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).

What do I notice when I look around at my fellow panel builders? There are three problems.
• Dead stock is constantly getting accumulated.
• Finished goods do not immediately leave the shop floor.
• Manufacturing lead times are not decreasing.

Self-discipline and client relationship management are the solutions for the first two. Now, let’s only concentrate on the third point: reducing lead times in our panel board manufacturing.

The fabricated enclosure was always the main constraint in execution while I was in welded panel manufacturing for the first decade of my career. Depending on the size of the switchboard, it would take me anywhere from 2 to 4 weeks to get the enclosure ready from the date of the drawing approval.

This situation improved dramatically in the year 2000 when welded technology gave way for a modular switchboard enclosure system (branded subsequently as MODUTEC). The constraint thereafter shifted to areas like BOM availability, design, people, and infrastructure.

Alternative sources & multiple brands ensured early availability of BOM, & deadlines are now much shorter. The advent of e-commerce further supported this procurement speed. Software & outsourcing possibilities have arisen to support faster design. Due to pieceworkers and/or contract labour, manpower is accessible at a pinch. Vendor-managed infrastructure is a cost-effective way to scale while improving supply chain management. Hence, On-Time Delivery & Lead Time Reduction consistently started improving!

Returning to the enclosure, our Panel Partners are encouraged to maintain a stock of our profiles and related joiner components. They can then put the skeleton together in a day after their GA Drawings have been approved. The bus bars, switchgear, and connections are all completed in the first week. The doors arrive from Modutec in around 7 to 10 days, and lo, the switchboard can be delivered in just 3 to 4 weeks, as opposed to the equal time taken to receive just the welded manufactured enclosure!

Isn’t it common knowledge that when our clients are in a hurry, they will almost always be willing to pay a higher price? This is the key ingredient of profitability that I imbibed as critical and today, in Modutec, it’s our MISSION to Simplify Panel Building, empower Panel Builder competitiveness and enhance the speed in Electrical Distribution; as electrical energy users, shouldn’t be made to wait. Agree?

Check out our website, YouTube channel & Linked In for more inputs and send us your coordinates, so we could take this idea of enhancing Inventory Turns, with you, to the next level!