Amara Raja Electronics aims to be Rs 10,000 million company in the next three years

With expansion on the cards, AREL is exploring related diversification beyond its current product range. It is also open to partnerships of any nature to increase its presence in the EMS space.

By Kartiki Negi

Monday, August 18, 2014: Established in 2003, Amara Raja Electronics Ltd (AREL) is part of the US$ 750 million Amara Raja Group, founded by Dr Ramachandra N Galla, now the group chairman. Headquartered in Tirupathi, AREL is a technologically progressive company focused not just on electronics manufacturing services (EMS) but also on consumer power solutions (CPS) and consumer durables (CD).

Today, AREL is a reputed name in the market, known for its design expertise and low-cost manufacturing capabilities. Ramana Prasad Alam, CEO, AREL, says, “Our team is dedicated to delivering end-to-end product lifecycle solutions at the lowest total cost of ownership, enabling our customers to keep their commitments and stand out in their markets. We leverage the expertise and experience of the Amara Raja group to excel in engineering, electronics manufacturing and supply chain management services.”

AREL is focused on building mutually successful partnerships and providing flexible solutions to enable its customers’ success. “We help our customers anticipate, be proactive and prepare for unexpected changes in the global market; thereby, they are able to deliver products at the right time,” says Ramana Prasad Alam.

Maintaining a competitive edge

AREL is an integrated manufacturer of electronic products with in-house manufacturing facilities for magnetics and wire harnesses; it sources plastic and sheet metal parts from within the Amara Raja group. The company’s suite of solutions spans the entire product lifecycle, right from conceptualisation, design and prototyping, to production, testing, development, delivery and after-market support. “By understanding the unique complexity of each customer’s business, we develop customised solutions that drive product innovation, keeping in mind cost savings, supply chain efficiencies and improved time-to-market,” says Alam.

AREL offers more than just manufacturing. Whether one wants to expand a product line, launch a prototype programme or integrate a joint development and manufacturing strategy, the company is determined to deliver quality product support while lowering costs at the same time. Its services include design support, procurement and preferential sourcing, low and high volume assembly, wire harnessing, box build enclosures, plastic injection moulding, systems integration, testing, rack wiring, final assembly, full functional testing and monitoring, packing and shipping services, scheduled deliveries and management systems. In addition, it provides value added services like inventory management, branding, as well as documentation and post-manufacturing services. Delivering end-to-end solutions, its integrated supply chain is adaptive and responsive to continuous change, being tailored to meet its customers’ unique requirements.

“You can count on us. Our quality, technology, service and expertise from around the world allow you to get more from an EMS partner like us. We always put the customer first. We help you become more successful by providing technological competence and total dedication,” says Alam.

The journey so far

Started with a small investment of about Rs 20 million, AREL clocked a revenue of Rs 2500 million in the fiscal year 2012-13. The company was started as part of the corporate social responsibility initiative of the Amara Raja Group with a vision to offer non-migratory job opportunities to rural women, helping them to stay on at their own traditional homes while being gainfully employed.

Back in 2003, AREL started with a small PCB assembly operation – as part of its backward integration plans for a sister company dealing with industrial electronic products for the telecom, railways and power (transmission and distribution) industries. Later, it launched its own home UPS systems (inverters) through a new distribution channel to reach out to retail customers.

“We have increased our manufacturing capacity from 10,000 PCBs per month to 75,000 PCBs per month by moving to two-shift operations,” informed Alam. The company has recently added an additional SMT line, which has the most modern features.

Since the company was started more as a CSR initiative, the location naturally had to be in a rural area. However, being part of a hi-tech industry like electronics, the major challenge for the company is the availability of skilled manpower from the vicinity. Alam says, “Our biggest challenge has been to create a pool of skilled people for the business, for which we have to invest in training of the workforce on a continuous basis.”

Business strategy

The business model of AREL is based on a two-pronged strategy—one is to specialise in large economies of scale in manufacturing and the other is to focus on low volume, high technology precision manufacturing. Other core areas include raw materials procurement and pooling together resources available within the Amara Raja Group—industrial design expertise as well as value added services. “If your business requires a fast, efficient, cost-effective turnkey service, AREL can provide everything from basic PCB manufacturing through to the complete product assembly. You’ll have the full support of our design and production engineering teams throughout the process,” states Alam.

Its strengths…

The company carries out its operations from its state-of-the-art manufacturing facility spread across 20,000 sq m in Chittoor, which is strategically located between Bengaluru and Chennai. The facility, one of the key strengths of the company, is also well connected to the national highway grid, airports and sea ports, making it easy to export and import products.

The company considers its workforce as its biggest strength. Currently, it employs about 750 people with an average age of 30 years and who are predominantly women. They are trained in-house on different skills in the field of PCB assembling and manufacturing. “Our biggest assets are our employees, because they are highly committed and have very high learning quotients. Moreover, they are proud to be part of a progressive industrial group within the district, and feel privileged to enjoy the non-migratory employment opportunities closer to their roots,” says Alam.

… and achievements

In the last two-three years, AREL has set up lots of manufacturing processes and systems. “We have achieved QA certification, EMS certification and our quality processes have come up very strongly,” explains Alam. Besides, the company has strengthened its manufacturing lines with an aim to increase productivity as well as reduce defects from the assembly line.

On the sales front, AREL has really done well in a span of just two years. “We have made sure that while we build capabilities, we also build capacities. We invested heavily in EMS capabilities and we are adding more number of machines. We are gearing up for future expansion,” adds Alam.

Strategies for sustainable growth

Alam feels that the foremost sustainable strategy AREL has adopted is to achieve total customer satisfaction through the collective commitment of its employees. To accomplish this, the company emphasises on establishing superior specifications for products and processes, employing state-of-the-art technologies and robust design principles. It strives for continual improvements in process and product quality by implementing methods and techniques to monitor quality levels and offer prompt after sales services. The company also follows several lean manufacturing practices such as JIT, 5S, Kaizen, Six Sigma, etc.

The company’s second sustainable strategy is to be strong on the quality front, whether it is related to a process or product—both are compliant to ISO 9001:2008 quality system standards.

Next, to sustain itself in the competitive market, AREL chose to provide its customers with valuable engineering expertise. From prototype design and components verification, to production models, its engineers and technicians are available to support clients with documentation (including 2D/3D CAD drawings, parts lists, assembling diagrams, etc), design support, prototyping, re-modeling, harness routings and more. “Simply tell us what you want to achieve, and we will help you get there,” says Alam.

The company also strives to cater to customers with urgent needs, who need assemblies as quickly as possible. Depending upon material availability, same-day or next-day deliveries are made. AREL saves time by offering delivery to customers inside India. For customers in other countries, it manages delivery through tie-ups with its preferred shipment facilitators.

Future plans

AREL has robust plans for 2014-15. “I am happy to say that our first quarter revenues have been in line with our expectations. We now aim to achieve a sales revenue of Rs 3000 million this year,” says Alam. The company plans to cross Rs 10,000 million in revenue within three years from now.

AREL is now trying to focus on acquiring customers from the defence, medical, power electronics, automobile, consumer electronics and railway sectors. The company is open to exploring new opportunities where it can tie-up with big international EMS manufacturers in ways that will be mutually beneficial for both partners.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine