construction process.

3.2 Categorisation of OSM

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16 Constructing Excellence – The Housing Forum Manufacturing Excellence Innovation■Best Practice■Productivity 17

that a significant proportion of respondents are involved in one or more of the principal structural systems but that there is also representation in the sample of producers of sub-assemblies and components.

Table 2. Primary construction form

Table 3 shows the range of client markets served by respondents, based on 61 responses. The majority of those canvassed are already active in the UK housing market serving both the speculative and social markets. These suppliers also service a wide variety of other client markets.

Table 3. Client market

3.4.2 Interviews

Semi structured interviews were carried out with 27 key players (representing 21 organisations) in both manufacturing and housing development. A full list of those interviewed is included in appendix 1. These interviews were predominantly conducted face to face, with a small number carried out by telephone. The interviews aimed to capture qualitative information on the industry and explore issues arising from the survey in more depth. A copy of the interview checklist is included in appendix 2.

3.4 How the research was carried out

The research was based on three main

sources of data:

Review of literature on OSM production in housing from academic sources, trade press and general media.

Survey of manufacturers and suppliers of OSM products

Formal and informal interviews with leading players in the manufacture, supply, construction of OSM as well as housing developers (social and speculative) who have had experience of projects involving OSM

3.4.1 Survey

Questionnaires were sent directly to 100

manufacturers of OSM products identified through literature and internet searches. Additionally, the survey was distributed through the Construction Products Association (CPA) and British Precast to all of their members. A total of sixty one responses were received, 31 from the direct mailing, giving a response rate of 51%. We have been unable to determine the exact number of recipients of the survey via CPA and British Precast and given a certain degree of overlap with our own list it is not

possible to define an exact response rate for these surveys. However, as can be seen from the tables below the survey provides a representative sample both in its response rate and the scope of markets and technologies used by respondents. It also encompasses the vast majority of the major suppliers

The survey served a dual purpose. It was partly concerned with data for a directory of firms involved in OSM (see appendix 5). It also aimed to canvass the view of manufacturers on their current and future capacity to supply OSM products to housing, and the external influences that might affect this capacity. Respondents were asked to classify the primary construction material used in their products and whether it was applied to housing or other form of construction. Table 1 illustrates that out of the 61 responses firms supplying products from the full range of primary materials were canvassed. Additionally this table shows that firms produce components using multiple materials and have products that were applicable across the construction market.

Table 2 illustrates the spread of construction forms produced by respondents of the survey. These ranged from fully volumetric whole house systems, through a variety of structural forms, to smaller components. Again based on 61 responses, it shows

Client Market % of respondents

Private Housing 90% Social Housing 81% Education 77% Commercial Buildings 75% Hotels 72% Healthcare 71% Retail 56% Industrial Buildings 48% Temporary Buildings 30% Other market 10% Form Number of responses

Volumetric modules 10 Framing systems 32 Panel systems 20 Foundation systems 7 Cladding systems 19 Roofing systems 11

Bathroom and kitchen pods 8

Building Services 11

Other (floor/stairs/roof) 4

Primary Material

Concrete

Steel

Timber

Other

Market Housing Other Housing Other Housing Other Housing Other

Number of responses 2426 39 33 46 37 14 15

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4.1 Meeting the future demand for

new homes

A number of recent policy documents both from government and non-government sources have identified concerns over the number of houses being produced annually in the UK. These are summarised below.

Sustainable Communities: Building for the Future (ODPM 2003) sets ambitious housing and planning targets for the period 2003 - 2006. It is the first radical attempt to tackle the housing supply issues that exist across England. The plan aims to tackle the lack of affordable housing, the supply of high-quality homes, reform of the planning system and

revitalisation of run down communities blighted by abandonment and neglect. It considers the

‘liveability factor’ for communities (transport, schools, open spaces, etc.). It targets growth in areas like the Thames Gateway to stop urban sprawl and safeguard countryside. It also calls for an increase in density. The interim report of the Review of Housing Supply (Barker 2003) also examines the question of appropriate levels of house-building throughout the UK, but with more of a focus on the economic effects of undersupply. It expresses concern that lower rates of house-building are constraining economic growth, restricting access to housing, and influencing the distribution of wealth through our society. The report suggests that to keep the cost of housing in line with that of the 1980s there is a shortfall in production of between 93,000 and 146,000 homes per annum (compared to current output of around 140,000). Amongst many other

factors and influences on the housing supply system the report suggests that new technologies could both improve the quality of construction and assist with addressing skills constraints in the industry. The earlier Joseph Rowntree Land Enquiry (Barlow et al, 2002) also argued that there was a substantial under-supply of new housing in the UK. It suggested that to meet the demand arising from demographic changes and other needs up to 2016 around 225,000 new homes will be needed each year in England alone. The enquiry found that demand for new homes is likely to remain concentrated in the South and particularly in London – some two thirds of the growth in household numbers is projected to be in southern England, with 20% concentrated in London. In contrast, almost 50% of new housing has been developed in the North and the Midlands in recent years. Many feel that without an increase in land availability and reforms to the planning system, meeting this demand will be hard.

4Background

The context for the increased interest in OSM is set by

two important factors – the intense pressure within the

housing market, especially in South East England, and a

government and industry concern to improve the

performance of the construction industry.

The report suggests that new technologies

could both improve the quality of

construction and assist with addressing skills

constraints in the industry.

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identified five key drivers of change which set the agenda for the construction industry at large: committed leadership, a focus on the customer, integrated processes and teams, a quality driven agenda and a commitment to people. Targets for performance improvement include an annual 10% reduction in capital cost and construction time, a 20% reduction in defects and accidents,

a 10% increase in productivity and profitability and a 10% increase in predictability of project

performance.

The first report of the Housing Forum’s Off Site Manufacturing Working Group, Homing In On Excellence (Housing Form 2002), aimed to promote the use of OSM in the UK, based on a projected skills shortage for traditional methods, a concern over the ability of traditional construction to regularly produce homes of sufficiently high construction quality, and a belief that OSM had the potential to address both of these issues in a cost effective manner. It explored where OSM may be best applied and discusses the benefits of not just ‘design for production’, but also ‘design for living’ and the benefits of OSM to consumers of housing. Accelerating Change set new targets to recruit 300,000 people into the industry by 2006 and double applications to higher education construction courses by 2007. It also set a target for 20% of construction projects by value to be undertaken by integrated teams and supply chains by end 2004, reaching 50% by end 2007. An ‘integration toolkit’ has been produced to help the industry to achieve these targets. The toolkit provides guidance on processes and methods, culture and activities, and tools and techniques for integrating whole-life (sustainable) activities of the UK construction

industry. Accelerating Change distinguishes between the integration of supply teams

(which include the client and are formed to provide solutions that meet clients' requirements and then often disbanded) and supply chains (which are long-term relationships often involving design,

procurement, inventory management and product installation).

The combination of a desire to modernise the construction industry as a whole – and house-building in particular – and the pressure from housing demand forms the backdrop for the growing interest in OSM. This interest was directly expressed by the Deputy Prime Minister, who has stated ‘To increase the supply of affordable housing we need to use more off-site manufacturing’ (Prescott 2003)

4.2 Modernising the house-building

industry

From the early 20th century until the end of the 1960s, innovation in many industries was

characterised by attempts to improve the production process by concentrating on mass production to take advantage of economies of scale. Manufacturers were able to produce more goods, more cheaply, enabling them to expand markets and increase profitability. In turn, this improved returns on investment in expensive factory equipment. Consumers found that many products became readily available at affordable prices. There was a compromise, however, in that mass production approaches resulted in standardised products providing little choice for consumers.

During the 1960s, the last period of major

government sponsored innovation in house-building, similar ideas were adopted – the aim was to optimise housing production systems to increase output in response to an increased aggregate demand for new housing. But this approach largely failed to address user requirements, and it failed to fundamentally re-shape the political context within which novel forms of housing were produced and used.

In more recent years, many industries have attempted to work more closely with prospective customers in an attempt to address issues of customer requirements. New product development strategies have evolved linking customer

requirements with better production technologies and systems. A greater level of customisation of products, produced on flexible manufacturing systems has emerged. Economies of scale have been complemented by ‘economies of scope’ in production, where a range of customised goods are made using the same production facilities. Customers have been offered more choice and are able to purchase goods which match their requirements more closely.

In a similar manner to efforts in the 1960s, the house-building industry has again come under pressure from government to adopt concepts and techniques from other manufacturing industries. It has frequently been argued that the construction industry in the UK is very different from the manufacturing industry and this – along with the distinctiveness of the different market sectors of house-building – has inhibited the industry from adopting approaches used elsewhere. Nevertheless, a number of government and other reports have called for the industry to modernise, notably Rethinking Construction (Egan 1998), Homing in on Excellence (Housing Forum 2002), and Accelerating Change (Strategic Forum for Construction 2002. The central message of Rethinking Construction is that through the application of best practices, the industry and its clients can collectively act to improve their performance. The report identified targets for improvement in construction productivity, profits, and defect and accident reduction. The report

Accelerating Change set new targets to

recruit 300,000 people into the industry by

2006 and double applications to higher

education construction courses by 2007.

The central message of Rethinking

Construction is that through the

application of best practices, the

industry and its clients can

collectively act to improve their

performance.

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Respondents were also asked to indicate the proportion of production that was housing related for the same periods. Table 4b shows a fairly steady level of around 60% in recent years but with a predicted general increase in the coming years to over 70%. This suggests that manufacturers are expecting housing related output to increase at a higher rate than other markets.

From the data above we can therefore conclude that manufacturing facilities are not generally running at full capacity either for housing or for other markets. There is scope within current facilities to increase output and in some cases expand output further through the introduction of multiple shifts.

It has not been possible to gain a full picture of OSM output in terms of housing units. This is because of problems in relating numbers of systems sold to numbers of completed housing units and because of double counting by suppliers. However, estimates can be made based on a combination of survey and interview data and extrapolation, supplemented by work from Ove Arup and Partners.

5 OSM producers and their capacity

5.1 Current output

Survey respondents were asked to give an indication of the actual output of their production facilities in relation to capacity over the period 2000-2002 and an estimate for the period to 2006. Forty-eight responses were received to this question. As table 4a shows, capacity has remained fairly steady on average at around 70% of maximum plant output, with a predicted increase to around 80% by 2006. Discussions with manufacturers on this issue highlighted that these figures were generally for single shift working on a production line and there could be scope for expansion through the introduction of multiple shifts.

Year 2000 2001 2002 2003 2004 2005 2006

% of maximum

plant output 73 73 66 69 71 76 79

Table 4a. Output as a % of total capacity

This section discusses current levels of production and levels of potential future

capacity within the OSM industry in the UK. It also considers the current level of

imported products and components as a source of OSM supply, and manufacturers’

perceptions of limitations to their ability to expand production levels.

Year 2000 2001 2002 2003 2004 2005 2006

% of maximum

housing output 59 59 60 63 70 73 73

Table 4b. Housing related output as a % of

housing capacity

There is scope within current facilities

to increase output and in some cases

expand output further through the

introduction of multiple shifts.

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5.2 Sourcing of raw materials and

components

Table 6 shows the percentage of imported materials used in OSM production, based on 61 responses. The majority of firms do not appear to rely heavily on imported materials or components in their current production processes. Interviewees suggested that the main reason for imports are economic rather than a lack of availability in the UK, with a number of firms reporting that their imports vary according to where they can source materials at the best price at the time. The only major element that falls outside this picture is timber where significant quantities are imported because of the limits on home grown product.

Table 6. Percentage of materials and

components used in systems that are

imported

n/a = not answered or qualitative answer

5.3 Perceived limitations to expansion

Respondents were asked to identify factors that might limit the expansion of the UK OSM market. Based on the responses from 59 firms, we can see that there are two main themes relating to market demand and production capacity. Market demand and public perception are linked and can be said therefore to have by far the greatest influence on any expansion in capacity (table 7).

Similarly, actual production capacity and the availability of labour can be seen as imposing limits on rate of expansion without a corresponding expansion in production facilities. As discussed above most manufacturers do have the ability to expand production levels using existing facilities but only to a certain extent before further investment is required. The issue of skills availability, both in the factory and to an extent on site, is covered in more detail later in the report

In contrast, the availability of finance is seen as a relatively insignificant limitation. OSM manufacturers appear to be able to readily access capital for expansion of their facilities, providing a clear forward order book can be identified. This was supported by comments in the interviews. Likewise government regulation is not seen as a limitation on expansion of capacity, although it has been suggested by some housebuilders that this could be a result of a lack of awareness by some manufacturers of forthcoming regulations relating to housing construction. A summary of new housing related government regulation and its potential impact on OSM produced homes can be found in section 5.5.

Table 5 shows 15 of the major OSM manufacturing companies, along with the number of housing units each expects to supply in 2003 and 2004(unit numbers have either been obtained directly or extrapolated from floor areas or numbers of modules). This suggests that the major suppliers currently produce at least 17,000 housing units per annum with scope to expand to in excess of 30,000 units in 2004. However these numbers should be treated with caution as some industry commentators have suggested they are overly optimistic, particularly for 2004.

Table 5. Estimated output of major OSM suppliers

Company 2003 2004 Notes

Barratt / Terrapin 1000 6000 Estimate from Ove Arup Britspace 300 300 Estimate from Ove Arup

Elliott 100 200 Based on interview

Forge 300 600 Based on survey

Framing Solutions 750 2000 Based on survey Fusion Homes 300 900 Based on survey

Meteor 2000 In design

Pace Timber 1800 2250 Based on interview

Pinewood 3000 3000 Estimate from Ove Arup Prestoplan 2000 2400 Based on interview

Rollalong 350 500 Based on interview

Space 4 2000 3500 Based on survey

Spaceover 350 500 Based on interview Stewart Milne 4000 6000 Based on survey

Yorkon 1500 1500 Based on interview

Range of responses Percent

0-20% 54 21-49% 8 50-75% 13 76-100% 20 n/a 5 Total 100

Market demand and public perception

are linked and can be said to have by

far the greatest influence on any

expansion in capacity

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Table 7. Possible limitations on expansion of

capacity

It should be noted that none of the manufacturers considered the mortgagability of OSM produced homes to be a barrier despite the fact that strong reservations have been raised by some lenders. The UK’s OSM industry therefore appears capable of responding to an increased demand for its products by expanding its current production capacity. There are a number of examples of companies pre-empting such demand and either expanding their own facilities or engaging in joint ventures with other firms to set up new production facilities. Additionally

the research has identified a number of overseas firms that currently produce OSM components for their domestic market and who are monitoring developments in the UK to identify a suitable time to enter the market. We have also identified firms in the UK who produce OSM components for other parts of the construction market again keeping a watching brief on market developments. Both of these sets of firms could contribute to overall capacity if the use of OSM in the UK housing market becomes more prevalent.

From the preceding two sections of the report we can surmise that from the manufacturers’ perspective, any major increases in capacity will need to be driven by expressed market demand. Providing such demand is of sufficient scale and durability, manufacturers and their financiers should have confidence in investing in additional plant and labour. Answer % of respondents Market demand 47 Skills shortage 37 Public perception 36 Capacity 36 Competition 25 Finance 17 Regulation 15 Technical issues 14 No limit 7

We can surmise that from the

manufacturers’ perspective,

any major increases in capacity

will need to be driven by

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In a similar manner, but for a different target market, the business model for RSLs is not based around the actual construction process either. RSLs are non profit making organisations who aim to provide affordable homes to rent for people on low incomes. Much of the funding for a new development is based on grant applications to the Housing Corporation, with associated caveats that influence the design of their homes. Unlike the speculative developers, however, RSLs have a long term interest in the homes built on their behalf as they will have a maintenance responsibility for them throughout their lifespan.

Both forms of developer are primarily concerned with acquiring land in the right location and securing development permission and funding. The

construction processes that have evolved to support these activities therefore tend to be based around a highly flexible supply chain linking contractors and subcontractors in a way that can respond quickly to changing demands with a reasonably predictable level of performance.

In contrast, the business success of manufacturers of OSM components and systems depends on the efficient use of their production facilities to maximise the return on investment for these facilities. In order to best achieve this they aim to minimise variations in their product and ensure a steady flow in the volume of production. Short term variations in demand that the developers can readily absorb are less readily accommodated in a factory environment. Production planning is often carried out over a long period to ensure that the flow of production is as smooth as possible and to minimise inventory of both raw materials and finished products.

The final part of this supply chain is occupied by the assemblers of new housing, whether employed directly by the developer or sub-contracted to carry out specific tasks. These, the actual house builders, are usually working to very low margins of

profitability and high expectations of speed. As such they have little scope in their own business activities for experimentation unless supported by the developer.

The major actors in the supply chain for OSM produced housing thus have significantly differing drivers to their businesses, potentially creating tensions which may influence the speed and extent of uptake of OSM.

6 Factors shaping the uptake of OSM

6.1 Housing development – differing

business models

Shifting the location and nature of house-building from a site based craft activity to a manufacturing based OSM activity does not simply involve the replacement of one set of processes by another. The business drivers and models of housing developers and manufacturers are radically different. To better understand the differences between these two sectors and the implications for the adoption of OSM, it is necessary to consider the key influences on each party’s business practices.

Speculative developers generally work on a business model that is primarily concerned with the increase in the value of land as a result of a change of use to residential use. They profit from the development of land and the management of finance during this process, rather than the actual construction process itself. Their current market is constrained by the availability of land suitable for development and the time taken to agree the appropriate conditions to change the use of such land. As discussed above, the level of new house-building is estimated to be much lower than the potential demand. In short, there is a sellers’ market and the primary consideration for a purchaser is the price and location of a dwelling. This means that speculative developers tend to compete with each other less on the basis of the physical product (product

differentiation) than the value of their products for a given location (cost leadership).

The uptake of OSM is partly influenced by the

perceptions of developers on its advantages and

disadvantages, which are themselves influenced by their

business models and processes, and partly by wider

market and regulatory factors. This section brings

together views from manufacturers, housebuilders and

other key players to explore these issues.

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issues that would be resolved on-site need to be specified at an earlier date under OSM. While many manufacturers are willing to ensure that their systems are applicable to established designs from developers, finalising the design of a dwelling needs to occur earlier for most OSM systems than for traditional construction methods. However, the design lead-in time for OSM may not readily fit in with the existing construction and procurement schedules of the housebuilders. The survey suggested that this issue applied consistently across the different types of OSM, from large structures through to smaller components. Problems may also arise when late changes to the design are requested. An example of this is the minor alterations to design that may be agreed with the on-site sales team, such as moving the position of a power outlet, an easy activity at first fix on site but less easy once the designs have been sent to the production line. As well as the tension between the business processes of OSM manufacturers and those of housing developers, the survey suggested that tensions exist at the site level. These relate to the interfaces between OSM components and site produced work, where there may between

considerable variation in the tolerances expected by manufacturers and builders. Of lesser importance, but still considered a potential problem, was the issue of handling OSM components, in terms of their size and weight and minimising the risk of damage during installation.

Another tension lies in the drive by OSM manufacturers to standardise components and minimise variations on the production line, to optimise manufacturing efficiency – this may sit awkwardly with the desire of developers or planners to produce variation between individual dwellings or the need to respond to site specific conditions.

Disadvantage % of respondents

Lead-in time (for design and scheduling) 21 Matching tolerances to on site work 19

Public and industry perception 19

Cost 17

Design limitation in providing variety 14

Handling / Logistics 8

Certainty of future demand 2

Table 9 Disadvantages of OSM

6.2 OSM vs. traditional housing

development processes

In order to investigate the factors shaping the uptake of OSM in housing, manufacturers were asked an open-ended question on the advantages (table 8) and disadvantages of OSM (table 9). The responses (60) were coded and grouped into the general headings shown in the tables.

From the perspective of OSM manufacturers, quality of production and finish are regarded as the most significant advantage of OSM over traditional construction. With responses ranging from the ability to design for manufacturing through to higher levels of control over the production process they were able to achieve in the factory, there was a general consensus that OSM produced components were of a higher quality than traditionally built equivalents at handover, a key issue in a market where consumers

are becoming increasingly discerning. Manufacturers also considered the reduction in on-site assembly time to be a particular advantage of OSM. The time to produce components in the factory was also felt to be lower than equivalent construction time on-site since factory production was able to take advantage of higher levels of automation and mechanical assistance in production.

Turning to the disadvantages of OSM, while public and industry perception was seen as a problem, with current products being viewed in the light of the failures of prefabricated systems in the 1960s and 1970s, many of the responses suggest that

manufacturers perceive there to be problems arising from the differences between their business processes and those of housing developers. In particular, the change in production locale from site to factory means that more extensive design work needs to be carried out prior to manufacture and

Advantage % of respondents

Quality 39

Time (e.g. speed of construction, of return of investment etc) 31 Reduced reliance on skilled trades 15

Control (e.g. of production process, non-weather dependant etc) 13

Optimisation of existing processes (e.g. waste reduction) 11

Predictability (of outcome/programme/cost) 8

Improved performance 5

Sustainability 2

Reliability 5

Other advantages 18

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to make small savings on costs as they become more familiar with OSM systems, but overall it is likely that on average OSM will remain more expensive that traditional construction.

Model 1. Static demand

Model 2 illustrates the effect of increased market demand on suppliers. This model still accepts that manufacturers will be subject to increases in the costs of labour and materials, but this will be offset by their ability to reduce overall production costs through economies of scale and scope. As such the overall cost of OSM production is likely to remain reasonably stable while the cost of traditional construction is predicted to rise. Discussions with a number of suppliers have suggested that an increased market would enable them to be more competitive with traditional construction purely on price terms in a few years if the market develops in the way they envisage.

Model 2. Increased demand

Model 3 illustrates the combined effect of an increase in demand for OSM products combined with a re-engineering of the production processes of both suppliers and developers. In a similar manner to model 2, the increase in demand allows economies of scale and scope to reduce overall production costs. However, this is coupled with savings arising from closer links between

manufacturers and suppliers enabling a higher level of design for production, more effective scheduling to accommodate variations on site, and a greater general awareness of the different market forces affecting each party. In this instance it is likely that cost would be reduced more dramatically than in model 2 but over a longer period of time as the reengineering of the supply chain would require significant resources.

Model 3. Re-engineered process

6.3 The cost of OSM

Overall, OSM construction is generally seen as a more costly solution than traditional construction. While a small number of developers have found that OSM is cost neutral, or even possibly lower in cost than traditional construction, the general view appears to be that it is currently more expensive. While the actual on site assembly time for many OSM components is significantly less than their traditional components (for example volumetric suppliers reported being able to install 10-15 modules per day on site), the design and production lead times, and in particular redesign times, can remove this time advantage and any beneficial impact this may have on costs. Another problem lies in the mismatch between the delivery of OSM components and systems, and the often poorly coordinated on-site building processes. As one developer, who had moved back to traditional house-building from timber frame, put it, ‘It was costing us too much money. It wasn’t the cost of the frames – it was when you got to the site and how the site was managed.’

Manufacturers recognised that higher costs were a significant disadvantage to OSM (table 9). This was, however, frequently tempered with a view that costs were not always compared in a like-for-like manner. Potential savings in time spent on site and the cost of associated preliminaries may not always be taken into account by developers. Furthermore, economies of scale and cost engineering would reduce current costs. Many OSM suppliers currently design their products around traditional housing types, often the ones in current use by developers. This is seen as a market entry strategy since it allows developers to demonstrate that a house produced using OSM components can be indistinguishable from a traditionally built home. Redesigning houses to better

suit the specific characteristics of the OSM product would certainly allow for a cost reduction. Likewise the creative combination of standard components to create variation in overall design without causing excessive variation on the production line will allow best advantage to be made of economies of scale and scope.

There is therefore the potential for the current cost gap between OSM and traditional house-building

approaches to narrow as products and markets mature in the longer run. In the short term if demand increases faster than suppliers can expand there may be short term price fluctuations. However, continued inflation in the costs of traditional house-building approaches may mean that at some point in the future, the combination of economies of scale through increased demand and economies of scope through design engineering will allow OSM and traditional construction to compete on pure price grounds. Indeed, some developers and manufacturers would argue that this is already possible.

Three potential economic models illustrating the possible directions in which the OSM market could evolve can be envisaged. These models are based on data from both the survey and the interviews and are intended to illustrate possible routes rather than to predict specific outcomes.

Model 1 shows the likely effects if current market trends continue with very little growth from current levels of production. The costs of OSM – currently estimated by suppliers to be in the range 5% below to 20% above the traditional construction costs – will continue to rise in a similar manner to the costs of traditional construction as they will be affected by similar market forces such as the cost of labour and materials. Manufacturers and developers may be able

Range of OSM costs

Traditional construction projected increase in cost

Range of OSM costs Traditional construction projected increase in cost

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Part A. Progressive collapse of structure

A new approved document will be released in 2004 covering the structural design of buildings. This new document will require that the structural design of all buildings, including houses, demonstrates structural integrity against disproportionate collapse caused by impact or other major forces (e.g. vehicle crash, explosion etc.) To comply with this it is likely that additional engineering design and bracing of structures may be needed. ODPM believe that the implications of this may be more serious for brick and block construction than for other structural forms. Timber-frame and particularly steel-framed structures are likely to be able to achieve compliance at little extra cost. Additionally steel structures may provide greater flexibility in terms of means of compliance, particularly in the 2-6 storey building range.

Part B. Fire

There are currently moves by the fire service and campaign groups to mandate the installation of sprinklers in multiple occupancy dwellings. It is unclear whether this will result in successful revisions to the building regulation. If it does, there could be a requirement to install additional systems into all such buildings, increasing construction costs and with implications for the type of structure.

Part E. Acoustic insulation

Sound attenuation has become a major issue in medium and higher density housing development and it is important that OSM techniques

demonstrate compliance in terms of acoustical separation. There are some questions over whether this has been adequately dealt with in some instances, for example where volumetric units are

used – at issue here is the insulation between units. The onus will be on manufacturers and builders to prove compliance. Consultation is continuing on developing robust details for masonry, timber and steel framed buildings and up to 30 different wall and floor systems are being assessed.

Part L. Thermal insulation

Similar issues are raised to those for acoustics in Part E, particularly concerning the use of bathroom modules where one of the walls forms the external wall of the dwelling.

Part Q. Access to broadband

This proposed regulation is currently in consultation. If it becomes accepted there will be an additional need for manufacturers and constructors to provide access ways to allow future cabling throughout all new dwellings. This could add extra costs in production, but if access ways are carefully designed into OSM systems the cost implications should be minimal.

OSM has the potential to address some of the issues being presented by new legislation in the form of the building regulations. In particular the issues of thermal efficiency and progressive collapse may be easier to design to using OSM components. However the issue of acoustic performance may present design

challenges in OSM where structures tend to be of lighter construction than traditional masonry.

6.4 The appropriate use of OSM

OSM is not, and is unlikely to become, a universal construction solution for all housing in the UK. The applicability of OSM varies according to the type of building, the client market and the financing of the project. This is generally more of an issue in

speculative house-building than in the public sector. Projects for public sector clients generally culminate in phased handover of significant portions of the site or the handover of all the properties on a single day. In these instances OSM techniques can benefit the construction process, given the relative surety of completion time in comparison to traditional construction. Typical delays to handover such as exceptionally inclement weather are mitigated by the form of construction.

Certain building types such as apartment blocks require completion or near completion of all units prior to occupation and as such can benefit from the speed and certainty of construction time offered by OSM. However in the construction of detached, semi-detached and even terraced housing such certainty of completion date may not be necessary. Speculative development is highly dependant on the management of cash flow and the completion of a particular unit timed to suit the completion of the

sale. Traditionally speculative house-building has relied on the ability to accelerate or retard the speed of construction on a particular plot to suit its sale status. In some instances OSM can remove some of this flexibility – the developer gains no benefit from the early completion of construction, rather has to finance the entire construction cost until occupation.

6.5 New regulations

We noted in section 4.2 that while building regulations are not seen as a limitation on the expansion of OSM, some housebuilders feel there may be a lack of awareness by some manufacturers on the implications of forthcoming regulations. Several sections of the building regulations are of particular relevance, notably:

OSM is not, and is unlikely to

become, a universal construction

solution for all housing in the UK.

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7 Labour, skills and OSM

The skills shortages within the construction industry have been widely discussed. With an estimated annual turnover of between 65,000 and 75,000 people per year (Campbell 2001), the ability to recruit, train and retain skilled labour is critical for modernising construction. The UK construction industry has historically had low levels of training in comparison both with other countries and other domestic industries. Between 70% and 80% of UK construction's workforce is estimated to have no formal qualifications; at least 35% of workers are classified as labourers, compared with 5% in Denmark, 7% in the Netherlands and 17.5% in Germany (Clarke, 2002). Furthermore, the UK construction industry has seen a dramatic reduction in training at all levels – entrants to professional courses fell 40% between 1995 and 2000 and construction trainees dropped steadily during the 1990s (Clarke, 2002). It has been suggested that an increase in the use of OSM may form part of a solution to the shortage of skilled labour in construction and in particular housing.

7.1 On-site skills issues

Previous research on mechanisation and OSM in house-building in the UK, Germany and the Netherlands suggests that there is a contrast in the way labour is trained and different types of labour are categorised between the UK and other countries (Clarke 2000). These are associated with different work processes and different levels of mechanisation and OSM of components. Low levels of

mechanisation and OSM were found in the UK, compared with Germany and the Netherlands, and the range of activities for the separate trades in assembling superstructure elements was simpler. In the UK labourers remain a significant group within the construction industry. Skills are narrow and training provision low. A high proportion of the labour force remains self-employed, working for labour-only subcontractors and working to price or output. In comparison, in Germany and the Netherlands labour is employed directly and work processes are more complex, with more specialisms at the interfaces. The division of labour is industry-wide, training provision is extensive, and skills are broad and integrated into the grading structure. Greater speed, higher productivity and lower levels of supervision are associated with industry-wide systems compared with traditional craft forms.

‘I think this country is pretty poor at training large parts of its workforce. In Germany,

you train for three years to become a concreter. Here, you only have to be able to

handle a shovel.’

Nick Whitehouse, MD of Terrapin (Building, June 2001)

The UK construction industry has

historically had low levels of

training in comparison both with

other countries and other

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Certain specific trade skills were valued by

manufacturers, particularly in joinery, plant operation and concreting. In many cases however those firms looking for these skills were more interested in a general ability than a specific craft training.

Table 12 shows how 30% of respondents were more interested in a more general issue of character and attitude to work. Which we have categorised as work ethic, this comprises responses relating to a commitment to quality and performance.

The vast majority (89%) of manufacturers found that the core skills required in operatives to work in their plant did not exist in the general stock of labour they were able to recruit and that they would need to provide additional training. Around 16% of those saying they did expect their labour to have acquired the necessary skilled labour through vocational training. A similar proportion said they would acquire it from other manufacturing companies (see table 13 below).

It has also been suggested that there is a ‘built-in resistance to change’ caused by the hierarchical nature of professional training, which separates the professions from craft-based trades, with the cost functions (surveying, buying, estimating) forming the dominant form of expertise in UK firms. Together, these characteristics have led to the suggestion that innovation is being hampered by skills, education and training structures in the UK (Clarke 2002). However, it is by no means evident that problems on site caused by the lack of skilled workers can be solved by greater investment in off-site

manufacturing – a key reason why many UK housebuilders are investigating prefabrication systems. Clarke (2002) reports that the opposite has been found to be true: a skilled workforce is needed to enable such innovations to be brought on stream. Gann (1998) supports this describing how the skill structure in UK construction is not sufficiently adaptable to support innovation required to sustain long-term performance improvements and suggests that changes in skill requirements can be met better if operatives are initially given broad foundation training to which additional skills can be added when and if they are required. Firms currently fill gaps in the availability of appropriately trained people by employing labourers with minimal training for work

which often requires considerable skill and knowledge to perform properly. Firms also require multi-skills to improve flexibility, in which workers trained in one trade acquire new skills associated with other trades.

In terms of the on-site assembly of OSM products, it can be seen that training agencies are starting to take on board some of these comments as illustrated by the new CITB course in timber frame assembly.

7.2 Skills in the factory

The survey explored the kinds of skills OSM

manufacturers look for in their production line labour. The 59 responses were coded and divided into three categories, skill levels, particular craft skills, and general skills (tables 10 – 12).

The majority of suppliers that specified a specific skill level were looking for people with a medium level of training particularly in what are seen as the

traditional craft skills. While general labourers and a small percentage of skilled (City and Guilds or NVQ qualified) individuals were needed, employees with more general semi or multi-skilled abilities were preferred.

Table 10. Level of skills required

Skill level % of respondents

Skilled 7 Semi-skilled 28 Unskilled 8 Multi-skilled 5 No skill level specified 52

Table 11. Specific skills required

Skills % of respondents

Carpentry / joinery 31

Plant operation 21

Concreting / steel fixing 13 Mechanical / fabrication 7 Electrical 5 Glazing 5 Plumbing 3 Plastering 3 Plant maintenance 3

No specific skill specified 9

Table 12. General skills required

General skills % of respondents

Work ethic 30

Health and safety awareness 8

Interpret drawings 8

Numeracy 7

Literacy 5

Project supervision 2

No general skill specified 40

Table 13. Where skills expect to be

acquired from.

Source % of respondents Vocational training 16 Other manufacturing companies 16 Construction trades 13 Other OSM manufacturers 8

Other training source 5

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Current policy initiatives are already addressing some of the more pressing inhibitors to the expansion of OSM. In particular any major expansion in land supply for housing and ring-fencing both land and finance for developments that will use modern methods of construction should both give a boost to OSM. However, while we do not address the issue of planning directly in this report, it appears that the clear guidance on planning issues relating to OSM may be required as a number of respondents have suggested that the use of OSM in a proposed development has led to resistance from some planning authorities.

This report has not discussed two issues which will be critical in shaping the future market for OSM housing: customer attitudes and life cycle

economics. With regard to the former, lessons from past experiences in mass manufactured housing must not be neglected and it is to be hoped that regulatory measures today are sufficiently robust to ensure OSM housing is built to a standard that is acceptable to its end-customers. While the report has touched on the economics of OSM housing, it has not been able to address the lifecycle cost/benefit implications. Costs in use are clearly of considerable importance in influencing the financial viability of OSM, and better data is needed to investigate this issue.

Finally, while the findings of this research are generally positive, there is a danger in expecting the market to develop too quickly. Any expansion in the use of OSM should be clearly signalled to give both developers and manufacturers the opportunity to develop closer links and to identify suitable projects in sufficient time for the manufacturers to have appropriate input into the design. Sudden shifts in the market will cause disruption that is equally likely to result in market exit by some manufacturers who, by the nature of the manufacturing processes will be unable to remain competitive in a cyclical industry.

8 Conclusions

One major restriction to an expansion in OSM is the availability of appropriate labour. This is partly an issue of appropriate future training in the skills required in both the factory and on site. On a positive note, manufacturers have argued that they are not necessarily looking to recruit highly trained operatives and are prepared to invest in training of employees.

A more fundamental problem in moving house-building towards modern, OSM-based methods of construction is the mismatch between the norms and practices of housing development and those of the OSM suppliers. In order for OSM to become more universally applicable for house-building both parties need to examine how to best adapt working practices to the new approach. In particular, the issue of ‘design freeze’ and production scheduling demonstrates the need for better coordination between each link in the supply chain. Developers need to start considering how best to adapt their design practices to best utilise OSM components.

Manufacturers need to consider how best to link design and production cycles to allow late alterations in design to permit customer choice. One

compromise may be for a hybrid of OSM and traditional construction, whereby certain components are standardised while craft activities produce the external variation in design, but this might significantly impair the benefits of OSM. A redesign of OSM components around the manufacturing process rather than the current norm – designing components to traditional house designs – would therefore allow a more efficient production process. However such a redesign could involve a significant time lag before these components could be implemented on site. Moreover, while

reengineering the activities of all the major players in the supply chain may well permit a more rapid response to new development opportunities while retaining the advantages of off-site production, this would represent a very significant challenge to the housing sector as a whole.

In the short-term the UK’s OSM industry is capable of accommodating any likely increase in the

demand for its products by expanding its current production capacity. Several companies are either

expanding their own facilities or engaging in joint ventures with other firms to set up new production

facilities. Greater levels of expansion may be possible through the introduction of multi shift working

or through further investment in new facilities. Manufacturers have shown willingness in our research

to commit to further investment in plant and facilities if a stable market demand emerges.

And while OSM costs may currently be higher than the equivalent under traditional approaches to

house-building, this gap may narrow with a maturing market. However, there are potential barriers to

the uptake of OSM.

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Consumers make the final purchase decision and will therefore need to be made aware of the relative advantages and disadvantages of OSM over traditional construction so that they can make informed decisions. Manufacturers / Developers

Manufacturers are not necessarily looking to recruit highly trained operatives and are prepared to invest in their own training. However, there is still a need to raise awareness of careers in this sector and encourage basic training in factory assembly.

CITB have just introduced training for on site assembly for timber framed systems. This could be expanded to other forms of OSM and used to ensure site operatives understand the specific requirements of OSM systems. There is a need to ensure that the design community is made aware of the specific requirements of OSM systems and appropriate ways to achieve diversity using standard components.

This research has predominantly looked at the use of OSM in new

construction. Other European countries, most notably the Netherlands have also made use of OSM in refurbishment. Further research is needed into whether there is potential for this kind of activity in the UK.

The next generation of OSM systems has the potential to exploit more fully the benefits of modern manufacturing methods. However manufacturers will need a clear sign that there is sufficient certainty of return on investment before they are able to commit significant resources to the development of new systems. This can only come from a steady increase in the demand for OSM rather than any short term, unsustainable, flurry of activity.

9 Recommendations

This report has identified that the UK manufacturers of OSM systems produced in the region of 17,000 homes in 2003. However we have been unable to accurately determine a precise figure for OSM house-building in general or for individual structural forms in particular. The NHBC goes some way towards this in recording timber framing construction figures from its members. However if targets are to be set for an increase in OSM

construction then accurate figures will be needed to measure performance against these targets.

The research has highlighted a discrepancy of opinion between manufacturers and developers as to the relative costs of OSM and traditional construction. There is a need for more research to be carried out to clarify the relative costs of various construction forms and to identify where cost savings can be achieved.

The growth of OSM usage is currently inhibited by the fragmented nature of the UK housing industry. In particular misconceptions and

misunderstandings over business drivers and what value is added can be observed along the supply chain. Manufacturers in particular have suggested that some forum which would allow designers, manufacturers and developers to explore how they can best work together would lead to a greater level of supply chain integration.

Manufacturers need to raise their awareness of the concerns and requirements of