How MEP Contractors Make Money With Prefab

0:00Jake Olsen: If you're a plumber, an electrician, or a mechanical contractor, you've got to listen to today's episode. Plumbers and electricians are the key to NVIDIA's growth, you know, so I think everybody's waking up to this MEP demand. Prefabrication is one of the best moves an MEP contractor can make, but it comes wrapped in hype, and the hype is where people get burned. Everybody's gonna, oh yeah, fab's gonna save the, you know, we'll do all this really metric, fab will save the world. I mean, there's a lot of projects that have lost a lot of money by trying to do fab without a good plan. So here's what you've got to get straight before you build a shop or expand the one that you've got.

0:36Jake Olsen: Prefab is not manufacturing. You're not stamping out 10 ,000 identical parts, and it's not field construction moved indoors either. It's something in between. Some of your job you can standardize like a factory, but a lot of it is one-off and it never repeats. And if you treat it all the same, you're going to lose money and end up sitting on piles of half-finished pipe the minute a design changes. My guest today is Jake Olson, the CEO of Stratus. He's a structural engineer with over 20 years' experience working in construction. And today we cover a great deal of ground when it comes to prefabrication.

1:16Jake Olsen: He makes the case that prefab is really a labor play, a way to hold on to good people that you'd otherwise lose in the field. I've got a lot of customers on the West Coast. We're not building hyperscale mega projects in Seattle or San Francisco. However, my customers there that have big fabrication shops are building subcomponents, prefabrication assemblies, using local labor that otherwise was kind of on the bench. And we get into where the money actually leaks out and its material handling and rework more than anything else. And he'll tell you where prefab really gets one, which isn't on the shop floor at all.

1:54Jake Olsen: It's in pre-construction before anybody cuts a piece of pipe. The success really starts early on during the DD, SD phases where you're actually, you know, into the CDs where you can actually have that conversation with the engineers involved, the owners, the architects. There's a lot to get into here today. I know you're going to enjoy it. And let's dive right in.

2:41Jake Olsen: your leadership.

2:47Jake Olsen: Jake, welcome to Construction Genius. Hi, Eric. Happy to be here. Great to have you. Please introduce yourself to the audience. My name is Jake Olson. I'm the CEO at a company called Stratus. Excellent. And what do you guys do? Stratus is really an operating system for MEP contractors that are leveraging fabrication in their workflow. So if you are mechanical, plumbing, piping, sheet metal, and you are electrical contractors, if you're trying to use fabrication as part of your delivery, that's where Stratus comes in. We help basically put a digital system in place to manage that design, to fab all the logistics involved if you're running a fab shop out to the field installation, connecting all of that in one platform.

3:31Jake Olsen: Let me just zoom out for a minute, go a little bit off script. I'm going to throw out a word there, and I'm going to want to get your response. Katerra. Sure. Yeah. I've been in the construction tech world for 20-something years. Everybody knew Katerra for a while. Now, some of us remember the Katerra story. Yeah, it's interesting because the logic of prefabbing is a very excellent logic, particularly for particular types of contractors like MEPs. I know Katerra tried to do a lot of that. Do you have any views on why Katerra didn't succeed? Yeah, I think, well, a lot of views on that. There's ways to use fabrication today that could be extremely successful by working basically alongside our traditional project delivery methods, our codes, our contract structures from owner to general contractors to subcontractors.

4:24we can actually have very effective off-site fabrication operations really by breaking kind of existing building designs and processes down into assemblies. And that's a lot of what MEP fab is. We're not building an entire room or house or sections of like, some of that does happen, this very large volumetric prefab. But a lot of what really is succeeding in off-site fab is actually assemblies of pipe, of conduit, duct in a rack or something like that, pieces of duct assembled together. It isn't this massive volumetric challenges. And, you know, I'm originally a structural engineer. You get into a lot of challenges with trying to do big volumetric.

5:09Codes change from jurisdiction to jurisdiction, seismic, wind loads. When you try to build larger pieces of the structure, it's hard to standardize, I think, in some of the ways that Gatero was hoping to. One, kind of set it and forget it, drop it in. And here's a module for a living room or a kitchen just because of how different the codes are. However, I can then take the subsets of that, like a plumbing battery. It can be designed unique for that project, that condition, the engineer's requirements. I can fab it off site and have actually great success without trying to build these big blocks of modular.

5:45And modular has a place we're seeing in data center construction. We're seeing a lot of success with modular. but I think a lot of the vision of Gaterra was more of these multifamily units and you know that really went against contract structures and some of the building norms and there's a lot of code challenges too and and I've got a couple structural friends that were there there was a lot of difficulty in just taking the same kind of code approved design and dropping it into all these jurisdictions that all have kind of different rules that's all another topic when we get deep about building codes, but it is not one size fits all jurisdiction to jurisdiction.

6:20Jake Olsen: It's so interesting, right? Because the idea is a good one, right? In concept. Yeah. And the word modest popped into my head when you were just describing their challenges. And when we're thinking about, you mentioned modular, but really we want to focus on prefabrication. Why should MEP contractors think of prefabrication, not just as a production method, but also as a labor strategy. Yeah. If you look at the mega projects going on today that are drawing a lot of headline news, you've got like Jensen Huang talking about plumbers and electricians are the key to NVIDIA's growth. So I think everybody's waking up to this MEP demand.

7:02If you look at the mega projects that are drawing a lot of demand, those are largely being built in in remote areas right now, areas that are not near a lot of labor density. So just by nature, the amount if you take a project is going to have a defined amount of kind of labor that needs to get done. There's only so much local labor pool that can support what happens on site. So a very popular strategy now is to try to move some of that labor into other areas that maybe, so for example, I've got a lot of customers on the West Coast. We're not building hyperscale mega projects in Seattle or San Francisco.

7:41However, my customers there that have big fabrication shops are building subcomponents, prefabrication assemblies, using local labor that otherwise was kind of on the bench. They're as busy as ever when they're building fabrication and shipping it into these areas that have less labor. So you can actually kind of move the labor offsite into kind of, it's like a geographical arbitrage on areas that don't have as much work. Secondly, if you think about it, to be a field, skilled trades in the field, that's a tough job. In a lot of times, you don't know where your next project is going to be, how close it is to your house.

8:19You think about maybe you got to drop off your kids at school or care for an elder parent or something like that.

8:24Jake Olsen: When one job this week is six miles from your house, the next one is 27 miles across town through traffic, it lessens the amount of people that can participate in that kind of field labor. Yeah. Conversely, I can set up a fab shop and I can say, look, this shop's going to run from seven to three. Yep. This is the address. Plan your housing, plan your, you know, your life around it. If you want to coach a high school sports or something like that, these are your hours, seven to three, your, your traffic, your commute. You can kind of, you expand the pool and you see that when you walk at these fab shots, you see just a different workforce dynamic.

9:02You see more women, more people that may have been in the field that can't just for multiple reasons, family life, whatever, they can't do the fieldwork anymore.

9:11Jake Olsen: They're extremely successful in these fab operations. And I think that's been a great way to have a stable labor pool by using offsite fabrication. So most of those are big trends we see a lot. Yeah. Where are contractors wasting the most skilled labor in the field right now, do you think? Yeah, waste is an interesting topic. And what some people would call waste is probably different than others. But one of the things that my kind of hit list drives me nuts is just material handling and logistics. And that's one area where you can actually get backwards on fabrication. And I've seen this firsthand many times where you end up doing a bunch of offsite fab.

9:54Now you've got a lot of bigger assemblies and pieces that need to get moved around and handled. If you don't think about what needs to happen on site, you can end up with a lot of people just trying to move this fab around. And not all site logistics are the same. Sometimes we're working with cranes or buck hoists. Sometimes we're ability to roll things, you know, put carts and stuff in place, but you can end up actually getting really inefficient by not thinking about kind of material handling and logistics on site. So that one drives me nuts. And I think it's one that doesn't get enough light going on it, mainly because we have hard times measuring things like that.

10:29But that can really cut into field productivity when we don't focus on material handling and logistics. And, you know, the lean guys would talk about time on tool. So if your job is putting hangers up, what percent of your day is actually putting hangers into the ceiling versus walking around, looking for things, sorting things out, shaking out a big cart of prefabricated hangers. You can end up spending a lot of time not on tool if you don't pay attention to that.

10:58Jake Olsen: Let me ask you a little more about that because as an MEP contractor, obviously you're working with a bunch of other contractors as well as the owner, as well as the prime contractor. And it would seem that sometimes the material handling aspects of it you don't have complete control over that. And so you may spend a bunch of time and effort fabbing offsite, bringing it to the job site. And because the GC doesn't have their act together, it doesn't matter how efficient you are offsite. You're just going to lose all of that because you can't coordinate with the other folks through no fault of your own.

11:33Jake Olsen: Is that something you see? Absolutely. Yeah. I spent some time working at a big mechanical contractor not too long ago. And we worked on this huge multi-story kind of life sciences project. And that crane schedule was a moving target. And basically, you know, you'd get out as the mechanical, we would get allocated certain days we could lift and we had to make sure we were ready to go. But that was not it. That was a very dynamic conversation in planning meetings and weekly look ahead meetings of is it really going to be Saturday, 6 a.m.? We need to have our fab station ready to go. And so there needs to be a tight feedback loop between and, you know, this is where scheduling people get all wrapped around the axle because we're going to set this fixed schedule.

12:20We're going to get charted all out. And these are going to be the days this project is going to happen. Well, guess what? Life happens. You know, there's there was like a concert in town and it completely changed our whole ability to ship. And, you know, that was never in the Gantt chart, you know, Bon Jovi concert. So those are the types of things that you just have to have a system. And I like to talk a lot about thinking about your fab process as a production system. And that is the inputs and the outputs. So when do we need stuff? You have to have a flexible system that can be dynamic, can adjust.

12:54Because to your point, there's always going to be variation in these mega projects. because there's just too much out of your control. Weather, outside influences, other trades, material shortages, when inspection goes bad, next thing you know, you've got to hold back a floor or two until we get something sorted out. These, I'm convinced, will happen, and it's the contractors that have the resiliency to adjust to that that are going to win, not the ones that have planned everything down to a fine point where they can't adapt when the change happens.

13:27Jake Olsen: So when you were talking just now, the just-in-time manufacturing popped into my head. Is that an accurate analogy there? Exactly. Yeah. You have to translate that to what it means when you stretch across like a BIM fab delivery. But the less work in progress you can have in that system, all the way from design out to install, the more you lower your risk and the more agile you are as a contractor. So number one for a lot of contractors is just introducing that concept and understanding that that's something they can measure. So how much kind of whip, work in progress do we have between design and install?

14:08Using that as a measure and the tighter we can keep that, the more reactive we can be, the less those change orders hurt, the less those schedule changes hurt, the less those, you know, I worked on a job for a big pharmaceutical provider. provider. And coming from the structural side, you want things like plan, plan, plan. And I was always, you know, you'll hear this all the time when you talk to contractors, what's the biggest problem with the job? Oh, the drawings aren't perfect. If the drawings were perfect, everything would be easy in construction, right? And we sat down this construction manager for one of the big pharmas and he was like, Jake, listen, I'm going to tell you a lesson here.

14:44We're the owner. If the FDA approves a new production process that saves us 1 % efficiency in our drug cost. I'm going to drive that change tomorrow. I'm the owner. I get to make that change. If you want to be the best contractor, you figure out how to adapt to that. Don't tell me the drawings have to be perfect, the design can't change, the schedule has to be locked. Tell me that you are ready to work with us to deliver this project. And that moment for me was like a big, like, you know what, I've been thinking about this wrong the whole time. It's the agility that really is what makes a great contractor versus somebody who's demanding fixed drawings, perfect drawings, perfect schedule.

15:25Jake Olsen: So that's interesting, though, because when you think about agility or flexibility, and then you think about the manufacturing process, at least in my mind, those things don't necessarily marry up all the time. Is that right? Or it requires a tremendous sort of mind shift for people, particularly contractors, to go from a construction mindset that we've been describing, where schedules change and site conditions are different from site to site, to a manufacturing process, but then not overdoing that, holding it lightly almost. And it seems like there's a lot of complexity there. So what changes when a contractor runs a fab shop like a manufacturing facility instead of a job site under one roof?

16:10Yeah, that's perfect. That's what I always like to say. Are you doing construction in a warehouse or are you doing manufacturing? And the reality is MEP fabrication, construction fabrication is not manufacturing. It's also doesn't need to be construction in a warehouse. It's something in between. And the real, the art is understanding it is not the same, understanding the unique parts of a lot of this fabrication is kind of one off, but a lot of it looks kind of rhyme, right? You know, so a pipe spool or a duct section, you're not going to build a 10 ,000 widgets, but they're going to look similar enough that you can embrace some manufacturing processes, some standardization, jigs, fixtures, tooling, some automation increasingly these days.

16:56So the real art is understanding we're not just doing manual construction in a warehouse, nor are we a true widget factory, automotive factory, whatever. And then learning, kind of taking the best from both and building a production system that's right. So something like whip control, just in time thought, that is absolutely applicable, as is batch control. So this is how we get, you know, this happens in every kind of manufacturing industry. You buy a tool that's really efficient. Maybe you get an automated welder or something like that. And you get this mindset like, man, I make money by having that thing run all day long.

17:37So you end up with just piles of semi-finished material, work in progress. And then comes the design change. You know, then comes the pharmaceutical who says, hey, we're going to route this piping a little differently. And you're sitting on all of this work in progress that you just can't handle. Same thing with the schedule changes, right? You have all this stuff staged and you're going to ship it all out there. And then they're like, hey, bad news. The crane's not available this week. Now you've got other work that you'd like to push through your system, but because you're so jammed up with what you thought you were doing because you were running, you were trying to go too much towards the manufacturing piece of just a thousand widgets that you're not being agile.

18:14And, you know, some jobs are different, Eric. You know, you think about, for example, some of these data center jobs are looking a lot more like manufacturing, where you are building 800 units of the exact same heat exchanger or chiller. So those lean a little bit more towards manufacturing, where we can put, you know, a true kind of manufacturing resources process in place. Other jobs are very much more like a job shop. If you've been in like a manufacturing job shop where everything that comes in the door could be different than the last one. How do we adapt to that? And I think that's the art of MEP fabrication is understanding which jobs fit and where in that spectrum and adjusting your process appropriately.

18:55Jake Olsen: So thinking of the M, the E, and the P, if you were to pick between one of those three as the most likely to be able to sort of get into this middle space between manufacturing and construction and really gain some efficiencies through prefab, which one would you pick? I actually think there's sub-assemblies components in each of those. I think a bit more of like what portions can we treat more like manufacturing versus which ones need to be more bespoke. And like I said, a lot of that is job-specific. If it could electrical, for example, we might do in-wall devices, pre-wire them, put receptacles together with whips that go up.

19:36We can treat those very much like a manufacturing operation because they're very standardized for that project. What receptacle, what wire nut, how are we doing the joining, what gauge wire, how long is the whip? That looks a lot like just banging out widgets. But the overhead racks that carry conduit on that same job from the same contractor, those might be one by one fitting into a corridor, being coordinated in much more of a bespoke. And I can go through examples with each trade, sheet metal and plumbing and piping. Sometimes the hangers are very standardized. Those look all the same. We need 6 ,000 clevis hangers with three-foot rods.

20:15However, the pipe that goes in them might have OLEDs and branches and might be very unique. So I like to think about it, about breaking that job down to the things we can fabricate and then building the right kind of process for each of those sub-assemblies or components, if you will.

20:33Jake Olsen: All right, quick break to talk about my book, Construction Genius. This is what I want you to do. Go to Amazon, search for the book, read all of the five-star reviews, because there's a ton of them, over 50 to be precise. and the reason I want you to read them is because real people wrote those reviews who've actually read the book and it'll give you an idea of why you should go and buy a copy right now on Amazon and here's the deal if you purchase 10 or more copies for your company and then send me an email ericatconstructiongenius.com I'll come in via zoom and do a one-hour Q &A and a bonus training session with your team at no charge.

21:13Jake Olsen: I normally charge$4 ,500 for an hour of my time. And again, for you, I'll do it at no charge if you buy 10 or more copies of my book. And the reason you should buy it is all in the title. It's effective, hands-on, practical, simple, no BS, leadership, strategy, sales, and marketing advice for construction companies. So if you're in the construction industry, this book is for you. So you can get it on Amazon. You can also get it on Audible in the audio version as well, narrated by yours truly. And I know you'll really enjoy it. So go out and get the book. And now back to the interview. It's interesting because when I think about prefab and even the modular, there's a lot of hype around it that seems to come from the outside to the contractors, right?

22:00Jake Olsen: And so the contractors get a marketing call from someone who's selling something. And of course, they're selling hopium a lot, right? And it seems just from what, as you're talking about it, if you're going to be successful doing this sort of thing with prefabrication, you need to think modestly about it. You need to be sort of sober and realistic in your expectations. And you have to develop the right mindset around it. Like you said, where we're not doing construction in a shop and we're not doing manufacturing, we're doing something in between. That's right. And I know we've been talking around that, but if you were to define that something in between in a couple of sentences, how would you define that?

22:44I think so on the front end of this, one of the roles we've seen spring up in the kind of the pre-con phases, even bidding phases, is a prefabrication coordinator or planner that works for the trade contractor that's got the experience, that can sit with both the owner and the general who thinks that prefab is going to solve everything, everything's going to be wonderful, and sit with some actual real-world examples and say, okay, let's look at this project as we're early, where we're still in kind of design development. And let's like really think what could be standardized, assembled, modularized.

23:19How can we break this thing down into prefab areas, sections, ideas? And just in that iteration, I mean, you can take things like headwalls in a hospital. The architect might have made each one of those a little bit bespoke and a little bit different. And that's where an MEP contractor could get in and say, look, we can still make this thing look different on the outside, but can we standardize the way the med gas is running behind the scenes? In that case, I can treat this as a module. So once you've got a prefab plan in place, bathroom pods is another great one. Sit with the architect. Yes, you can have different urinals and different toilets, but can we standardize the way we're going to run our waste and venting out of those?

24:02And then, you know, that allows us to prefab. So once you've kind of built that prefab strategy really early on, ideally, even during design development, I think to your question, then we can start laying out our prefab strategy for that project. What percent of work, what types of joining methods is a great one, right? If everything is welded, can I make that a hybrid system where I could use like a groove coupler for my field connections and weld in the shop? So press fittings are, you know, in the field are easier on copper than soldering or brazing. So that's where you get really early on and you build that strategy of how we're going to break this job down into sub-assembly components.

24:42That then informs your whole downstream, like where am I at in the middle of manufacturing versus job shop? The more you can standardize modularize and i'm not talking about katerra big volumetric modules but just you

24:59Jake Olsen: know sub assemblies think about it that way yep then you can really start thinking about how that's going to work in the shop logistics and material handling is a big one eric how big are my units that what are my constraints on site do i have a am i going overland and i need to you know have low boy trucks, what's my maximum height to get under bridges, load capacities on roads, if I'm doing helicopter lifts or crane picks or buck hoist movement. All of that needs to bake into building a prefab strategy for the job. And then once I've kind of defined the size of these sub assemblies and components, a first pass at a schedule, which you got to know right out of the gate, that's going to change.

25:43Jake Olsen: Yes. Then we can start kind of putting that operational system in place. And, you know, that's really what our software does. Like it helps get down to that production system methodology where it applies. And there's some stuff isn't going to be a good fit for that. You're going to say, look, that, that whole area there, it's just going to be field fabbed and, and, and that's okay. You know, maybe you're underground, you can't meet the schedule because we're still, so you're just going to go out and lay that out and do that in the field. But the success really starts early on during the DD, SD phases where you're actually into the CDs where you can actually have that conversation with the engineers involved, the owners, the architects who otherwise everybody's going to, oh yeah, Fab's going to save the, you know, we'll do all this volumetric, Fab will save the world.

26:30I mean, there's a lot of projects that have lost a lot of money by trying to do Fab without a good plan.

26:34Jake Olsen: Yeah. What do you see with the contractors you work with, at what point do they decide, okay, we're going to build a fab shop or we're going to buy a fab shop? When do they make that pivot? Because you can sub it out to your competitor who's doing the fab, right? When do you see typically that sort of break point? Yeah. For some contractors, it's a big job. It's a big kind of reason to get into fab. And they won some big hospital and the general contractor is big on fab. And like, all right, we got to do it so we're going to ramp up i think for many though it's been just kind of a slow you know some cases not slow a fast but it's just been an incremental step by step by step i can't tell you how many customers we've got hundreds of customers how many i've been to that have added another 10 000 square feet added another 100 000 square feet and hey we used to be here now we got the place across the street too and actually the good positive thing going on is a lot of them get started.

27:31They see the benefits. Maybe they take a portion of the work on the piping contractors. Maybe they do carbon steel pipe. They start seeing success and then they think, oh, we could do our plumbing. Maybe we should start looking at plumbing prefab too. And that's a very common path. Or they're doing sheet metal fabrication and they just said, maybe we could do our pipe as well, our HVAC piping. So usually it's kind of an incremental growth as they get something started, they see success. But like I said, other times you win this huge job and it's like, the only way we're going to do this is to build these OSM, these offsite modular for data center and chip fab and that you'll see that more where they're like, hey, we're going all in.

28:12We just won this job. We got to figure out how to build these modules and they'll kind of step change their fab capacity.

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29:03Jake Olsen: It will teach them the three essential messages they have to communicate every day in order to motivate and lead their team effectively. It'll show them how to build and lead a high-performing team, give them a framework for running effective meetings so they'll be able to solve problems in less than an hour and also give them a higher perspective on their leadership that will enable them to work on the business and on their teams and not get stuck in the weeds micromanaging. So go out to my website, theshift.constructiongenius.com, read all about the course and then enroll yourself and your leaders in the course and I guarantee that it will transform your leadership.

29:44Jake Olsen: If it does not, you take the whole course and you didn't get benefit from it, you just send me an email, eric at constructiongenius.com, and I will cheerfully refund you 100 % of your money. I'm really confident this course will transform your leadership. So again, go out to the website, theshift.constructiongenius.com, learn more about the course and start taking it today. That's interesting. So as people are going down this path, it's one thing to sort of have a warehouse and, you know, throw some guys in there putting stuff together out of the sun or whatever. But where does automation like weld robots and things like that actually make sense in the MEP fab shop?

30:22Jake Olsen: And I'm asking because, you know, you can see how you can go down this rabbit hole and start pouring tons of money into it. Right. And so robots, I mean, who doesn't like a robot? When does that start to make sense? Yeah, it's increasingly entering the conversation. We connect to a lot of tools, so we get good data on these trends. I think there's a lot of portions of FAB that lend themselves to automation robotics. And when you are running a digital workflow, you can actually talk to those machines. You can kind of feed the instructions digitally. So welding robots, a lot of the larger mission-critical projects have lots of diameter inches of welding.

31:05And ROI is pretty well proven on these weld robots now. If you can kind of break the job down, and this does take planning. You can't just kind of build the sub-assemblies the same way you would if you're going to hand-weld, because there are some constraints on how these things work. But if you can pre-plan that, the weld robots are amazing. And, you know, there's automation on linear cutting. There's a conduit bending on the electrical side. That, as anybody who's kind of watched traditional manufacturing kind of move into automated, If you've been in a car plant lately, it's mind-blowing how much automation.

31:43In a lot of ways, I feel like we're just kind of getting started in MEP fab. So it's exciting. And I don't see that trend reversing. Once you put your welding robot in, you don't say like, oh, you know what? We don't need that anymore. Most people buy another one, not get rid of their first one.

31:57Jake Olsen: Well, since we're talking about robots, I got to ask you about AI. How does BIM, AI, and digital workflows help turn prefab from an idea, a nice idea, into an actual repeatable system? Yeah, it's lumping BIM and AI. So I'll peel those apart a little bit. So BIM, in its own sense, is a good 3D model that's fabrication ready. And I think that's where a lot of people get confused. used the 3d model that the architect creates and maybe the engineer overlays the mechanical MEP engineer overlays that's not fabrication ready that's needs a second step actual parts and fittings with the fabrication instructions how are they joined together will this run on my coil line for sheet metal but once I've got a fabrication level model you can really leverage fab now you basically have digital instructions for everything that needs to happen in the shop, including directly talking to a machine.

32:59So take like a header on a pump skid or something that's got these really complicated cutouts for the way pipes are going to be welded. If I've got that modeled at a fabrication level in BIM, I can feed that cutting instruction straight into a pipe profiler without any human in between trying to look at paper or anything like that. I can digitally talk to that. So a good fabrication level BIM is a massive step change in your fabrication ability. By the way, that's what our software does. I mean, it basically helps you take that BIM and turn it into your entire fab workflow. How AI is getting overlaid is really interesting.

33:42So the great thing about BIM is it's structured data. And I see a couple interesting vectors here. One of those is actually, how do we get to that fabrication level BIM faster? So there is a couple companies out there working on actually creating that fabrication level BIM using kind of machine learning, LLM type of systems from existing. So if I've drawn 62 fire sprinkler systems, can I quickly, by hand, can I take those and get the 63rd done, relatively less labor, more AI intensive. And I think there's going to be promise there. I think we will get more fabrication level BIM faster with some of these AI tools.

34:26The other side of it is same thing. If I'm working in a digital system, what am I doing repeatedly that I can look at automation and the same kind of training mechanisms in place, right? So for example, in our software, we're constantly breaking down large pieces of assemblies into small pieces. How those get broken down, right now, it's still kind of a semi-autonomous or semi-automatic process. They're still a human in the loop. But how those get broken down can actually teach how to break it down the next time and the next time and the next time. So I don't have to manually keep creating those fab packages and track it.

35:05So I think there's a lot of kind of agentic workflows that will sit on top of this digital fab process that are enabled by all the way back upstream again, having a good BIM fabrication level data ready to feed into the fab process.

35:19Jake Olsen: Yeah, it's interesting. I can tell that you actually, well, the nice thing about talking to you, Jake, is you know what you're talking about. You're not just a tech guy coming into construction thinking I can make some money. So what mistakes do contractors make when they're trying to implement prefab? I've seen it. You can lose a lot of money on prefab. Yes. And the two areas I think that people get really upside down on are material handling and And not having the number one above all of this is not having a measurement in place. And you have to be able to know where you're at against your budget, against your estimate.

35:54If you're going to introduce a fab process, now you've got labor in two places. You have material purchasing in two places. You know, you're shopping your job site. You have to have a way to connect that, roll that back up to your estimate and know if you're on track or not. So where do people get in trouble? the amount of kind of material handling, trucks, shipping, logistics, the labor that goes to load things on a truck, take it off. Some of these shops, you walk in and they're like, pipe comes in this door, they pick it up, they put it in the cart, they take it off, they put it over here, they put it in the, and if you sit there with a stopwatch, you know, they're adding twice the labor that they would have if they just shipped it to the site and welded it on site.

36:32So, you know, the great contractors get really focused on putting measurements in place, really tracking that. So material handling is a big one. And then the second one is rework in general. And that's a lot associated with kind of the schedule stuff we were talking about. So when you get too much work in progress in your system, just by nature, you're going to run into issues on rework. And I can't tell you how many stories I've had of contractors who shipped a bunch of fab, gets to the job site field foreman and saying well you know what that's not what we needed

37:09Jake Olsen: or we never got it in the in the prefab shop the rework stems from several places number one is knowing what to build when making sure it's at the right place at the right time and believe it or not even knowing where the dang material is you'd be surprised how much material gets lost just by not having kind of visibility traceability yeah the other one is kind of like we talked about the changes that are inevitable, it will happen. If you've got six months of pre-built stuff sitting in your shop and there's a little change, somebody's got to pay for that. There's going to be rework. So getting too far over your skis on fab.

37:48And then, yeah, quality control is, I think, that can happen anywhere along that chain in your BIM, in your fab, in your install. and not having that connected to actually chase those quality problems back to root causes. How do we deal with that when everything was field built? You just kind of sort it out in the field and nobody worried about it, right? But when you're shipping these big pipe spools and the flanges have to be 16th of an inch tolerance and mate perfectly and they have to be clocked perfectly and all these, if you don't have that dialed in, that creates a lot of risk on redoing some very expensive types of fab.

38:28Jake Olsen: Yeah, it's interesting. So if you're going to get into this and do it well, obviously you're going to make mistakes as you go because that's just part of the process. But you also have to be, from what we've been saying here, you have to have your expectations set correctly. I think it sounds like sort of start small and get comfortable with a particular part of your process that is suitable for prefabrication. Sounds like getting the right people in place in terms of a prefab coordinator, someone who can really work well with the GC and the owners, that's vital as well. What am I missing here from what we've talked about?

38:57Yeah, mistakes are fine as long as we learn from them. Yes. It's the mistakes that we don't learn from that really bite us. So, you know, that's kind of continuous improvement mindset. I'm increasingly seeing contractors hire people from manufacturing types of roles into their fab shop. And I think that's a really positive movement. You know, somebody who's run fab for Caterpillar. I said a customer who hired a guy from Caterpillar to come in and, you know, be part of their fab shop operation. You know, couple that with construction because there's going to be unique aspects of construction and codes and processes that, you know, somebody that worked for Caterpillar may not understand.

39:41And however, that caterpillar person is going to bring some discipline in lean and continuous improvement and just manufacturing mindset that just isn't inherent. And it's not any contractor's fault. You know, none of these folks went to school to learn operation science. So marrying those two things together, I think, is a really positive trend I've seen. And it lends itself to putting the measurements in place, putting a continuous improvement process in place, having thinking about risk from work in progress, tracking from logistics management, that coupling of construction, how we know it, and some manufacturing mindset, like we talked about before.

40:19It's not all manufacturing.

40:21Jake Olsen: It's not all construction. It's something in between. And I think that marriage of those two skill sets has been a big success for our bigger customers that are really running great fab operations. Yeah, that's really great. Appreciate that. So Jake, tell us a little bit more about yourself and how people can get in touch with you and who should get in touch with you, please. I have been doing construction my whole life, 20 something years now. I started off as a structural engineer, primarily working in the field on some big projects. Got into the MEP world, software MEP world early, probably 2005 before.

40:54Jake Olsen: Back in the day. Yeah, contact before people called it contact and have built several companies, several software platforms and companies over those years. But yeah, most recently took over as CEO of Stratus. So we've been doing this for about 10 years now. Stratus is on its 10-year anniversary, so lots of experience. We've got hundreds of MEPs, contractors on our software. Anybody that an MEP, mechanical, electrical, plumbing, fire sprinkler, piping, sheet metal contractors that are leveraging fab or would like to leverage fabrication as part of the delivery method should definitely give us a ring.

41:29Most customers we talk to are on some type of paper, spreadsheet, markers, pencils, smart sheet, homegrown database thing. And that's fine. We love helping those people get converted into a more digital kind of dedicated product that will help them accelerate. So if you're an MEP contractor that has a fabrication as part of your delivery method, give us a call. Stratus.build is our website. It's very easy to click a button there and we'll be right in touch. And I'm on LinkedIn all the time. Jake Olson at Stratus, you'll find me on LinkedIn. So that's great. Yeah, we'd love to chat with contractors that are trying to think more like manufacturing.

42:14No, I get that.

42:15Jake Olsen: What's the number one problem or the number one benefit people get from using your software? What's the number one problem you solve or the number one benefit that people get? Yeah. Most contractors that join us are doing something like an analog stratus, I call it. If you're going to do fab, these problems exist, whether I'm here or not. Where's my stuff? How much of it do we make? How do we make it? When do we ship it? Most contractors do what they, you know, they're problem solvers. They build a spreadsheet. Next thing you know, the spreadsheet gets a little bigger. They build like stickers and labels and stuff like that.

42:48So most contractors are trying to solve the problems that we solve. It's just not digital, it's not efficient, and it's not connected in a way that can actually benefit. So we talked about having a continuous improvement and having measurements in place. You don't get that when everything's kind of one-off on spreadsheets and paper and all that. So the big problem we solve is we really build help. I tell people you're buying a software, but you're really buying as a workflow from us. And that's our goal is to help you take that process and turn it into kind of an operating system, a smooth workflow.

43:22So that's the biggest problem we solve. The big benefit we see is significant improvements in productivity in the shop. Some of that just comes from the visibility, helping contractors know what's working and what's not. Are we better off to do welding in the shop or Victolic for couplings? Those are the questions. Unless you're measuring, you can't answer that, and then you can't improve. So, yeah, it's fun. We've taken hundreds of contractors on this journey. We've got a lot of experience doing it. We've got an incredible team that sits with you. We've seen this. Everybody thinks they're unique.

43:54I guarantee you we've seen probably 99 % of your operation before somewhere else. And it's our job to help you be the best version of you as a contractor.

44:04Jake Olsen: That's beautiful. I really appreciate the insights you shared with us here today, Jake. And thanks for joining us on Construction Genius. Eric, pleasure was mine. I hope to chat again. Awesome. Thank you for listening to my discussion with Jake here today. Please share it with other people. Please give the Construction Genius podcast a rating and a review wherever you get your podcasts. If you're on YouTube, like and subscribe to the Construction Genius channel. And I'll catch you on the next episode. Thank you for listening to this episode of Construction Genius. Hope you found that 1 % of inspiration to help you in the next few days.

44:40Jake Olsen: If you like the show, please give us a five-star review on iTunes. Share it with other construction leaders who you think would benefit. And always remember that the show is brought to you by Kick-Ass Meetings. I've been working with construction leaders since 2004, teaching them how to run extremely effective problem-solving meetings that gets their people collaborating, taps into their creativity. And to get yourself a free copy of the Kick-Ass Meeting report, go to www.ericanderton.com slash kickassmeetings. Grab yourself that free report, read it, use it in your business. You'll find it extremely useful.

45:20Jake Olsen: And thanks again for listening.

45:29Thank you.