A factory can close for any number of different reasons – from tightening environmental regulations to financial troubles. A bankrupt factory can have a major impact on your business. If you purchase your modular homes from one or simply the prefab panels and trusses, your orders could be canceled altogether without prior notice. You may even have to forfeit your deposit.
That has happened quite often in the modular housing industry over the past decade.
Here are just some of the telltale signs your off-site supplier could be circling the drain.
Reduced Cash Flow
The first sign that things are going wrong is a constant shortage of cash. This can be evident when something needs repaired or replaced in the modular home you bought and the factory service department simply isn’t responsive. Finding money for the service department takes a back seat to trying to pay overdue invoices.
Unused Capacity
Used floor space can be an indication of several things, not all of which is a telltale sign of problems. It could mean that there is no need to use that space at the present time. If your factory clearly has the unused floor space and equipment to manufacture much more than they are currently, it could mean that they can’t find the labor to expand into it. Or it could mean they are losing builders and developers even while modular construction is hot.
Slow Payments
A modular factory that is slow in paying the set crew, paying for agreed repairs, or sending back overpayments could be running into cash flow problems. If this doesn’t improve or continues to get worse, it may be time to look for another supplier as you may find yourself on the list of creditors when they go bankrupt.
Lead Time Increases
Increased lead times can arise from several normal occurrences. Orders may be pouring in from builders and developers faster than they can be built. Labor shortages may be causing the factory to cut back on production to meet the level of workers available. But it could also mean that cash flow is not good which means suppliers aren’t being paid on time. This is not a good sign.
Employees Know
Factory staff usually know what’s coming well before you do. The purchasing department will notice if funds have become tighter. The production department will notice later and later delivery of material. The quality assurance department will notice the lack of corrective action for faulty production processes. And the Service department will stop returning your calls and emails.
As a builder or developer, you are responsible for the success of your own business and if you have to leave your current off-site factory because your gut tells you something is wrong, it just might be right.
Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects. Contact Gary at modcoach@gmail.com
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