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 Gaining a Competitive Edge By Reducing Your Cost of Operations With Documented Value Added®.


Applied Industrial Technologies is one of North America’s largest industrial distributors and a leader in supply chain management systems, resulting in more productive and efficient operations for many Fortune 500 companies and government agencies. This White Paper explains how a Documented Value Added® program can provide measurable results for reducing costs in your supply chain.


Introduction

There is a new air of conservancy in the government sector as it relates to spending and supplier performance. Gone are the days of forgiveness for cost overruns and delayed deliveries. Today’s focus is on Cost, Performance, Deliverability and Value. Budget cuts are ubiquitous and your operation needs to find new ways to control costs and improve performance.

Your organization needs to be more competitive and so do your suppliers. A strong industrial distribution partner can be extremely valuable in delivering advanced supply chain management services that can reduce costs for inventory, order processing and operations, while providing exceptional availability to minimize downtime.

Documented Value Added® is one way Applied Industrial Technologies is focused on providing measurable improvements in reducing your total cost of operations. This program utilizes a definable set of processes and industry best practices to provide advanced supply chain technologies with the following benefits for your operation.

Increased Productivity / Uptime Energy Savings
Reduction of Maintenance Costs Value Added Services and Quality Processes
Inventory Optimization / Management Transaction Cost Savings
Technical Support / Training

Price Savings

Today, and well into the future, US-based manufacturing firms and government organizations need to capitalize on advanced technology and local resources to be competitive in a global economy. As the number of manufacturing operations has decreased, the quality of operations has increased. Organizations are focusing on their own core competencies of manufacturing while partnering with suppliers that can deliver value-added services to streamline their operations and improve productivity.

Forecasting Product Usage Ensures Availability

A good supplier will work very closely with their customers to identify future demand and minimize inventory investment and stock-outs. If the supplier has a strong working relationship with the customer, the supplier will stock the products and deliver on an as-needed basis. Some suppliers offer storeroom management software that tracks and manages inventory.

Reduction in Lead Times and Increased Stock Availability

Many companies run multiple shifts and if a critical item fails, support is needed immediately. A local distributor with access to inventory 24/7 can keep a production line up and running. These same suppliers have larger inventories at regional distribution centers, which means there is substantially more inventory in the supply chain. Applied® reviews the individual customer needs at each of its more than 400 service centers to ensure optimum availability.

Quality Products Last Longer

Many times, low-cost products will not last as long as others and result in premature failure or a significantly shorter life span. Product failure and replacement is very costly from a maintenance standpoint and manufacturing downtime can be even more costly. A strong industrial distributor has broad experience and knows which products offer the best overall value based on cost, quality and length of service.

Repair versus Replace in a Large Motor Application

The Facilities Maintenance Department of an Air Force Base was in need of a 450hp motor for their auto clave. A new motor this size has a purchase price of approximately $100,000 and the lead time was more than six months. Applied® worked with the facilities manager to come up with a more cost-effective and timely solution. Applied’s GSA  Contract GS-06F-0042R includes motor rebuild and repair operations, so they were able to repair the motor in three weeks for a cost of $24,310. Applied also arranged for transportation of the motor at no charge, saving an additional $1,365. Total savings to the air force base, was $76,365 and five months’ time.

Stocking Critical Spares Saves Time

It is extremely important to work closely with the maintenance personnel and production team to identify key equipment that would bring a production line down. In many industries, down-time is measured in thousands of dollars per minute. The whole production line could be inoperable and the plant would need to shut down until the part arrived from the supplier. In the defense industry, a warfighter’s life could be jeopardized because a piece of equipment is not available. Imagine a multi-million dollar system that is inoperable because of a $1.00 seal or a $5.00 part that is not readily available.

Single Sourcing to Reduce the Number of Purchase Orders

Many firms do not realize how many different suppliers they work with and the savings that can be achieved by consolidation. The cost of doing an individual procurement varies by industry and by company. There are no fixed industry standards, however there are substantial savings in administrative costs if multiple items can be purchased on a single purchase order.

Real-time Delivery of Production Items

Today, many organizations are transitioning from maintaining large inventories with large, push-based production quotas to a pull-based production with smaller lot sizes and minimal inventory. To the manufacturer or user, the supplier must be able to deliver exactly what is needed, to the right place at the right time. Large distributors work closely with commercial and defense industries to minimize on-hand inventory for both production and MRO items.

Technical Assistance

Best Product Recommendations – Authorized distributors are trained in how to select the best product for any particular application. With years of experience, they have industry experts for most major industries. Many product failures are a direct result of the wrong product for the application.

Original Equipment Manufacturer Parts Interchange – Industrial Distributors supply many of the OEMs with component parts used in their original products. When that OEM discontinues production or does not support spare parts anymore, distributors like Applied® can oftentimes interchange those components, recommend new technology replacements, provide reduced purchase cost, shorter leads times, and improved performance.

Identify Production Line and/or Process Improvements – Distributors work with a broad spectrum of customers with varying types of production lines and supply chain processes. With this vast industry experience, they have become experts in making production lines more efficient and are committed to continuous improvement throughout the enterprise.

Failure Analysis – Industrial distributors have trained associates who can identify why products have failed in an application. In addition, they will work with their supplier network to identify the root cause of failures when they are not easily identifiable.

Repetitive Motor Failure

A major producer of processed goods was experiencing repetitive motor failure on four machines. The failure was
being caused by repetitive exposure to water and steam used in the nightly washdown of the equipment. The motor would fail every 2 to 3 months on each machine. Applied Industrial Technologies looked at the application and recommended a different brand of motor that was stainless steel, which resisted corrosion in the harsh environment. The new motors were installed and did not experience any premature failures. The annual estimated
Stainless Steel Corrosion-Resistant Motor cost savings to the plant are $18,112.

Repair versus New

Sometimes firms overlook the economic advantages of having an item repaired versus replacing it with a new component. New parts are often purchased on OEM “Follow-on” contracts without considering the option of repair. Depending on the product, a repaired item typically costs 40% to 60% of the price of a new item, resulting in a significant cost savings. If the item is a critical spare, these items can be repaired and held by the distributor in the event of a product failure. Some of the key items that are rarely viewed as repairable are:

Ball Screws Hydraulic & Pneumatic Components Cylinders
Bearings Live Centers Servo Motors
Circuit Boards Mechanical Parts Drive Shafts
Conveyer Belts Motors Shafting
Couplings Reducers Electrical Components
Slides Electric Motors Spindle
Gear Reducers

U-joints & Couplings

 

Screw Jack Repair

At a major primary metal mill plant, a screw jack needed to be replaced frequently due to the harsh environment. This large screw would tilt the cradle so that the teeming metal would flow through the tundish into a mold. The cost of a new screw jack was $21,893 while a repaired screw was $5,964 resulting in a savings of $15,929. The same mill was able to save a total of $382,308 using repaired versus new products.

Energy Savings

Industrial distribution partners work very closely with their suppliers to provide new or improved products that will save energy and help their customers meet Leadership in Energy and Environmental Design (LEED) certification. Distributors often survey a facility and identify annual energy savings opportunities by converting standard motors to energy efficient motors, eliminating air leakage, installing new drives, and offering a variety of products that consume less energy. A major component of the Documented Value Added® program is continuous improvement, and Applied® delivers new technologies and best practices as they become available.

Energy Efficient Drive Options

A properly designed belt transmission system is highly efficient, quiet and requires minimal maintenance. Certain belts are more efficient than others, offering maximum drive performance. To lower energy consumption, an Applied Industrial Technologies account manager worked with a customer to convert all V-belts on HVAC fan drives to synchronous belts. Synchronous belts are approximately 98% efficient and maintain that efficiency over a wide load range. According to the customer, this simple change saved them $17,612 in annual energy costs. In larger facilities that have multiple air handling units, the total annual savings can range from $10,000 to well over $100,000.

Environmental Sustainability

With the increased awareness on our environment, most government institutions are taking the initiative to become more environmentally sustainable. Some bases have even created an Environmentally Friendly Products Section at its supply store. Being a “green” distributor means more than just having eco-friendly products, it means actively advising customers on how to save energy in their operations and reduce their overall carbon footprint. In addition, many new green products will not only be more environmentally friendly, but also can help lower operating costs, comply with government mandates, and gain a competitive advantage in contract bids. Organizations must look beyond the most publicized green items and consider a much broader assortment of opportunities to achieve environmental sustainability.

Applied can help implement a comprehensive eco-friendly supply program. Key areas that should be considered include:

• Energy Reduction Products
• Water Conserving Products
• Recycled Content Products
• Non-Toxic Products
• Ozone-Friendly Products
• Bio-Based Products
• Products Composed of Biological Products or Renewable Materials
• Environmentally Friendly Products

BioRem 2000™

At Navel Air Station – Fort Worth, simulators are used to train C-130 pilots. The simulator is old and occasionally would leak hydraulic oil on the floor. Clean-up was costly and required the use of special absorbents. A new product called BioRem 2000 was introduced that provided a very economical solution. BioRem 2000 utilizes Microbe Technology that remediates hydrocarbons into water and carbon dioxide. BioRem 2000 can be sprayed onto a spill and render flammable liquids, such as gasoline, diesel and jet fuel, non-flammable within minutes. BioRem 2000 is safe to use on any water-safe surface, including metal, concrete, plastic and rubber. BioRem 2000 is NSF-approved A-1, A-4 class; biodegradable with a pH of 7 and is non-toxic, non-pathogenic, and completely harmless to human, plant, animal and marine life. Within minutes the spill can be washed down the drain.

Training

Proper installation and maintenance of products is critical to maximum uptime (80% of failures are a direct result of improper installation or maintenance of products).

MaintenancePRO® – Applied® offers a broad selection of hands-on courses that offer practical training on maintenance, troubleshooting, component application and failure analysis. The courses range from one day to three day courses and from introductory to advanced training. Customized training programs and apprenticeship courses can be developed to fit your unique requirements. MaintenancePRO training can also be brought to your plant floor, maintenance facility, training facility or wherever it is needed.

Inventory Reduction

Large industrial distributors are using advanced technology scanners and database management systems with formal processes to review customer inventories and determine the most efficient way to manage their inventory.

Part Number Consolidation - Many commercial off-the-shelf items are manufactured by multiple manufacturers. Often times these products are exactly the same in form, fit and function. Inventories can be substantially reduced by consolidating the number of brands carried by a facility.

Organization – Many times a part is needed but can’t be located so the company simply orders the part when it may be in inventory somewhere else inside the plant. Additional costs are incurred in both the cost of procurement and the cost of duplicate inventory.

Greater Accessibility -Many distributors track inventories electronically. Taking it to the next level, these distributors can have direct connections with manufacturers that not only integrate their systems but also allow end-customers to see what is available in the entire supply chain.

Eliminate Obsolete Parts - Many manufacturing plants have large amounts of inventory on hand for equipment that is no longer owned or utilized elsewhere in the plant. Reviewing and eliminating inventory provides substantial cost savings.

Reduction in Inventory Results in Lower Operating Costs – There are many valued-added benefits to reducing inventory and all the associated expenses related to managing that inventory. By reducing these costs, a firm can free up capital and invest in equipment and resources to maintain a competitive edge.

• Less labor to manage inventories
• Less insurance and taxes
• Reduction in scrap
• Fewer stock orders
• Less receiving & moving stock
• Reduction of obsolesce
• Overall lower operating costs

Conclusion

Applied Industrial Technologies has been providing value-added services in the supply chain for 88 years and continuously reviews their customer needs to help make them more efficient and profitable. Applied® is ideally positioned to review company operations and demonstrate how they can increase productivity and reduce overall operating costs. Applied uses a formalized documentation program called Documented Value Added® that provides electronically documented savings that have been approved by the customer.

When looking for a source of supply, it is important to look at more than just the cost of an individual item, but to look at the total value that the supplier can bring to your organization. You will want to reduce the number of suppliers you manage, reduce the number of critical spare items you stock, and increase the training support for your staff. Some of the key questions that can guide you to more profitable and competitive operations are:
 
Is your current supplier actively engaged in your business?

Does your existing supplier understand your unique business processes and assist in continuous improvements?

Does your current supplier provide technical assistance to minimize downtime?

Does your current supplier take an active interest in making you more competitive?

Does your current supplier document the savings provided to your operation?

In summary, Applied® is a highly experienced and proven supply chain leader. Applied® is experienced in assisting organizations in lowering their cost of operations by providing Documented Value Added savings and augmenting profitability. Applied® has received several awards for its valued work with the government, including two Excellence in Partnership Awards from the Coalition for Government Procurement, and Large Business Contractor of the Year Award from the General Services Administration (GSA). 
 




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