How can Offsite Production bring new styles for low marginal costs to the Fence Industry?

What drives Consumer Choice in the Wood Fence Industry and how can Offsite Construction bring more, higher quality choices for small Marginal Cost Differences?

The installed wood fence industry, as an Industry, has evolved over many decades. Choice has rarely evolved, with styles changing only marginally over time. Primarily changing through finishing techniques such as post caps or stains. The fact is, there is only so much one can cost-effectively do without excessive skill and compensation. Complex patterns and styles become prohibitive or even impossible to produce to custom-fit property, especially where there is terrain.

Many styles of wood fences that do exist today, of which there are really only a handful of core styles, exist because the typical fence builder in the area has the tools and the crews with the skills necessary to design as they build onsite with materials customary to that area. The contractor becomes effective at what the consumer wants in their region, but sometimes the consumer only wants what they are used to seeing if that makes sense. To be viable, optional NEW choices must only be marginally more expensive than the customary styles or they will not be purchased.

Take this 3 Rail, 3 Trim, 1x6 Dog Ear fence for example.

Most fence contractors and crews, to varying degrees, can install these posts plumb, install the rails on the posts with consistent spacing, and install fence boards on the rails to a satisfactory end visual appeal. But the finished look can vary depending on the Crew’s skillset and available tools. Some Crews have the skill, others, well, they don’t. Some are still learning, some are veterans of the industry… What kind of crew will show up on your site? It’s anyone’s guess really, and consumer clarity and expectations of the outcome can in turn be all over the board, creating a Customer Beware mentality….

The cost of that simple fence, with its limited complexity, should be relatively consistent from Contractor A to Contractor B. This leaves the consumer with little to weigh as to whom to award the work to other than possibly a personality they would like to work with or a feeling of trust. But most often, with this kind of fence, it just comes down to price. This has made styles like the 6’ Dog Ear fence commonplace in the Consumer Choice equation. They are common because most fence contractors can fabricate them, AND it's the default ask many times because it's what the consumer is used to. With very few variables or complexity in the fence style, there really isn’t much more to weigh than price.

So what if there were styles that took higher levels of skill to create, especially contour following? Would the consumer want them? Or do consumers really only want the few choices they have? Well, it certainly comes down to Marginal Cost and availability of Skill.

Consider this Horizontal Lattice Top fence with a cap. Consider how it flows through the terrain and how the lattice uniformly flows with it. The fence bottom hugs the terrain with the top smoothing along. A fence option like this might not just come down to price, but why should it be more expensive? To sell to the consumer, it must be only marginally more expensive.

IF Mrs. Jones asked contractor A to custom build this fence to fit every post-to-post location along each unique fence run of her yard, moving with the terrain and having consistent post spacing throughout, contractor A, as with most contractors, would say “Ummm, we don’t provide that style”, quietly pondering the risk / reward / skillset and “I don’t want to attempt” thoughts. Or perhaps instead of outright denying it, Contractor A might just throw out an installed cost double the per foot cost for a 6’ Dog Ear fence, hoping Mrs. Jones will buy what he is comfortable his crews can install without oversight and figuring she will reject the 2X price anyway. But IF she doesn’t, he will figure a way with all that extra padding he HOPES.

But what if Contractor B showed up and confidently said, “Yes of course we can do that! Do you want the lattice to flow smoothly through the terrain like this, floating over sharp hips and valleys, or would you like the top to stair step like this, while the bottom smooths through the terrain?

See here on my computer, your choice Mrs. Jones.” With that, Contractor B eagerly demonstrates through the Fence Genius Technology and Software a feeling of confidence and adequate skill to pull off the job. But if he went on to say it costs 2X the Dog Ear Fence, Mrs. Jones might be impressed with his confidence but will likely say “No Thanks”. But what if Contractor B was able to reply, “and it’s only about 15% more per foot than the Dog Ear option Mrs. Jones.” What might the reaction be? Would Contractor B win the job over Contractor A? I think she would say, “Yes, I am happy to pay the extra 15% for that beautiful style. It will compliment my home so nicely and it is different from the neighbors.”

But to ask for it in the first place, Mrs. Jones had to have seen it somewhere before or she wouldn’t think to ask for it. (Which is often why consumers only ask for a common style of fence) Contractor B sells the fence, and the entire Fence Industry notches up another fence sale, incrementally helping bring jobs all the way back through the supply chain. And each time that happens, more Horizontal Lattice Top fences would become visible to other consumers, and they would then ask their contractors for the product when they need a fence. (To be clear though, this thought experiment is NOT just about Horizontal Lattice Top fence. This is about offering new styles of fence, produced in a skill-augmenting way to enable reasonable marginal costs.)

The typical labor pool skill level drives available options in the wood fence industry. But over time, consumer expectations based on new experiences can drive the need for increased skill or methods to compete. In the above example, Contractor A might find it is time to embrace some technology. But just because someone has the skill to perform, if the cost is extraordinarily high over the other option, few will buy. As few buy, fewer yet will ask, and in turn few will offer the option, and that drives both consumer choice AND expectations.

If as an industry, starting one contractor at a time, we can get past this dynamic of 1.5 or 2X increases in marginal cost for something unique, the entire velocity of the fence industry could change, encouraging more consumers to put their available home improvement dollars into a New Fence and bringing jobs to the entire supply chain!

So you may be pondering…. This is like saying “IF we made a Time Machine, we could go back in time and invest in every sporting event.” How can we boost all skill and make such custom design options affordable enough to have consumers asking for them? My crews only have certain skills. It's hard enough to get them to orient a defect properly to upgrade quality, let alone build something so complex.

I have been promoting Offsite Construction of Custom Built, Ready-to-Install Fence Panel and Kit Systems using my new Fence Genius Technology for almost 2 years. During that time, I have spoken to so many contractors, lumber yards, AND retailers. Some I think of as forward-thinking, but almost all do the same thing when I bring up the concept that with Fence Genius and offsite fabrication, we can offer the consumer literally hundreds of fence styles.

It happens every time.... Their eyes inevitably glaze over, I see their minds drift, their hearing shuts down and they ponder….WHY? Consumers only ask for a handful of choices. So WHY offer them more styles and even more crazy yet, why let those consumers customize their style choice to their desired fence board size or gap width, with infinitely variable height increments, creating literally thousands of choices? Inevitably, the person I am speaking to reaches the conclusion in their head that the choices will be too expensive due to the dramatic need for increased skills and stop listening to my pitch. Blah, blah blah blah blah is what they here from that point forward.

With the Fence Genius Software Technology and Offsite Production Pod or a similar setup, our software and equipment can augment skill and diversify the labor force to create all styles at small marginal costs. Potential employees that otherwise have no interest in building a fence may find an interest working in their own climate-controlled environment using software and building something different every day. A fabricator can fabricate complex, customized Fence Styles. Producing offsite, the fence can be 100% finished before it hits the jobsite. Once assembled, an experienced 3-person crew literally only takes a couple of minutes per panel Onsite to cut the post to height, using the software as a guide, and to install the panel regardless of the style. This dramatically reduces the impact on the customer and optimizes the use of the truck and its equipment. Think of it this way. The software augments the skill, then the build rack in the POD enables that fabricator to replicate the install environment without having to be there.

But how can the POD reduce this much cost for so many options, or rather how can it increase this much skill?

First, you must recognize there are a few steps to each fence installation that are irrespective of fabricating the panel style. Most times, the same posts are dug and set and similar materials are purchased. Let’s just say those steps are unaffected. (Even though they are in some very beneficial ways) The primary variable we need to focus on here is the labor cost in the POD to cut the components, such as the Rails, Trim, and Cap, and then most importantly the Skill or LACK of necessary Skill to assemble the actual fence panels. It is important to point out. IF you are building a fence on site, you are in fact building Custom Fence Panels like you are in the POD. You just happen to be building them in the direct sun, rain, or mud and on the posts while dragging around a nail gun and saw, designing as you go.

Consider a 3 Rail, 3 Trim, with Cap fence system such as this. The Offsite Fabrication Labor and Software Cost of producing that finished system in a Fence Genius Production Pod has been shown to be about 10% of the final installed cost to the consumer, including the software expense. Only 10%! This is a small percentage of the installed fence cost the consumer pays. So changes in this variable, be it up or down, or in employee pay working in the POD, only marginally affect the final installed cost to the consumer. You might immediately think, well then why use the POD and the software? Building in a POD increases Skill and product quality immensely while enabling Incredible Choice. You wouldn't get this custom fence for a 10% fabrication cost building it Onsite.

The fabrication of the most visual aspect of the finished product, that being the fence style itself, the thing everyone sees, is only about 10% of the installed cost. Sooo…, going back to Mrs. Jones that wants a Custom, Contour following Horizontal Lattice Top fence system. The materials for that fence are only marginally more expensive per foot than the 6’ Dog Ear, primarily because there is a Cap. The savings the 5’, 1x6 boards yield due to the lattice area offsets much or most of the horizontal lattice material cost. (Often hand-selected 1x6x8 boards to rip for lath) So materials, posts, jobsite visits, all things considered, should be almost the same regardless of the actual fence style and fabrication… So should it be much more expensive to add this Horizontal Lattice Top choice? No, it should not, and this is why Contractor B could suggest it is only about 15% more. Could the Contractor ask for more? I think so....

Let’s analyze the Marginal Cost and why it is minimally affected by looking at this Offsite Fabrication Component.

The POD is an asset. So it does require a place to work consisting of about 300sf per offsite producer. (For the pod and material lay down area.) Could be a Garage, a Shop, or an Industrial Facility. It could even be in a Lumber Store, using the lumber in the isle as its warehouse, and enabling the use of cull for rips etc. So 5 PODs might be 1,500 sf plus storage and yard space. On a monthly basis, that 300sf is a very marginal cost in some cases. Yes, there are tools in a POD, but there are also tools needed to work onsite including trucks sitting idle all day while crews build in the rain and mud.

To compare, let’s return to the 3 Rail, 3 Trim, Contour Following Dog Ear system above. The cutting and panel assembly labor to prefabricate the panels is perhaps $2.25 per foot, depending on the hourly labor cost. (Should take about 20 to 25 minutes per panel for this style.) Working in the Pod, production is very predictable because it is in a controlled environment and that brings benefits such as material handling to the POD door and eventually software-driven time tracking. Fence Genius will become more and more intelligent, to predict styles by region and estimate the time for construction based on every cut and nail that needs to happen. Now, this simple fence style might only be a marginal saving, but typical site-built contractors won't have the bottom-hugging terrain and the top smooth. So Quality is a huge benefit, beyond simple cost.

Now let’s compare the Contour Following, Horizontal Lattice Top system. A system you probably couldn’t pay employees onsite enough to build successfully due to skill and complex fabrication. What is the marginal cost?

It does take a producer longer to cut and assemble this Horizontal Lattice, but how much longer? The software is directing the process… To be conservative though, let's say 2.5 times as long, which is excessive for the limited marginal cuts and assembly. The $2.25 becomes $5.63, a $3.38 per foot labor increase on a fence that might cost the end consumer $40 per foot. The employee produces less footage per day, so the OH&P cost per linear foot produced must also be increased because you need to be paid more per foot to pay for the Pod and the square footage it occupies. So, what should we add?

Well, remember, you aren’t paying for a truck to be sitting on the job site either, so it is arguable this extra OH&P shouldn’t be a factor. Also, keep in mind, when the assembler is done with this job, their computer mouse takes them to the next job immediately. No tools to roll up, or loads to strap down. So this also provides savings in reduced Overtime, but again we will ignore that benefit as well. And the raw material is placed at their pod door with a forklift or pallet jack. So that is a benefit. And boards with slight defects aren’t being tossed in the mud, rather they are conveniently ripped or repurposed at the right time they are needed, and that’s a big benefit. But let’s ignore all those benefits that easily justify and offset the POD OH&P and add something anyways. Let’s add a .25 per foot increase over the POD OH&P for the Dog Ear style due to the slower nature of the Horizontal Lattice panel build.

So add the $3.38 increase in assembly labor with the .25 increase for the POD OH&P and we have an overall cost increase of $3.63 + some ratio of general OH&P on that. ?The materials are only slightly higher, primarily because of the Cap which isn’t part of the Dog Ear system. How can the materials be almost the same you ponder.... Remember, you are now building with some 5’-1x6 and the 6’ is 1x4 both of which are a dramatic savings, possibly enough to pay for the Lath)

SO.... the consumer needs to pay something around $5 more per foot for this beautiful, upgraded, and installed custom fence system! Probably a 15% or 20% upcharge over the Dog Ear. Not 1.5 or 2X!

So returning to the original reason I bring this up. Stop letting your eyes glaze over. Consumers will want new fence styles, and with Fence Genius we can open fabrication facilities all over the country, close to the last mile to serve the customer. Contractors, Lumber Yards, Building Material Stores can all potentially become Fabricators. This dynamic is what can and will bring new fence styles and more momentum to the fence industry through more affordable, new choices for the consumer. Fence Choices Can Win Fence Bids IF the marginal cost is reasonable. But we need to augment Skill and Speed through Fence Genius Technology!

Welcome to Fence Genius where we are…. Reinventing Fence Manufacturing Technology!?