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8 Ways To Reduce Cost


Automated Vendor Managed

John P. Aiello
Director of Business
EF Bailey Company

What is Automated Vendor Managed

Inventory and AutoCrib Industrial Vending
Systems ?
A point-of-use industrial vending
system, that gives you 24/7
secure access to your indirect
manufacturing, processing, MRO
and PPE items.
A way to have your industrial
supply distributor save you money
by managing your indirect

Whats Your Real Cost ?

Reduce Acquisition
Reduce Receiving
Reduce Carrying
Reduce Purchasing
Reduce A/P Costs
Eliminate Obsolete

Reduce Consumption Stop Waste,

Fraud, Theft and Abuse
24/7 Controlled Access
Accountability Track usage by department,
workcell, job, employee
Point-of use pull system dispensed in the
correct package quantity

Reduce Inventory Carrying Costs

Promotes supplier-consigned inventory - 80%
of automated dispensing machines have
consigned inventory from the supplier.
Move to demand-based ordering. Case studies
show that demand-based ordering with a
point-of-use dispensing system allows on
average about 20% less inventory on hand
min/max based purchasing
Management Software allows
most users to cut inventory up to

3 Cut Spend on New Tools Force use

of Reconditioned Items
Issue reconditioned items first, before allowing
access to new items

Reduce Obsolete Inventory

Increased visibility of slow and dead inventory
With AVMI contract your Industrial supply
vendor can more easily dispose of unused
Dispense older inventory first
AutoCrib software tracks RATE of use over
time for each item, so it will not automatically
reorder slow-moving items until they are
Most shops see obsolescence
reduced by 50% after
implementing industrial vending

Reduce and Eliminate StockOuts

Cut Spend on unnecessary overnight
Cut spend on carrying duplicate tools
and supplies

6 Remove Traditional Tool Cribs and

Tool Rooms entirely at the same
time making tools and supplies
available 24/7 at the point-of-use
Reassign tool crib attendants to more
productive work
Tools / Supplies available 24/7 while
maintaining security
Support increased production without adding
to headcount

Reduce or Eliminate Purchase

Items can be automatically
reordered when they fall below
preset levels
Consolidated monthly invoicing
with AVMI
Substantially reduced paperwork
Average time/personnel cost of a
purchasing department
purchase order is $150

Reduce Support Staff Costs

Real time inventory management
visibility eliminates time spent doing
cycle counts, managing min/max
inventory levels
With AVMI, receiving, accounting and
inventory control staff costs can be
reduced and staff reassigned since the
supplier can absorb these

Calculate Your Cost Savings .

Trips to Tool Crib / Looking for Tools & Supplies /
= Average time
looking for and retrieving item (15 minutes is the
US average)
E = Current # of shop employees
S = Current # of shifts
P = Average # of trips per day per employee
R = Average shop rate per hour
$ Cost Savings (Item Retrieval) = ((T-4)/60) x E x S x P x R
EXAMPLE: 10 shop employees per shift, operating 2 shifts per day.
Each employee making an average of 2 trips per day at 15 minutes
each to retrieve tools. Average shop rate of $60/hr.
$440 / Day Cost Savings = ((15 4) / 60) x 10 x 2 x 2
x $60

Calculate Your Cost Savings .

Stock Out Reduction
S = Number of Stock Outs per week
U = Average Cost of UPS Red ($19.50) or your cost of a stock out
$ Cost Savings (Stock Out) = S x U x 4.25

EXAMPLE: 2 Stock Outs per week, UPS Red $19.50

$165.75 / Month Cost Savings = 2 x 19.50 x 4.25

Calculate Your Cost Savings .

Reduction of Obsolete Inventory
V = Current Inventory Value
R = Obsolete Inventory (Industry average is 4% per year)
$ Cost Savings (Reduction of Obsolete Inventory) = V x R /100
EXAMPLE: $500,000 in indirect inventory, 4 % of inventory obsolete
per year
$20,000 / Year Cost Savings = 500,000 x 4 / 100

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10 Ways to Improve
John Aiello
email or call:
Director of Business
EF Bailey Company