How Modular Construction Saves Money

Modular construction doesn’t just save time, it also saves money. According to McKinsey & Company, from design and construction to financing and ongoing building maintenance, modular construction cost savings can be up to 20 percent. Here’s how:

Design Cost Savings

In the past, modular designs tended to cost more than traditional architecture plans. But thanks to repeatable, adaptable designs, modular plans have become significantly cheaper.

Modular designs are also less likely to require changes than their traditional counterparts, which often require changes when plans run up against reality on project sites.

When modular plans need changes, designers can refer to libraries of modules, which simplifies and accelerates the process and also saves money.

Construction Cost Savings

Modular construction savings add up even more in the construction phase, with savings expected in labor costs, materials, and rework. 

Labor Cost Savings

Modular construction transfers up to 80 percent of labor activity from the traditional construction site to the manufacturing facility. 

In the process, productivity is increased since advanced automation equipment speeds up repetitive processes. Highly skilled work like plumbing, electrical, and mechanical work that goes to high-wage earners on job sites can be done by lower-skilled workers using high-tech equipment in factories. And with weather not an issue, downtime is greatly reduced. For these reasons, modular construction means less person-hours and lower labor costs.

Out on the site, the cost of putting in foundations is the same for modular and traditional construction.

Once the modules have been delivered to the site, however, construction crews only need to assemble them and connect the building to utilities, making it faster and cheaper than the traditional alternative. For example, five workers can typically assemble up to 270 square meters of finished floor area per day.

Plus, since the more difficult work was already done in the factory, modular construction also removes the need for subcontractors and their profit margins.

The smaller onsite staff also brings down overhead costs, including management and security. 

All told, offsite manufacturing can reduce labor costs by up to 25 percent.

Material Cost Savings

Compared to the materials used in traditional construction, some materials used in offsite fabrication can be more expensive. 

This is because the automated machines in factories require exacting materials and can’t cope with deviations or imperfections. Therefore, higher quality material is required.

In addition, since modules are transported to the site after they are finished, materials used in modular construction also need to be stronger than the ones used in traditional construction. They need to remain structurally sound throughout the transportation and construction processes. 

Overall, though, material costs in modular construction are typically between 5 to 10 percent lower than in traditional construction. Builders achieve this in the following ways:

  • Modular builders purchase supplies directly from manufacturers and cut out intermediaries.
  • Factories order materials for multiple projects at the same time and benefit from economies of scale.
  • Materials are sent to the factory and not the job site, simplifying logistics.
  • Material waste at factories is much lower than at construction sites, potentially reducing costs by up to 10 percent.

Transportation Costs

Transportation is an area where modular construction could potentially cost more, depending on the distance between the factory and the site, as well as access to the site. In addition, transportation regulations in some jurisdictions can increase project costs by up to 10 percent. 

To lower these costs, builders often use a combination of 3D modules and 2D panels and simplify logistics to deliver products as cost effectively as possible.

Still, any increased transportation costs are more than offset by reduced design, material, and labor costs.

Rework Cost Savings

Quality control is easier in factories than on construction sites, leading to fewer costly mistakes and substantial savings.

For example, when workers make mistakes on a construction site, their mistakes might go unnoticed for months or even years. And once discovered, the defects could take months to fix.

In offsite construction, the vast majority of rework is typically avoided and any fixes are easier and cheaper to make since modules are standardized.

Financing Cost Savings

A traditional building project that takes one year to complete might only take six months for a modular construction company to finish. The shortened construction period brings a shorter financing period and less interest paid, creating more savings.

Savings Over a Lifetime

Finally, the precision of factory construction significantly improves build quality and has a major impact on project performance over the years. Energy bills, for example, tend to be lower, and repairs less frequent. 

Overall, modular construction can add up to significant savings. Depending on the specifics of the project, it can save up to 20 percent compared to traditional construction.

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