Despite its relatively small size, Air International Thermal Systems is a tier-1 supplier of HVAC systems to major automakers around the globe. Its North American customers include GM in the United States and Canada and Volkswagen in Tennessee and Mexico. With no manufacturing plants in North America, however, Air International depends on its supply chain to provide a less expensive, high quality product faster than its larger competitors.
Like most companies, Air International initially used spreadsheets to manage its supply chain, using FTP sites to upload and download documents and bills of materials. But the company knew that using spreadsheets to manage multiple complex products across its global supply chain was not a sustainable process.
“Lacking the ability afford a six figure PLM (product lifecycle management) system, Air International did the best it could with spreadsheets, emails, FTP sites as well as hand-delivered and overnighted CDs until 2002,” says Michael Repetto, business director at Air International.
Recognizing the need for better means of sharing data, and looking to level the playing field with its more established tier 1 competitors, Air International sought out a better approach and began talks with Arena Solutions, a supplier of cloud-based PLM software.
According to Repetto, the benefits of cloud-based PLM were too big for Air International to ignore. The benefits he cites include:
* Lower initial costs: Instead of paying tens of thousands of dollars up front for an annual license plus the on-going yearly maintenance and support, users pay less than $100 per seat per month. And as the business grows or contracts each year, the PLM solution can scale up or down to match it.
* Lower operations costs: IT resources required to manage and maintain the typical on-premise enterprise applications are greatly reduced with a PLM cloud application. Hardware, headcount, and overhead are three areas of operational costs where reductions will occur.
* Easy connection to suppliers: “OEMs and tier-1 suppliers will never be able to realize the vision of a connected and seamless product development environment unless all critical suppliers are easily linked into the system,” Repetto says. “With a cloud-based system, there’s no software to install and no barriers to fast collaboration.”
* Control, visibility and security: Cloud-based PLM systems ensure the build package is always up to date. This is in contrast to on-premise alternatives where a license, login and provisioning are required for each and every supplier.
* A single version of the truth: Because costs are low, organizations can connect their entire supply chain to the PLM system, which reduces error, increases quality and speeds problem resolution.
Cloud PLM Cost Benefits
Beyond the far lower purchase and IT support costs associated with cloud-based PLM systems versus installed PLM software, the logistics of deploying the system across a large supply chain was a big benefit for Air International. “With a cloud-based solution, there’s no need to deploy software on-site for suppliers and the cost of adding suppliers is a fraction of the on-premise providers,” says Repetto. “Air collaborates with more than 300 suppliers through Arena, a feat which would prove far too expensive and unwieldy with traditional PLM software.”
According to Repetto, Air International saves 10 percent on its parts cost with its cloud-based PLM system because of “greater visibility into a supplier’s costs.” This has allowed Air International and cut its own prices by 10 percent to stay competitive with its larger tier-1 competitors.
Air International also uses the cloud-based PLM system to save million of dollars on its injection mold tools, Repetto notes. “These tools can cost anywhere from $200,000 to $500,000 each, and they have traditionally been manufactured in North America,” he says. “Arena gave Air International the freedom to source globally, which led us to contract with Chinese manufacturers who provide injection mold tools at 33 to 50 percent less than traditional manufacturers. Plus, they delivered them 20 to 33 percent faster. On a complete air conditioning project, this can result in significant savings of at least hundreds of thousands of dollars, which significantly affects our ability to provide competitive quotations.”
Optimizing the Prototyping Process
The cloud-based PLM software has also been put to use by Air International in its prototyping process. “Making an incorrect prototype assembly can waste more than $10,000,” says Repetto, “and since the prototypes can take weeks to build, precious time is also wasted, introducing delays that can cascade throughout the schedule.”
Having a “single version of the truth” that all suppliers can follow has all but eliminated mistakes due to miscommunication or the use of out-of-date documents, says Repetto. “When an engineering change order is made, which can happen frequently during the design process, all relevant suppliers are notified immediately and the documents are readily available.”
During production, Air International uses its PLM system to ensure that suppliers are making the right part to the correct revision level. This aspect is critical, Repetto says, “because mistakes made at this stage could require us to go directly to the automotive OEM assembly plant to replace incorrect products and incur substantial sorting costs, expediting costs and penalties.” Using a cloud-based PLM system, all suppliers and manufacturing sites have access to current drawings and CAD data, he adds. “In the event an issue arises, they can quickly find and download the relevant data to compare to the product, which results in faster resolution of issues.”
Supply Chain Effects
Beyond prototyping and production issues, the mere fact of managing such a large a global supply chain carries with it its own headaches. After all, established suppliers can go out of business, change focus or even get dropped due to substandard quality or delivery issues. When Air International needs to get quotes from new suppliers, the company can add prospective suppliers to the PLM system, which enables them to share all of their drawings, CAD files, specifications and other documents, Repetto says. “All information is completely up to date and everyone has access to the same information, making the quoting process much more efficient. It eliminates the problem of global version control.”
Repetto adds that the cloud-based PLM also makes the process easier for new suppliers. “For instance, if a potential new supplier is interested in selling to Air International, once we send the supplier an invitation, sales reps can upload a virtual tour of their facility, presentations and data sheets that give us a complete picture of their capabilities,” he says. “And since there’s no need to purchase a site license for quotations, we can source from suppliers all over the world, which enables the company to access much lower pricing through increased competition for their business.”
This streamlined process has enabled Air International to reduce the amount of time it takes to procure supplier quotations by 20 percent, according to Repetto.