Pratik YadavMark Brown

Analytical Model: Evaluating Incoterm ConversionStudent: Mark Brown, SCM 2019

Student: Pratik Yadav, SCM 2019Advisor: Bruce ArntzenSponsor: Large Industrial Conglomorate

Lack of active inbound material management at RMDR production sites in Europe & Asia has resulted in:

- Limited visibility of material coming into production

- Higher inventory stocks -> increased net working capital

- Higher transport costs due to limited consolidation opportunities

- Limited flexibility to manage unexpected scenarios

- Increased risk to the JIT production setup Problem & The Methodology

Background

Key Question

Relevant Literature

Initial Results

Expected Contribution

January 2019 Poster Session

BACK TO KIOSK MENU

ü Work with the business unit to identify productionsite as pilot

ü Shortlist 3-5 suppliers to run the pilot

ü Identify 5-7 products per supplier for analysis

- Should an organization try to manage inbound actively?

- If yes, then what products should be managed actively?

- What are the best in class solutions to manage the inbound operations?

- Kumar et al. (2010) Migrating to F type incoterm purchases for greater control of goods

- Schneider (2010) Wal Mart case study / benefit of lead time predictability on cash flow

ü Mathematical model looking at total cost per product under different incoterm scenarios including variability

ü Framework to quantify risk associated with each step

ü Incoterm selection per product – C&D vs E&F

ü Easy to visualize risk and total cost overview per product

ü Pilot for selected categories to validate results

DATA ANALYSIS

SCOPE DEFINITION

RESULTS

0

5

10

15

20

25

30

35

40

45

50

Carrier 1 Carrier 2 Carrier 3 Carrier 4 Carrier 5

Min-Max Lead Time - CN-DE

Min Max

30%

59%

11%

0% 10% 20% 30% 40% 50% 60% 70%

C/D Incoterms

E/F Incoterms

Missing Incoterms

Direct Material Spend Per Incoterm Category

- Template for material buyers to understand inbound savings opportunities with select suppliers and products

- Best practices on how to actively manage the inbound operations