MMC: An Opportunity for SMEs
This article first appeared in the RICS Construction Journal HERE
THE USE of modern methods of construction may be at a tipping point, and as the use of the solution grows so do opportunities for SMEs in the construction industry.
Despite the potential benefits of modern methods of construction (MMC), and it being the subject of a plethora of reports and papers papers in the past decade, its adoption and application across the construction industry has been far from universal. The shift from traditional methods to digital and manufactured solutions has not been a simple act of technological substitution for early adopters; it has challenged organisations to adapt their culture, mindset and behaviours.
Market commentators such as Savills predict that housebuilding will double its adoption of MMC over the next ten years, and while changes in technology have typically driven complementary change in the social, economic and environmental landscape, the impact of COVID-19 has reversed the rules. The use of MMC may have reached a tipping point.
The rallying cry from UK Prime Minister Boris Johnson to
places the construction industry at the epicentre of the UK economic growth strategy. Reinforced by the CLC’s Roadmap to Recovery, the government has signalled a clear ambition to catalyse industry modernisation – to realise transformational change through adoption of MMC.
Seeking to mitigate supply issues – such as labour shortages and uncertainty of input costs – and address a burgeoning demand, the housing sector has begun to gravitate towards MMC to deliver better quality and low carbon products. Anticipated shifts in user demand have similarly driven private sector clients to explore innovative opportunities through MMC as they re-appraise project value.
With a shift in focus rippling along the value chain, several large organisations have acted swiftly in announcing their intentions to intensify a focus on MMC. While market movements are often perceived through the lens of large companies, MMC also offers small and medium-sized enterprises (SMEs) opportunities and challenges.
Statistics produced by the Department of Business, Energy and Industrial Strategy (BEIS) identify that SMEs represent 99.9% of businesses working in construction in the UK and almost 75% of turnover. With over a million SMEs in the construction industry, small and medium enterprises represent the lifeblood to the sector and the heart of both local and national economic growth. Typically, SMEs in construction fall into one of 6 sub-segments, each of which has varying characteristics and needs, as shown in Table 1. The opportunities and benefits that MMC may offer SMEs are similarly varied.
MMC is a term used broadly to describe contemporary innovations in construction, including new technologies – such as digital tools and techniques – offsite manufacture and use of efficient processes to deliver more productive, more sustainable and generally better outcomes.
Recognising the importance of standardising terminology, last year the Ministry for Housing Communities and Local Government (MHCLG) published the MMC definition framework. For housebuilders this identifies seven categories of MMC, as seen in Figure 1, the first five of which apply offsite and near site pre-manufacturing techniques.
The range of MMC categories reflects the variety of available tools, techniques and processes that can be applied to realise better outputs and outcomes. As the understanding of digital and manufacturing techniques evolve and market matures, the depth and breadth to each category will undoubtedly grow. It is this growth that affords SMEs opportunity.
While the MMC framework is project and product focussed, MMC can be applied at both a business and portfolio level. As a precursor to deciding where, what and how to apply MMC, companies should always consider the why. MMC is an enabler, not an outcome. The key questions for any SME should therefore be:
- What are the company’s business goals, objectives and desired outcomes?
- How can MMC enable the company to realise these?
Applied in the right context, MMC can, among many things, offer benefits of increased productivity, efficiencies in time and cost, enhancements in quality, greater certainty of delivery and reduced waste, as seen in Figure 2.
At an industry level, the quantitative data-set demonstrating these benefits remains inconsistent; the Jansen report (‘Quantifying the Benefits of Offsite Construction’ www.ciria.org/c792)) reaffirmed that project and business performance metrics are regularly measured differently across organisations.
This in itself, offers RICS members the opportunity to provide advice that supports clients to transition towards more data driven, value-based decision making.
As the industry evolves, many SMEs are flexible and nimble to respond to the changes in market conditions. Nonetheless, embracing innovation necessitates a different complement of skills and changes in team dynamic and mindset that can be disruptive. Adoption of digital solutions over recent years, for example, has challenged many organisations as they seek to apply a fresh approach; MMC introduces similar challenges.
Adopting and integrating MMC to deliver sustainable benefits is rarely a matter of technological substitution – it requires new points of team engagement, interrelationships and activities. Adapting old habits and retraining to develop new skills and create new behaviours requires commitment and potential investment; both culturally, to ensure the change is realised, and financially.
Integration of manufactured solutions infers investment in factories, plant, machinery, automation equipment and technology to develop in house capabilities. While some have chosen this path, significant capital outlay is not necessarily a precursor to MMC adoption. Some SMEs are managing their financial investment by developing strategic alliances and collaborative partnerships with producers, others by developing ‘knowledge factories’ rather than investing in production facilities. The Supply Chain Sustainability School [https://www.supplychainschool.co.uk/], itself an SME, is one example of a growing knowledge economy around offsite technologies that offers support to companies as they seek to expand their knowledge and capabilities to maintain a competitive advantage.
With greater awareness and understanding, SMEs can begin to reflect upon how MMC can influence and alter fundamental business dimensions, such as their processes, their value proposition and business model, to create and realise new opportunities. The adapted business model canvas illustrates the interconnectivity between key building blocks of a business model and how MMC is transforming each. Truly exploiting the opportunities that these changes afford requires a strategic view of the following.
As clients seek to realise value through MMC, the basis of engagement with the supply market is evolving – new procurement channels are emerging that offset historical bias within frameworks towards large scale business and instead afford greater opportunities to SMEs. The DfE framework for offsite schools – less than 6,000m2 – includes 80% SMEs; while the Crown Commercial Service framework for Modular Building solutions and Hyde Housing MMC framework are both balanced at similar proportions.
Similarly, by embracing solutions that are manufactured beyond the confines of the site hoardings, investment can be channelled towards local SMEs in supporting growth in areas of economic deprivation. The UK has a landscape of regional imbalance, as seen in Figure 4, which has typically hampered the ability of SMEs in many areas to grow, recruit, innovate and be profitable.
With a high proportion of MMC specialists rooted in the industrial heartlands of the Midlands and North, the potential to support a rebalance aligned to the government’s “levelling up” agenda is real. Embracing modern methods can certainly support the strength and resilience of local economics and, specifically, the opportunities for those SMEs within them.
CASE STUDY 1:
Reds10: A better, more sustainable product solution
As a vertically integrated volumetric manufacturer, Reds10 applies MMC to offer clients a full turnkey service, focused on providing
The recent completion of Green Park Village Primary School resulted in nominations for Education project of the year and Best use of volumetric technology at the Offsite Awards.
In developing a market differentiator, Reds10 are currently collaborating with accommodation operator HOST to develop a proof of concept project that produces a living digital twin of Sedgemoor Worker Accommodation Campus. This well help to create real-time insight, improving the quality of service and enabling optimisation of value and performance of the built asset. While MMC is at the core of their business, they have consciously chosen to apply, adapt and develop their approach to perceived customer needs to deliver a better, more sustainable product.
With a high proportion of MMC specialists rooted in the industrial heartlands of the Midlands and North, the potential to support a rebalance aligned to the government’s ‘levelling up’ agenda is real. Embracing modern methods can certainly support the strength and resilience of local economics and, specifically, the opportunities for those SMEs within them.
CASE STUDY 2:
PCE Ltd: A unique value proposition and better product delivery
While remaining an SME, PCE Ltd is a market leader in applying MMC through design and build of offsite hybrid engineered structures. Their business strategy is consciously structured around principles of design for manufacture and assembly (DfMA) with intent to realise productivity improvements, higher quality control and repeatable efficiencies in delivery.
At plot no 6 in East Village, PCE have applied a kit of parts approach, integrating precast concrete together with unitised facades as preassembled subassemblies. Simple principles have been innovatively extended to the mechanical and engineering building systems, with distribution modules installed within precast prior to site assembly. Working in partnership with Mace Tech and Oranmore Precast on this project, PCE have demonstrated a unique market proposition – applying MMC to cultivate differentiators to their peers and, in so doing, establishing new relationships, customer reach and work activities.
PCE apply these principles across the wider business portfolio, spanning multiple sectors including the delivery of architectural excellence and quality at Kingston University and at scale at HMP Wellingborough, incorporating more than 12,000 components.
CASE STUDY 3:
Future Joinery Systems: Integrating value-chains digitally
Through the adoption of digital solutions, SMEs are transforming relationships and interactions along the construction value chain in delivering manufactured products. Future Joinery Systems (FJS), as designers of specialist joinery, typify this innovative approach.
Their unique business model seeks to add value along the supply chain by reducing interface friction by use of bespoke digital tools – bridging the gap between design and manufacture by providing connectivity between designers, working in their native files, and a network of fabricators.
Consciously embracing digital solutions to create a new interaction model, FJS have cultivated a niche market position and specialisation. While a micro business, FJS have committed to the Construction Innovation Hub platform project; working as a design team member with other key industry players – including PCE – to develop a new model of operation. They have similarly invested in R&D – funded by Innovate UK – to support development of their platform solution in transforming interaction between participants along the value chain.