GSCMI Case Competition: Sustainable Growth through Network Optimization SCM Consulting Peter...
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GSCMI Case Competition:
Sustainable Growth through Network Optimization
SCM ConsultingPeter JacobsonRaudel MedinaJavier ArguelloJin Guo
GSCMI 2013 Case Competition 2
West CMSC’s struggle (Peter Jacobson)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
Supply uncertainty• Undeveloped external supply network
in west• Warehouses (W34, W87) interests not
aligned CSMCs• CDC interests aligned to CSMCs, but
located in east• Custom products require custom
components
Demand uncertainty• Customer orders are difficult to
forecast• Customers demand short lead times• Product nature is innovative (highly
customized)
Supply chain is misaligned with
goals of CSCMs in west
High shipping
costs
High inventory holding costs
GSCMI 2013 Case Competition 3
Reduce premium freight
frequency
Minimize overall
inventory level
Ensure sustainable growth
Short-term
Eaton’s goals in redesign (Peter Jacobson)
Long-term
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
GSCMI 2013 Case Competition 4
An agile supply chain (Peter Jacobson)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
Reduce supply uncertainty• Establish a dedicated
warehouse to serve Electrical Division in the west
• Collaborative replenishment: vendor managed inventory
• Improve information sharing (EDI)
• Review / redesign Kanban System
• Develop supply network in west
Reduce demand uncertainty• Coordination with customers• Postponement• Product design: Standardized
components/multi-functional parts
GSCMI 2013 Case Competition 5
The Solution (Raudel Medina)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
Leasing Warehouse
Standardized Components
Kanban System
Consignment
External Supplier
• Leasing a warehouse in the west coast
• Consignment parts
• Review/Redesign the Kanban System
• Broaden external supplier base
• Standardized components/multi-functional parts
GSCMI 2013 Case Competition 6
Solution Analysis (Raudel Medina)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
• W87 provides small amounts of parts to CMSC sites
• “Other” sites account for the inter-site CMSC inefficient product move
• Costs of leasing reduces the investment in a permanent site
GSCMI 2013 Case Competition 7
Warehouse Location (Javier Arguello)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
Lease in Phoenix
• 7 locations = 62% of Premium Shipments
• Los Angeles and Phoenix minimize transportation costs
• W87 is located at Los Angeles
• Phoenix has lower leasing cost
• Lower labor costs
• More opportunities to expand
62%Premium
GSCMI 2013 Case Competition 8
Eaton’s Success Plan (Jin Guo)
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
GSCMI 2013 Case Competition 9
Other factors (Jin Guo)Uncertain Economic Conditions
Economic slow-down will negatively impact the demand for Eaton’s services
Short-term Lease ContractProject Management Team
Wrong supply chain management team may make the problem worse even with a good supply chain strategy
Select the right team in charge of the projectCoordination
Coordination between implementing the new system and satisfying the demand from all sites
Well-designed process to execute the new strategy
Problem Recommendation
Analysis
Implementation
Risks & Contingencies
GSCMI 2013 Case Competition 10
Summary – Q&A
Reduce premium freight
Control Inventory
Long-term Growth
GSCMI 2013 Case Competition 11
Backup
GSCMI 2013 Case Competition 12
Transportation calculations
GSCMI 2013 Case Competition 13
Transportation calculations
GSCMI 2013 Case Competition 14
Warehouse leasing
Source: http://www.loopnet.com/
GSCMI 2013 Case Competition 15
Arizona vs California
GSCMI 2013 Case Competition 16
Shipment trends over year
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8,000,000 9,000,000
10,000,000 11,000,000 12,000,000 13,000,000 14,000,000 15,000,000
Orders from CSMC sites
Months (2013)
$
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -
200,000 400,000 600,000 800,000
1,000,000 1,200,000 1,400,000 1,600,000
Orders by premium ship
Month (2013)
$
GSCMI 2013 Case Competition 17
Eaton’s financials