5 Ways Electrical Automation Control Panel Builders Gain Profit with Denver Electric Distributor
Breakthroughs Media
July 30, 2010
More info click here: www.cpidenver.com
Building electrical control panels for automation or industrial usage is a competitive business. And with today´s economic climate, the sensitivity to price is intensified. Every panel builder´s ability to maintain their bottom line profitability is constantly threatened. The first reaction most panel builders have to those threats are to immediately cut their price, thereby reducing their profit margin. Unless measures are taken to reduce the corresponding production costs, this is a sure way to drive their business into financial trouble. So all costs incurred must be recognized. These costs go beyond just the price of components used in the panel. There are cost reductions in labor, inventory levels, acquisition, and handling that are possible when creative methods are employed. Here are five of those methods for dollar savings.
1. Utilize the Just-In-Time inventory concept. Select a distributor partner that has the capability to establish an inventory delivery system that supplies products exactly when needed. Getting product too early results in paying for the inventory before it can be resold. Also the chance for material getting lost or broken before it is used increases. Conversely, late delivery eats up time in looking for the product, checking on the delivery status, and reducing panel building efficiency while waiting for the material. Getting the product just when needed enables efficient production sequencing and allows the opportunity to sell the electrical panel before it has to be paid for.
2. Implement Kitting. Allow the distributor to package an entire bill of materials into a single part number by using a kit. This works particularly well if a panel is built repetitively. A kit eliminates the costly process of obtaining each product from an inventory stock location and moving each one to the point of assembly. A kit also eliminates the cost incurred with entering each component onto a purchase order. By creating a kit, a single line item can be ordered and received, and even delivered to the assembly point by the distributor, which reduces labor time for the panel builder.
3. Use Bar Code Scanning. Working with an electrical distributor that offers an inventory replenishment program that utilizes bar code technology can save a great deal of time by reducing inventory management costs for the panel builder. The concept is that the panel builder uses a hand held bar code scanner to scan needed items, and that item requirement is electronically transmitted to the distributor. That reduces purchasing time and eliminates keypunch errors. It also will help reduce buying the wrong amount of product.
4. Consolidate purchases by using fewer suppliers. Defining the cost of creating a purchase order is certainly subjective. Ask seven experts, and they will have seven different numbers. But all will agree the cost is much higher than is commonly believed. Buying more products from one supplier will save the cost of issuing multiple purchase orders. Additional time is saved because of processing fewer vendor invoices, and issuing fewer vendor payments.
5. Turn panel building into a variable expense. A panel builder can save overhead expense by reducing the panel building operation to a baseline level, and direct overflow business to a distributor that offers contract panel building. When a panel shop is underutilized, those costs are overhead. A better strategy is to staff minimally, and outsource those occasions when upward spikes in business occur.
These strategies are ways to go beyond product price reductions from suppliers. And not all can be implemented by every panel builder. But choosing one or two will afford the opportunity to maintain, or even increase, bottom line profitability.
To learn more about these cost saving strategies, and additional ideas to reduce cost, go to www.cpidenver.com, or send an email to info@cpidenver.com.
Building electrical control panels for automation or industrial usage is a competitive business. And with today´s economic climate, the sensitivity to price is intensified. Every panel builder´s ability to maintain their bottom line profitability is constantly threatened. The first reaction most panel builders have to those threats are to immediately cut their price, thereby reducing their profit margin. Unless measures are taken to reduce the corresponding production costs, this is a sure way to drive their business into financial trouble. So all costs incurred must be recognized. These costs go beyond just the price of components used in the panel. There are cost reductions in labor, inventory levels, acquisition, and handling that are possible when creative methods are employed. Here are five of those methods for dollar savings.
1. Utilize the Just-In-Time inventory concept. Select a distributor partner that has the capability to establish an inventory delivery system that supplies products exactly when needed. Getting product too early results in paying for the inventory before it can be resold. Also the chance for material getting lost or broken before it is used increases. Conversely, late delivery eats up time in looking for the product, checking on the delivery status, and reducing panel building efficiency while waiting for the material. Getting the product just when needed enables efficient production sequencing and allows the opportunity to sell the electrical panel before it has to be paid for.
2. Implement Kitting. Allow the distributor to package an entire bill of materials into a single part number by using a kit. This works particularly well if a panel is built repetitively. A kit eliminates the costly process of obtaining each product from an inventory stock location and moving each one to the point of assembly. A kit also eliminates the cost incurred with entering each component onto a purchase order. By creating a kit, a single line item can be ordered and received, and even delivered to the assembly point by the distributor, which reduces labor time for the panel builder.
3. Use Bar Code Scanning. Working with an electrical distributor that offers an inventory replenishment program that utilizes bar code technology can save a great deal of time by reducing inventory management costs for the panel builder. The concept is that the panel builder uses a hand held bar code scanner to scan needed items, and that item requirement is electronically transmitted to the distributor. That reduces purchasing time and eliminates keypunch errors. It also will help reduce buying the wrong amount of product.
4. Consolidate purchases by using fewer suppliers. Defining the cost of creating a purchase order is certainly subjective. Ask seven experts, and they will have seven different numbers. But all will agree the cost is much higher than is commonly believed. Buying more products from one supplier will save the cost of issuing multiple purchase orders. Additional time is saved because of processing fewer vendor invoices, and issuing fewer vendor payments.
5. Turn panel building into a variable expense. A panel builder can save overhead expense by reducing the panel building operation to a baseline level, and direct overflow business to a distributor that offers contract panel building. When a panel shop is underutilized, those costs are overhead. A better strategy is to staff minimally, and outsource those occasions when upward spikes in business occur.
These strategies are ways to go beyond product price reductions from suppliers. And not all can be implemented by every panel builder. But choosing one or two will afford the opportunity to maintain, or even increase, bottom line profitability.
To learn more about these cost saving strategies, and additional ideas to reduce cost, go to www.cpidenver.com, or send an email to info@cpidenver.com.
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