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"Manufacturers use Arena to improve productivity,
enhance collaboration, enable outsourcing, manage compliance and speed time to market. Read more about
the products they make and the markets they serve."
Source: Arena Solutions
Case Study: Air International US
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A Better Way to Manage Outsourced Manufacturing
Air International (US) Inc. (AIUS) is a division
of Air International (AI) Group Limited, a tier-one
supplier of heating ventilation and air conditioning
(HVAC), seat systems, steering systems, metal pressings, fabrication,
modular assemblies and rail and bus HVAC systems to the world’s automotive
industry.
AIUS, which develops passenger vehicle HVAC systems, works closely with the
corporate headquarters in Melbourne, Australia, AI offices throughout Asia and
Europe and a global network of suppliers and component manufacturers to serve
customers like General Motors and Lear Corporation.
A COMMITMENT TO OUTSOURCED MANUFACTURING
Since the launch of US operations in 1996, the company has used an outsourced
manufacturing strategy instead of maintaining its own manufacturing facilities.
This outsourcing strategy provides AIUS with a number of key benefits:
- Lower overhead costs—as contract manufacturing fees are less than the
labor and burden costs that would otherwise be incurred—which generally give
AIUS a 10-20% cost advantage over their vertically integrated competitors;
- The ability to find the best technology for the best price by working
with component suppliers all over in the world;
- The flexibility to select the right contract manufacturer—an existing
partner or an entirely new one—for each job.
For the first several years, communication between AIUS and its outsourced
partners was manual. Bids were developed on paper and in spreadsheets, and the
subsequent rounds of follow-up questions and additional faxes and emails created
multiple copies of supporting documents that were error-prone and tedious to
track. As a result, AIUS could only obtain a limited number of quotes for any
new project—and had difficulty ensuring that it was always taking advantage of
the best quotes available. AIUS believed that this increasingly complex manual
communication was forming a barrier that prevented it from maximizing the
benefits of its contract manufacturing strategy.
“Going with Arena was essentially a no-risk proposition. The
ability to simultaneously mitigate our risk and rapidly deploy a new system was
critical in an increasingly competitive market with contracting margins and
shrinking product development cycles.”
Michael Repetto
Program
Manager
Air International US
THE DECISION PROCESS
Considering a solution to better manage outsourced manufacturing In January
2002 Michael Repetto, program manager of AIUS, began investigating software
solutions to see if any would improve the outsourcing process for AIUS. “With
teams working around the clock and around the globe, we were spending too much
time on administrative overhead—and we still couldn’t ensure that everyone in
our network always had access to the latest information,” said Repetto. The
company decided that a solution would need to meet the following requirements:
- Centralized control of bills of materials (BOMs)
— “To ensure that everyone was working with current, accurate information,
we had to move beyond our manual spreadsheet process and centralize our BOM
data,” said Repetto. “But we knew this would only work if we could control
access so that each partner would see only the information relevant to the
work it was doing—no more, no less.”
- Support for geographically distributed project teams — The solution
would need to streamline communications with AI headquarters in Australia,
offices in China, India, Malaysia, Thailand, Japan, Korea and the UK and the
company’s global supply base—regardless of geographic location or time zone.
- Comprehensive change management — AIUS’s contract manufacturing strategy
greatly increased both the importance of sharing change information in real
time and the complexity of doing so. AIUS was tracking changes on paper and
in spreadsheets—and bringing together the entire 30-person team for
one-and-a-half hour weekly change review meetings. The cost of these
meetings—in terms of lost productivity and slowed development cycles—was
significant: 20% of the company’s annual change review processing costs.
Despite the significant time commitment this process entailed, it still only
provided a static snapshot of dynamically changing data and slowed the
entire development cycle. AIUS wanted a better way to share change
information in real time—both internally and with its supply network.
- Easy to implement and use — AIUS was planning to implement a solution at
the same time it was moving from design to production on an important
project. A lean organization, AIUS has limited IT and administrative support
staff and wasn’t in a position to divert development resources for a lengthy
system deployment. In addition, an easy-to-use interface would be critical
to keeping the development team and suppliers focused on the project, not on
learning a new system.
- Affordable — Because contracts are often won on price in the highly
competitive automotive supply business, AIUS could not afford a solution
that would require a significant upfront investment— especially before even
knowing whether the solution would work. Repetto was also wary of solutions
that would require additional expenditures—in terms of fees, downtime and
training expenses— every time a new version was released.
Considering the Options
After brief consideration, AIUS ruled out client/server systems like eMatrix
from MatrixOne for several reasons:
- Large upfront costs that made the decision extremely risky, such as high
software license fees, additional hardware and expensive consulting services
- Additional IT staff requirements
- Length and difficulty of implementation
- Difficulty of keeping system up-to-date without costly, disruptive
upgrades
- No real-time collaboration for external partners or globally dispersed
employees
“We would have had to hire additional IT staff just to set up a
client/ server system. This would have been a big distraction at a time when our
project schedule could not be impacted. We could have given access to some of
our partners with additional customization and VPNs, but most of them don’t have
the IT infrastructure in place to allow that,” Repetto said. “We needed a
solution that could be deployed quickly and would meet all of our functional
requirements, while optimizing our current resources. A client/server system
would have required significant upfront investment and then taken eighteen
months to implement. And we couldn’t even have been sure it would give us a
better way to manage our outsourced manufacturing.”
Evaluating Arena
In addition to looking at client/server software, AIUS evaluated the
on-demand Arena application and ultimately chose Arena for:
- BOM management functionality that gives the entire design and supply
chain a unified view of all product design information
- The software-as-a-service architecture that allows global product teams
to collaborate easily and securely
- Paperless product change management functionality that ensures everyone
in the AIUS network of employees and suppliers can access the latest
information
- Ease of implementation that allowed AIUS—and its suppliers—to begin
using Arena instantly
- A low total cost of ownership (TCO) that
results from the absence of IT overhead, the cost-effective subscription
model, the fact that automatic software upgrades are included in the
subscription and the lack of large upfront investment
Because Arena is an on-demand solution, AIUS had its account activated in,
literally, a matter of minutes. Then AIUS simply imported its data, set up the
administrative functions and configured access for its key suppliers and
manufacturers. In less than a week employees were exploring the full Arena
feature set and sharing the latest BOMs with their contract manufacturers—at no
cost to any of the suppliers.
“Going with Arena was essentially a no-risk proposition,” said Repetto. “With
no large upfront costs and a subscription model, we could evaluate the full
system with our own data and be confident that it would work in our environment
before making an ongoing investment. The ability to simultaneously mitigate our
risk and rapidly deploy a new system was critical for a company like ours in an
increasingly competitive market with contracting margins and shrinking product
development cycles.” Today, AIUS shares information in Arena with more than 20
suppliers, including its two key contract manufacturing partners and component
suppliers in five North American locations (Indiana, Ohio, Pennsylvania, Quebec
and Mexico), Europe (United Kingdom) and three Asia-Pacific locations (China,
Korea and Thailand).
“A client /server system would have required significant
upfront investment and then taken eighteen months to implement . And we couldn't
even be sure it would give us a better way to manage our outsourced
manufacturing .”
- Michael Repetto
Program Manager
Air International US
USING ARENA TO WIN A NEW CONTRACT
Soon after implementing Arena, AIUS began preparing a bid for a new air
conditioning system for a major automotive customer. Repetto and a team of
engineers uploaded the BOM information and design documents provided by the
customer into the company’s Arena workspace. The purchasing group set up access
for chosen suppliers and invited each one to view the information it needed to
provide quotes. Without ever faxing a single drawing or e-mailing a single
spreadsheet, AIUS had supplier quotes in hand one-third faster than it had had
in the past—and with a lot less effort.
With Arena, AIUS also was able to obtain quotes from more suppliers. Instead
of preparing individual packets of information for each supplier, AIUS only had
to grant each supplier access and email a link to the relevant information in
Arena. The improved efficiencies and expanded set of sources enabled AIUS to
submit a more competitive bid—one that was 5-10% lower than it otherwise could
have offered.
Like every RFP process, this one required several rounds of follow-up with
the client. By offering clear visibility into the sources, costs and lead times
on which each quote was based, Arena made it much easier for AIUS to react to
this dynamic process, obtain new information as needed and prepare updated
quotes. Not only did this save time and eliminate confusion throughout the
process, it also meant that once a configuration was selected, AIUS could know
exactly what was included in that configuration—and have immediate access to all
the information required to start the project.
RESULTS
AIUS broke even on its investment in Arena in just two months. Repetto
estimates that since starting to use Arena to manage its outsourced
manufacturing, AIUS has reduced related expenses by 15%. And the benefits
continue to accumulate:
- AIUS is able to offer bids that are 5-10% more competitive, while
improving profitability on the contracts the company wins. Instead of
compromising margins in order to deliver the lowest possible quotes, AIUS
can locate lower prices and begin making money on contracts right away
- .AIUS now has the ability to go to more suppliers in less time,
meaning the company can more easily choose sources that optimize price
for a particular project.
- Obtaining quotes from suppliers and getting them started on new
orders is up to 40% faster with Arena, making AIUS more responsive to
clients and providing significant time advantages in competitive bid
situations.
- AIUS has been able to avoid the types of mistakes that can cost hundreds
of thousands of dollars in scrap and re-tooling:
- Since beginning to use Arena to ensure that contract manufacturers
and suppliers always have access to the most current data, AIUS has not
encountered any revision-related errors with its supply network.
- The prototyping phase is much more efficient. AIUS typically
evaluates multiple permutations of an assembly before one is
selected—and the selected one is not necessarily the last one tested.
The revision history in Arena gives clear visibility into exactly which
parts and processes are associated with the chosen revision. This
reduces delays in development schedules and ends mistakes like one that
AIUS had encountered previously while developing HVAC systems for two
different vehicles for an automotive client. Without clear
documentation, AIUS had produced one prototype for both cars, but
because one vehicle had less space available than the other, AIUS
incurred $100,000 in re-tooling costs. Since using Arena, AIUS has not
encountered any such problems. Centralizing product data in Arena has
ended confusion about which parts, specifications and processes are
associated with each assembly.
- Online revision control has also eliminated the communication
challenges associated with time zone and language differences. For
example, both AIUS and AI headquarters use a component from AI Korea—but
they use different versions. By making it easy to ensure that each
office orders the right version, Arena lowers the risk of missed ship
dates and other costly delays.
- The change implementation process is one-third faster,
which AIUS expects will mean an annual savings of 30% of the costs related
to that process. Without paper documents to review or lengthy meetings to
attend, it’s easier for the AIUS network to communicate about changes
earlier in the process, and to view and respond to changes more quickly.
- Less than a year after its decision to go with Arena, AIUS has
already saved $115,000 in change review processing, change
implementation and outsourced manufacturing costs alone. This represents 22%
of annual costs related to those processes—and does not include savings the
company is achieving through faster quote processing, more competitive
bidding, reduced scrap and more.
In addition to the quantifiable time and cost savings, Arena has proven to
deliver certain less tangible— but no less important—benefits for AIUS as well.
Because Arena gives suppliers a better understanding of a project’s scope, they
feel more like true partners. Between this closer relationship and the fact that
they save time with Arena, suppliers are more likely to meet deadlines and work
with AIUS to lower costs. Over time, Repetto expects that Arena will help AIUS
lower prices further and become even more competitive. For example, the company
is currently considering adding a contract manufacturer in Mexico. Before using
Arena, the company’s manual information-sharing process created a barrier to
doing business with new partners, since any increase in distance tended to
increase the chance for errors and jeopardize AIUS’s ability to meet deadlines.
Repetto feels confident that Arena will make it easy to bring new partners into
its global supply network and thus enable AIUS to truly deliver the most
competitive quotes to its clients.
“In this business, lost time often means lost money,” said
Repetto. “Arena gives us a comprehensive view of every one of our projects,
which allows us to make informed decisions more quickly. By removing
communications obstacles and eliminating overhead throughout the design chain,
Arena helps us get the most out of our outsourced manufacturing, which is
critical to our ongoing success. Arena gives us a competitive edge that we
couldn’t afford to be without.”
Less than a year after its decision TO go with Arena , AIUS has already saved
$115,000 in change revie w processing , change implementation and outsourced
manufacturing costs alone —22% of the annual costs related to those processes .
sales contact
sales@arenasolutions.com
p.
1.866.937.1438
Corporate contact
Arena Solutions
4100 East Third
Avenue
Suite 300
Foster City, CA 94404
p. 650.513.3500
f.
650.513.3511