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By Paneltronics, Inc. | Trusted Authority in Electrical Power Distribution Since 1979

Part 2 of 3: The Costs Nobody Puts on the Spreadsheet

By Paneltronics Inc. | Trusted Authority in Electrical Power Distribution Since 1979

The Numbers Behind the Decision

Before we get into the details, let’s talk about the basic math. At its core, the make-or-buy decision comes down to two numbers: what it costs you to build the panel yourself, and what it costs to buy a finished assembly from a specialist.

The procurement world has a straightforward way of looking at this. You need four numbers to get started:

1. Your volume — how many panels do you need per month, per quarter, or per year?
2. Your fixed costs — the tooling, floor space, equipment, and infrastructure required to build panels in-house.
3. Your per-unit direct cost — the raw materials, labor, and components for each individual panel.
4. The supplier’s per-unit landed cost — what a finished, tested, ready-to-install panel would cost you from a dedicated manufacturer.

From there, the formulas are simple:

Cost to Buy (CTB) = Volume × Supplier’s Per-Unit Landed Cost

Cost to Make (CTM) = Fixed Costs + (Per-Unit Direct Cost × Volume)

If your cost to make exceeds your cost to buy, the numbers are telling you something. And if the reverse is true, that’s worth knowing too.

But here’s where most manufacturers get tripped up. They plug in the obvious numbers and stop there. What they don’t account for are the soft costs. And those soft costs? They’re where the real money hides.

Figure 1. The make-or-buy math: two formulas, four inputs, one decision rule.

The Costs Nobody Puts on the Spreadsheet

When your accounting department looks at in-house panel assembly, they see the hard costs: wire, breakers, busbars, faceplates, switches, terminals. Those are easy to track. They show up on invoices and purchase orders. But there’s a whole layer of expense sitting underneath those numbers that rarely gets calculated, and it can make the difference between a profitable operation and one that’s quietly bleeding money.

The Purchase Order Burden

Let’s start with something every purchasing agent knows, but few companies actually quantify: the cost of managing multiple vendors for a single assembly.

To build an in-house electrical power distribution panel, your purchasing team might be juggling 15 to 30 line items. Breakers from one supplier. Busbars from another. Custom-etched faceplates from a third. Marine-grade wire from a fourth. Terminal blocks, indicator LEDs, rocker switches, and labels from several more. Each of those relationships requires its own purchase order, lead time, packing slip verification, and invoice processing.

Industry estimates put the administrative cost of processing a single purchase order anywhere between $50 and $200 when you factor in requisition, approval, receiving, quality checks, and accounts payable. Now multiply that across five, eight, or ten invoices per boat set. It adds up fast.

Compare that to the outsourced scenario: one part number, one vendor, one PO, one invoice. Your buyer manages one relationship and one lead time. If a component is missing or backordered, that’s the supplier’s problem to solve, not yours.

Administrative Cost Comparison

Figure 2. Per-build admin cost. Sources: APQC Open Standards Benchmarking; industry estimates.

Activity	In-House (Components)	Outsourced (Assembly)
Sourcing	Constant price shopping for 30+ parts across multiple vendors	Annual price review with one partner
Receiving	Unboxing, counting, and labeling 30+ individual items	Unboxing one protected, finished unit
Quality Control	Testing every individual switch, breaker, and connection	Plug-and-play functional testing of the final assembly
Accounts Payable	Processing 5 to 10 invoices per boat set	Processing 1 invoice per boat set

The Weight of Inventory

When you build panels in-house, you’re not just buying parts for one boat. You’re buying safety stock to make sure the line never stops. And that safety stock comes with its own set of problems.

Dead stock risk. If you decide to change a switch style mid-season, or a component gets discontinued by the manufacturer, you’re left sitting on thousands of dollars of inventory that will never get used. It just collects dust on the shelf until someone eventually writes it off.

Shrinkage and damage. Small components like fuses, LEDs, and crimp terminals are easily lost, damaged, or borrowed for other projects without being tracked. It’s not theft, but the effect on your bottom line is the same.

Opportunity cost of space. Every square foot of floor space dedicated to storing bins of electrical components is a square foot that could be used for something more productive, like a second assembly station, a testing area, or additional production capacity.

Capital tied up in work-in-progress. Your money is locked up from the moment you purchase the raw wire until the finished boat gets delivered and paid for. With an outsourced panel, the clock on your capital doesn’t start until the completed assembly arrives at your dock, ready for installation. That’s a significant difference in cash flow, especially for smaller operations.

Figure 3. The four costs hidden inside that 25%. Sources: ASCM; APQC.

Engineering and Skilled Labor

Building electrical panels isn’t just about bolting switches to a faceplate. It requires someone who understands wiring logic, circuit protection, load calculations, and industry standards like ABYC and ISO. That’s either a licensed electrical engineer or a highly experienced master technician. Either way, you’re paying a premium for that expertise.

When you build in-house, you’re paying for all of that thinking time on every single unit: routing decisions, crimping specifications, labeling layouts, and troubleshooting when something doesn’t test right. That skilled labor cost lives on your payroll whether you’re building 5 panels a week or 50.

When you work with a specialist, that engineering cost gets absorbed into the supplier’s per-unit price. You receive a finished panel with a wiring harness that plugs directly into your boat’s main harness. Your own assembly team doesn’t need to be electricians. They just need to know how to follow a simple installation procedure. You’re effectively shifting your skilled labor requirement from “electrical engineer” to “general assembler,” and that’s a meaningful cost reduction.

Warranty Exposure and Liability

This is the one that keeps operations managers up at night. When you build panels in-house, every warranty claim on an electrical failure traces back to your team. A loose crimp connection, a miswired breaker, a terminal block that wasn’t torqued properly. Those failures don’t just cost you parts and labor to fix. They cost you customer confidence and, in some cases, they cost you the customer entirely.

On a boat, the stakes are even higher. A car breaks down on the side of the road, and it’s an inconvenience. A boat loses electrical power in the middle of the ocean, and it’s a safety issue. Reliability isn’t optional in this industry. It’s everything.

When you purchase a finished panel from a qualified manufacturer, the warranty liability shifts. The supplier stands behind the product. Component failures, wiring defects, and workmanship issues become their responsibility to resolve, not yours. That’s one less thing your team has to worry about and one less line item on your rework budget.

Beyond the Numbers: The Strategic Picture

The make-or-buy decision isn’t purely financial. If it were, every manufacturer would just pick the cheapest option and move on. The reality is more nuanced than that, and the best framework we’ve seen for thinking through it comes from the world of strategic procurement. It breaks the decision into three pillars: business strategy, risk, and economics.

Figure 4. The decision rests on three pillars. Adapted from strategic procurement frameworks.

Pillar 1: Business Strategy

The first question is simple: Is building electrical panels your core competency? If you’re a boat builder, your competitive advantage probably lives in hull design, ride performance, interior fit and finish, or brand reputation. The electrical panel is a critical component of the boat, absolutely. But it’s not the reason your customer chose your boat over the competition.

Think of it this way. You wouldn’t manufacture your own engines, and you probably don’t make your own gauges or steering systems either. Those are specialized components built by companies whose entire business revolves around doing that one thing exceptionally well. Electrical power distribution panels are no different. A company that has spent decades refining panel design, testing, and manufacturing is going to deliver a more consistent, more reliable product than a team that builds panels as a side task between other production responsibilities.

The key question to ask your team: does building panels in-house give us a meaningful competitive advantage, or is it simply something we’ve always done?

Pillar 2: Risk

Every sourcing decision carries risk, whether you make it or buy it. The question is which set of risks you’d rather manage.

Building in-house means you carry the risk of component shortages, obsolescence, quality control failures, and the ongoing challenge of keeping skilled labor. If your one master electrician retires or takes another job, your panel assembly operation could grind to a halt overnight.

Buying from a specialist shifts many of those risks to someone who is better equipped to handle them. A dedicated panel manufacturer has deeper relationships with component suppliers, larger purchasing volumes, established quality control processes, and a bench of trained technicians rather than a single point of failure.

That said, outsourcing introduces its own risks: lead time dependence, a single source of supply, and the need to clearly communicate your specifications. These are real concerns, but they’re manageable. And they’re the kind of risks that a strong supplier relationship, built on clear communication and mutual accountability, is designed to handle.

Pillar 3: Economics

We’ve already covered the soft costs. But there’s one more economic factor worth highlighting: production speed.

When you build panels in-house, every unit moves through your facility at the speed of your slowest process. If your electrician is wiring panels, those panels are being completed one at a time, in sequence, and any disruption (a missing part, a wiring error, a sick day) ripples through the entire production schedule.

When you receive finished panels from a specialist, installation becomes a fraction of the time. Your team unpacks the panel, positions it, connects the pre-built wiring harness to your boat’s main harness, and moves on. What used to take hours of skilled labor now takes minutes of general assembly. That time savings compounds across every unit you build, and it frees up your production floor to focus on what actually differentiates your product.

True Cost Comparison at a Glance

Figure 5. Same panel, two cost structures. The visual headline; line-item detail follows below.

Cost Category	In-House (Making)	Outsourced (Buying)
Procurement Labor	High: managing 20+ vendors and multiple POs per boat	Low: managing 1 vendor and 1 PO per boat build
Inventory Carrying	High: safety stock, dead stock risk, shrinkage, storage space	Low: just-in-time delivery of finished assemblies
Engineering Labor	High: requires skilled electrician or engineer on every unit	Low: engineering cost absorbed by supplier
Production Speed	Slow: manual wiring, sequential assembly on-site	Fast: plug-and-play installation in minutes
Warranty Liability	You own it: all rework, failures, and field service	Shared: supplier covers component and workmanship defects
Quality Control	Your responsibility on every individual component and connection	Supplier delivers tested, certified, ready-to-install units

So Where Does That Leave You?

If you’ve made it this far, you’re probably already running some of these numbers in your head. Maybe you’re thinking about how many vendors your purchasing team is managing right now. Maybe you’re looking at that shelf of safety stock and wondering what it’s really costing you. Or maybe you’re just starting to ask the question that matters most: is this really the best use of our time and resources?

We’re not here to tell you what to do. Every operation is different, and the right answer depends on your volume, your capabilities, your market, and your goals. What we are saying is that the decision deserves a closer look, especially if it’s been a while since anyone ran the real numbers.

In Part 3 of this series, we’ll walk through the partner approach in detail. We’ll talk about what the hybrid model looks like in practice, how to evaluate a panel manufacturing partner, and the questions you should ask before making your decision. We’ll also share some perspective from nearly five decades of working with manufacturers across the marine and specialty vehicle industries.

In the meantime, if this article got you thinking, we’d love to hear from you. Whether you’re ready to explore your options or just want to talk through the numbers, the team at Paneltronics is always happy to have the conversation.

Curious what your iceberg looks like underneath?

The BOM is the tip. The PO burden, the inventory carrying, the engineering hours, and the warranty exposure are the parts you can't see in the spreadsheet. If you want help mapping out the full cost for your build, our team has had this conversation with OEM manufacturers since 1979.

Contact us at sales@paneltronics.com or visit us at www.paneltronics.com

About the author

Edwin (Ed) Robledo — Paneltronics Senior Technical Marketing. 10+ years of published content creation and technical writing in the electrical and electronics industry, including articles and white papers on circuit, electrical design, and engineering best practices.

In collaboration with: Pedro Pelaez, President of Paneltronics, and

DRAFT | Part 2 of 3