Unit pricing is no longer the key to a manufacturer's ability to control costs. As a result of aggressive supplier bidding in an intensely competitive market, prices have been squeezed to a point where additional savings potential is limited. Unit costs of competing products generally differ only marginally.
Consequently managers are taking a total cost approach for determining potential savings. Understanding that purchase price amounts roughly to one third of the total cost of an item, they continue to seek reduction of unit costs by building long term supplier relationships. But they are finding that the bulk of the real cost savings lies in the total elimination of their own non-value added manufacturing activity.

Enter AIRmation! We help reduce manufacturing costs by providing precision subassemblies...
on time...and competitively priced.

Assembly Services Include: Mechanical subassemblies Electrical subassemblies Electrical wiring harnesses Pneumatic tubing harnesses Machine frames, guarding, and more.

AIRmation assemblies eliminate the customer's
non-value added manufacturing activity

The typical acquisition cycle for a manufacturer involves the following steps: (1) plan, (2) purchase, (3) receive, (4) stock, (5) kit, (6) assemble, (7) quality control, and (8) install. Thousands of transactions can be eliminated each month using value added services from AIRmation.

EXAMPLE: Consider the hypothetical manufacturer who uses one 6-valve manifold on each of the 20 machines he builds monthly. The chart (left) shows non-value added steps he can eliminate by working with AIRmation.

IN-HOUSE APPROACH:
The typical 6-valve manifold has 45 bill-of-material items. 8 steps x 45 B.O.M. x 20 machines = 7200 transactions per month. . . or 86,400 transactions per year!
AIRmation APPROACH:6-valve manifold assembly has only one bill-of-material item. 4 steps x 1 B.O.M. x 20 machines = 80 transactions per month... or 960 transactions per year.
Monthly transactions saved = 7,120
Yearly transactions saved = 85,440

Costs of Acquisition:

• Unit pricing
• Quoting time including phone calls, formal quotations and evaluations
• Administering paperwork required to process purchase orders and quotations
• Mistakes occurring in processing the volumes of purchase orders and quotations
• Handling associated with receiving, inspecting, storing, kitting and invoicing materials

Costs of Possession:

• Carrying costs average approximately 2% per month
• Interest cost on money tied up in inventory
• Cost of space required to store inventory at various manufacturing stages
  (i.e. stockroom, inspection, receiving, work in process, etc., often at a cost of square feet times lease cost per square foot)
• Cost of handling, cycle counting, and receiving
• Cost to process shortages, rejects, over shipments, early shipments, obsolescence, inventory shrinkage, and scrap