A few months ago, you printed a column about a material handling system builder that brought its panel building jobs back in-house. We've been thinking about that, too, for similar reasons. We're trying to either bring it all back so we get the benefits of volume, or just do the custom, one-off builds that have more complexity, but high value and high importance to be perfect. I'm sure we're not alone. Anybody have some ideas, experiences to share about this?
—From April '13 Control Design
Seek Out Specialists
The question of whether to build panels in-house or outsource them is part of the reason why we exist. Our customers are very good at building machines, conveyors and other equipment, often with some assistance from system integrators (SIs). However, they usually don't have the manufacturing expertise to build panels. So, they frequently outsource the panel building and PLC programming to us; the SIs do more programming and test them here; and then they're shipped to the builders or into the field for installation and more testing.
People have been going back and forth about how to justify the costs of panel building for 20 years, but it can require many engineering or programming skills that are different than what a particular machine builder might have. Many builders outsource panel building and PLCs because they aren't big enough to do it routinely on their own, or they have to meet a certain schedule, or they got burned in the past when they tried to do it in-house. A raw comparison can make the in-house route look attractive. However, the costs of punching holes, making sure designs and panels conform to UL and other standards, testing and other tasks can really add up if you're not doing them all the time.
Overall, we see more outsourcing of panels coming to us now because we have the everyday expertise and machines to do it faster and with better quality. We have the CNC metalworking machines and powder-coating equipment that a lot of builders and SIs don't have. I think we're doing more work outsourced to us because many machine builders are in more specialized niches, and so it's a better decision to outsource.
To decide whether to build a panel in-house or outsource it, you have to look at the project's true material and labor costs. If you think it's not that hard to do it yourself, then check out the tools and time you're going to have to invest. If you're going to tie up resources to build a panel, you also have to consider whether it's worth for you to be taken away from building your core-competency machines, which are probably a lot more profitable.
It's true that panel building is getting easier with PLCs that are simpler to program and use, terminal blocks that are quicker to install and have more accessories, and with pre-fabricated cordsets and wire management solutions. However, panels must still comply with U.S. National Electrical Code requirements like NFPA Standard 70, which requires securing UL or other third-party testing and listings, and that can be another barrier to freelance panel building.
Be Sure About This
We constantly deal with this from a perspective of 1) pulling in high-volume panel builds that might be being built for ABB at a third-party extension of ABB's manufacturing, and 2) helping a good customer improve profitability, quality and aftermarket support by having ABB provide the panel.
Moving panel business from a subcontractor in house is no small task, and it's not for the weak of heart. Bringing panel business in house is a large organizational commitment that will require a cross-functional team and managerial commitment from all areas of your business, including sales, marketing, engineering, production, operational excellence, IT support and finance. If company middle management have divergent goals from your panel project, it will make the project more difficult than necessary. Following a product development process and narrowing the process scope to the specific needs of the project is important. A critical aspect of evaluating the project viability of moving it in house is knowing how your panel builder contracts have been set up and, do you, as the buyer, own all engineering, including panel layouts, bills of material and metal-fabrication drawings? Knowing this up front will allow you to know if you are localizing manufacturing, or developing a product.