Megger hasn’t just survived the past 18 months, it has thrived. Despite a dip in demand, the challenges of remote working and ongoing supplier disruptions, the company has completed two acquisitions and is on track for a record-breaking year. Jonny Williamson reports.
Megger has been a global leader in electrical test and measurement for more than 130 years. The products it manufactures cover almost every application within the electrical supply industry, from generation and transmission to distribution and consumption. Founded in London and headquartered in Dover, Megger’s footprint now encompasses nine production sites in the UK, Germany, Sweden and the US, and more than 40 sales offices across the globe.
A healthy appetite for growth by acquisition has seen the company acquire seven businesses or associated assets since 2018, with a further two currently in development. With major changes in how power is being generated and distributed, the conservative behaviour of many energy providers and a growing emphasis on ‘electrification’ from every side, what does the future hold? We sat down with Group Operations Director, Piers Grumett, to find out.
What was the senior leadership team’s immediate response to COVID-19 and resulting lockdown?
Piers Grumett: The board’s strategy, right from the beginning, was simple – protect our people, support our customers and preserve our cash. Protecting our people involved putting appropriate control and safety measures in place to minimise transmission and safeguarding as many jobs as possible. Supporting our customers is just good sales relations, with the big shift being the move from face-to-face to online.
Preserving cash was about scaling back on investments and travel, which wasn’t really an option anyway. That only lasted a few months, however, because the dip in work came back relatively quickly. In fact, all our facilities remained open throughout the pandemic. Demand fluctuated but a large part of what we produce goes into electrical utilities, which obviously needed to keep the power flowing and the lights on.
Clearly, however, there has been a shift in where electricity is needed away from large traditional centres like office blocks as large numbers of people began working remotely. We did make use of government support schemes and the support provided, but for a shorter period than many because demand soon picked back up. The problem then changed to a supply chain issue, and that’s by far the biggest challenge we’re facing today.
What have you done to resolve, or minimise, that disruption?
A number of things. We’ve explored using alternative suppliers, like many others have done. We reengineered some of our products where we could find a similar component that required small changes and available at lower costs and/or shorter lead times. That entailed extra costs, but it reflects our strategy to support the customer.
Other businesses may have decided not to invest and told customers that lead times will just be longer. We’ve chosen to spend extra on re-engineering or buying components at a slightly higher price in order to keep our customers supplied. We’ve taken advantage of what was available within the supply chains of our other production sites, and part of our business continuity plan includes making sure the capabilities of each site aren’t too dissimilar.
That makes it easier to shift production from one site to another. We’ve also brought some manufacturing in-house, where possible, for easily fabricated items such as internal fittings for test vans. Though, I imagine that will almost all return back into the supply chain because the cost difference in manufacturing it inhouse is quite high. Assembling a few dozen items by hand is incomparable to a high-speed automated line at one of our suppliers. We do already have a software package that helps with our supply chain planning, but how to achieve greater visibility and more accurate forecasting is something I’m keen to learn more about at Digital Manufacturing Week.
Is automation a development your exploring within your own operation?
Many of our products are low volume and bespoke, so trying to justify heavy automation is difficult. However, the recent advances in collaborative robots are very interesting because the machines are now available at a lower price point than even a few years ago. Cobots provide the opportunity to introduce small, automated stations as part of the assembly line for certain repetitive tasks or to help improve safety, with human workers either side of them. Indeed, a couple of our manufacturing sites are looking at doing exactly that.
Given the bespoke nature of your product portfolio, what have you done to make your manufacturing operations as flexible as possible?
In 2019, we introduced a new company-wide operating system based on a set of principles and practices developed by ourselves and other successful companies around the world. The Megger Excellence System is a continuous improvement methodology to help us create value, eliminate waste and develop our people and processes to make our business predictably reliable.
On the production side, we are standardising work and setting up mixed model cells capable of manufacturing multiple products while maintaining the flow mentality that is so integral to Lean. Manufacturing flexibility may come through having various carts loaded with product-specific parts and materials positioned around each cell; or it may come via process ‘islands’ capable of doing similar tasks located together.
Our aim is for MES to be fully embedded by mid 2023. The first fundamental to be implemented was visual management, which was already in place to some degree in many of our operations. As well as the expected production KPIs, visual management also includes ‘Short-term Interval Control’, which means acting quickly using problem solving tools when we see performance deviate from our target or standard.
I’ve really emphasised the importance of understanding the principles and fundamentals of operational excellence. You can have all the tools in the world, but if you don’t understand how the tool works and what is does, it’s not going to get used and the business won’t receive the benefit.
Having made an acquisition, what’s your process for integrating them into the Megger family? It sounds like the Megger Excellence System will be beneficial to that?
Absolutely. Some of our acquisitions have been specific product lines or assets, so that’s just a case of bringing that knowledge or IP into one of our existing sites and putting it on our system. For businesses with their own ERP system, for example, we tend to leave them for six months while we analyse their operation and make a plan for migrating them onto our system. In one instance, we acquired part of a business and we had no choice but to carve them out of their ERP and put them onto ours straight away. That’s probably the most challenging example because of the tight timeline involved.
What’s your take on how the energy market is changing?
A big change has been the shift towards online measurement and monitoring, something we’ve responded to within our product range. Last year, for example, we introduced our new CertSuite package, a cloud-based solution that can be used on almost any device – smartphone, tablet, laptop or desktop computer – in any location, whether or not internet access is available. Our contractor customers tell us time and again how important it is for them to save time on jobs and one of the biggest timesavers is for them to change from manual completion of certificates to a software-based solution.
More and more of our base units and equipment comes equipped with a software package offering reporting, analytics and insights, and increasingly that is all happening online. Part of our strategy is certainly to grow in that area. To help fuel that growth, earlier this year, we announced a strategic partnership with Intelligent Process Solutions (IPS) Group to co-develop online condition monitoring equipment and services, and asset performance management and insights through advanced data analytics.
Demand for physical test equipment is a slow-growing, mature market; but it is growing, particularly as developing countries install more capacity. There are also increasing challenges within Europe and the US in terms of where electricity is being generated and how it flows around the grid.
Historically, large utility companies generated power and distributed it to end users. The flow was one-way. Now, you have end users generating energy for themselves, you have lots of distributed energy resources such as wind farms, and electricity is flowing in both directions. That has significantly changed how electricity flows around the grid. There is a huge opportunity for Megger to help support electrification, the mass adoption of electric vehicles, and the whole drive towards net zero.
How is this transformation impacting your operation?
The products we manufacture today are for testing the assets. I don’t see that there’ll be any rapid change in those assets; it’s more about managing how power flows through and around those assets in the most efficient way possible. And that’s something Megger excels at.
Megger is on track to break all its performance records this year. What do you believe lies behind such success?
Our people, unquestionably. Our people are great, they know their stuff and take the initiative. As leaders, our job is to support their development and help when needed. Yes, we provide the overarching strategy and set the culture, introduce initiatives like the Megger Excellence System, but each of our centres largely behaves autonomously. What’s key is having local leaders and strong teams who are focused on making sure each centre is performing and targets are being met. That enables the directors to step back, look at the bigger picture and plan for the future – whatever it may bring.