Why Some Factories Falter — and What Their Numbers Reveal

A new “Cause and Effect Series” by Bill Murray

I’ve been asked many times, “Why do some modular factories make it while others don’t?” There isn’t one single answer—there are patterns.

Over the next few articles, I’m taking a closer look at some of the most common causes I’ve seen firsthand, (both in my own company plus those of others witnessed through advisory assignments)—but, more importantly, the systems that separate the successes from the failures.

This first article tackles one of those quiet but costly causes: the absence of accurate, current costing and estimating systems. The effects often prove devastating.

The False Comfort of “We Know Our Costs”

In almost every struggling factory I’ve walked through, leadership believed they did know their costs. Spreadsheets existed. Estimating programs produced clean reports. Prices were set to be competitive.  (In one case the sales price was actually set exclusively on the competition’s price!  Think about that one.)

But when we dug in, two serious gaps appeared—both rooted in missing systems, not missing intelligence.

First, their estimating data wasn’t tied to current realities. Material pricing, labor rates, and production assumptions hadn’t been updated regularly—or at all. In a volatile environment like construction, that lag can be devastating. I’ve seen estimating models six months out of date that were already thousands of dollars off per module because of incremental cost increases that went unnoticed.

Second, very few factories “audit” their own results once the job is finished let alone during the manufacturing process. The actual material, labor, and overhead costs are rarely compared to the original estimate. That feedback loop—the one that validates or corrects assumptions—is often missing entirely.

So estimates remain unverified. They look professional and consistent, but they drift further from reality with every job. The plant keeps pricing future work on untested numbers, not realizing the gap between estimated and actual costs has widened to dangerous levels.

I’ve seen that gap quietly erase entire profit margins before anyone even noticed, or until it was history.

The System That Was Missing

When estimating and production operate in separate silos, numbers stop meaning anything. That’s the real issue I’ve seen over and over again—not that people don’t care about costs, but that they don’t have a system to keep those costs synchronized with reality.

A good system creates a closed loop between estimating, production, and feedback.

1. Estimating sets the baseline. Each bid starts with defined assumptions for material, labor, and overhead.
2. Production records the reality. As the job runs, actual costs are captured—not just material invoices, but man-hours, waste, and rework.
3. Feedback closes the loop. When the job finishes, someone compares what was expected to what actually happened—and documents the variance.

Without that loop, there’s no mechanism to catch drift. Estimators continue pricing work based on outdated standards; production teams fight fires without understanding the root cause; management thinks the margins look fine because no one has verified otherwise.

The good factories, after every project, the proper team members sat down with a one-page variance report—simple, color-coded, and brutally honest. If labor hours were exceeded, if material costs were exceeded, sometimes heated discussions took place.  If framing costs dropped because of a process improvement, that update went straight into the estimating database. The excellent factories performed weekly and in one instance even daily assessments and variance reports.

There is excellent software out there to steer proper costing and auditing, but it is useless, as is often the case, if the culture doesn’t demand essential disciplines to allow the data to drive results.

The Cost of Not Knowing

When a factory doesn’t know its real costs, the damage builds slowly and quietly. Jobs that look profitable on paper often aren’t—but no one discovers that until the cash runs thin.

Without verified data, every project becomes a guess. Some hit the mark, some don’t, and over time the misses outweigh the wins. By the time a P&L exposes the truth, the company has already spent the profit it thought it earned.

I’ve seen plants lose margin one assumption at a time: a few underestimated labor hours here, a small material overage there, a little overtime that never made it back into the estimating model. Nothing catastrophic—just a slow erosion that no one measured.

And when leadership finally starts asking why the numbers don’t match, the answers are all symptoms: “materials went up,” “labor is short,” “sales discounted too deep.” The real problem isn’t the conditions—it’s the missing visibility.

Once you put a feedback system in place—tracking actuals, auditing assumptions, updating estimates—those excuses disappear. The numbers stop surprising you, because they finally mean something.

The Takeaway

Factories rarely fail from lack of effort or intelligence. They fail from lack of clarity—and in manufacturing, clarity comes from systems.

When you don’t have a structured way to capture and verify your true costs, every bid is a gamble. When you do, you gain control—not just of your numbers, but of your future.

At one point in my career, I became a GM for a factory that was part of a privately held corporation.   The owners decided to offer for sale their entire company.  They had hired a consultant to guide the sale process.  One of the very first things he addressed was this:  Prioritize all systems and processes.  Show proof that they are in place and used.  Document all systems and processes, reduce them to writing.  It was the single biggest piece of advice we received.  It made a lasting impression on me as a GM.  It took us almost a year to get our act together.  It paid big dividends.  Ultimately sales, production, and finance finally start speaking the same language—one built on facts, not assumptions.

I’ve watched that shift happen firsthand. My team used this systems-based philosophy in a turnaround.  Once real costing systems are in place, confidence replaces guesswork.

That’s when a company stops reacting and starts managing.

At Offsite Innovators, we welcome your thoughts and comments.  We also welcome the opportunity to assist.  Don’t hesitate to contact us at:

If you’d like to explore this further, connect with me today.

Bill Murray, Co-Founder of Offsite Innovators