The electrical switchboard industry’s path to prosperity

This article talks about how Modutec evolved in the switchboard and panel building industry through their transformation from welded to modular enclosures.

I started my business in a Paying Guest accommodation in Rajaji Nagar, Bengaluru, right out of college in 1983. With electrical stocks under my bed and travelling on my brother’s motorcycle, I would sell MDS Switchgear MCBs and DBs from one customer to the next.

In 1990, I started manufacturing electrical switchboards and control panels in a 1000-square-feet shed. I used to believe that profit equalled sales minus purchases minus overheads. I had no idea I was using an incorrect equation. It left out an important consideration, which I discovered much later in my entrepreneurial journey. Inventory Turns is what it’s called!

The higher my inventory turns was, the lower the cost I could keep down, in order to boost my company’s profitability. Conversely, the slower the turns of my merchandise, the lower the profit gain. Worse, I had to spend extra money on storage, insurance, and maintenance!

For most sectors, a decent inventory turns ratio is between 5 and 10, indicating that you sell and replace your goods every 1-2 months.

I realised that the inventory turns ratio may be enhanced in several ways:

• More accurate forecasting thanks to a close relationship with your customers, which is crucial.
• Increase sales by putting in place the right qualifications, tactics, and systems.
• strategically reduce the price to improve sales rotation.
• Higher profitability and cash flow are a result of better inventory acquisition pricing.
• Concentrate on the best-selling items, which are based more on perceived value.
• Improved Order Management via kitting, logistics, and planning.
• Get rid of any safety stock or old inventory that requires constant care.
• Minimize your purchases and try to get more done with less.

Increasing inventory velocity boosts cash flow while lowering the demand for working capital. Accounts payable and receivables will be significantly more balanced as cash flow improves continuously. All of this is due to the fact that there is less cash required for working capital (to pay for inventories).

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