IE Solar

Solar Technology: Cutting Costs the Unsexy Way

The top heavy comment comes from the fact that from Q2 '07 to Q3 '07 the selling and admin expense jumped from 3.6 Million to 5.3 Million in a Quarter where the Sales only increased a half a million.
The Q3 loss was 3.7 Million, I'm sure the additional 1.7 million of Selling and Admin expense was overhead, probably a lot of it un-necessary (possibly and overblown ERP exercise). Check the Income statement quarterly data.

The Inventory problem (check the balance sheet quarterly data). Over the course of '07 the inventory went from 1.8 Million to 6.6 Million (nearly 4x) in a time when sales only doubled. Apparently the inventory was funded with debt (debt up to 4.9 million from 530K) and AP up from 4 million to nearly 9 million.

If the trends seen quarter to quarter on these debt, inventory, and admin expense numbers don't improve and keep trending in the wrong direction, look out.

Or I could be completely off base and these investments were sound, setting up Akeena for growth. The '07 financials will be interesting.

I think the fundamental problem with Akeena might be a management team made up of mostly Software guys, trying to make a go of it in a hardware / construction based business. Vaporware doesnt exist in this industry, it doesnt produce Kwh.

Solar Technology: Cutting Costs the Unsexy Way

An interesting article, but misses the mark big time.

The typical residential solar install costs roughly $8.00 per watt installed. Of that $5.00 is materials cost. The remaining $3.00 pays for the contractor's direct labor, indirect labor, the assorted insurances required, contract administration, rebate administration and the cost of Sales and Marketing. If your lucky you might have a few bucks actually hit the bottom line as profit. The thought that somehow a elaborate ERP solution will somehow squeeze out additional profit or cost savings to the customer is a bit naive.

Let me explain:

A Solar Installation is not overly complex. Compared to other construction fields, it would probably be equivalent to a door and window contractor. The real trick to success is to have all of the proper doors and windows for the job tightly scheduled to arrive at the start of construction. It is possible to engineer the other associated hardware, shims, hinges, down to the penny. I'm sure it is possible to check every door and window for level and squareness to optomize shim expenditures but the level of engineering required does not justify cost. The problem is solved by having trained installers with well stocked vans.

Granted, there are some larger installers that may need ERP. Akena is publicly traded and we can see they turn their inventory maybe twice a year. They have an inventory problem. Maybe an MRP / ERP will help, or maybe it will add another layer of overhead and complexity on an already top heavy company.

Our company is perfectly happy managing our inventory with QuickBooks and Excel and turning the inventory 40x per year. A few basics diciplines and a lot of product knowledge in the procurement function goes a long way towards success.

Bruce Whitehill CPIM
Materials Manager
Independent Energy Systems