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Award winning Capstone Project for the Center for International Trade and Transportation\'s Global Logistics Specialist Program 2010.

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  • 1. 2010ACMEs Supply Chain Solution ProgramInnovative Logistics ConsultingGreg MatthewsDan PhillipsKaren AllecSven von BorriesSeptiadi TjahjonoSokchanda Im 6/28/2010

2. TABLE OF CONTENTSEXECUTIVE SUMMARY .......................................................................................................................4 Who is ILC? ................................................................................................................................................ 4 ACMEs Current Situation ......................................................................................................................... 4 End Result of Implementing ILCs Plan...................................................................................................... 4 Overview of ILCs Recommendations ....................................................................................................... 5 Bottomline ................................................................................................................................................ 7INNOVATIVE LOGISTICS CONSULTING PROFILE....................................................................................9 Mission Statement .................................................................................................................................... 9 Vision ......................................................................................................................................................... 9 Company Profile ........................................................................................................................................ 9 ILC Services ................................................................................................................................................ 9 Responsibilities ........................................................................................................................................ 10 Success Story ........................................................................................................................................... 15 Client Testimonies ................................................................................................................................... 16CONCEPTUAL SUMMARY ................................................................................................................. 16 SWOT Analysis......................................................................................................................................... 17 Assumptions/Major Issues ...................................................................................................................... 17 Goals and Objectives ............................................................................................................................... 19ILCS ANALYSIS ................................................................................................................................. 20 Information Technology .......................................................................................................................... 21 Warehouse/Distribution ......................................................................................................................... 29Page 2 3. TABLE OF CONTENTS Transportation......................................................................................................................................... 41 Green Initiatives ...................................................................................................................................... 49CONCLUSION ................................................................................................................................... 58BIBLOGRAPHY.................................................................................................................................. 62APPENDICES .................................................................................................................................... 64 Page 3 4. EXECUTIVE SUMMARYInnovative Logistics Consultants (ILC) wants to congratulate ACME Stores for taking a bold steptowards achieving new supply chain objectives. ILC would like to thank ACME for the opportunityto propose this solution for ACME to reach their goal of developing a fully integrated strategiclogistics plan.ILC is a pioneer in the field of supply chain management and has worked with many Fortune 500Who is ILC?companies such as General Electric, Proctor and Gamble, and Coca Cola in our 15 year history. ILChas developed a plan of action that will enable customers to prosper and grow into the future.ACME is a strong company with good leadership and is open to change. Despite identifiableACMEs Current Situationfinancial and operational waste, they are currently competing effectively in the marketplace.ACME could benefit greatly from Information Technology to manage inventory and warehouseoperations, changing from a push to a pull distribution model which will result in less costlywarehouse expenses, and a more efficient transportation model.Furthermore, the vast majority of ACME stores are located on the east coast which has been lessimpacted by the recession. As opposed to the Southwest, where high foreclosure rates havecaused financial chaos, and the Midwest, where manufacturing has declined and unemployment isvery high.The current retail trend for ACMEs competition is to increase logistics budgets while reducingother capital investments. Target for instance, spent 23% of their capital investment budget onimprovements to their supply chain in 2007 and 31% in 2009 (Target Co., 2009).ILC has developed a comprehensive logistics plan for ACME that will reduce waste and increaseEnd Result of Implementing ILCs Planefficiency. This plan will include a state of the art IT system, a fully optimized warehouse, andPage 4 5. EXECUTIVE SUMMARYdistribution network. ACME will cut transportation costs and become a more environmentallyconscious company. With ILCs plan, you will see a $42 million first year savings, a total savings of$224 million at full implementation, and a cash flow increase of $298 million for an overall benefitof $522,432,792 (See Appendix 1-ROI/Payback).In our analysis of ACMEs Distribution and Warehousing model, we researched ACMEsOverview of ILCs Recommendationscompetition to define the industries best practices and create a benchmark model using TargetDC operations.Information Technology is the most important facet of supply chain management today. With theInformation Technology - Total Visibility and Integrationuse of state-of-the-art Enterprise Resources Planning (ERP) solutions, retailers are now able tohave real time inventory control driven by consumer demand.ACMEs current in-house ERP software system, although good is Microsoft based. It is designed forsmall to medium business needs and will not handle an expected annual growth rate of 10%. Werecommend implementing an ILC hosted ERP system at a cost of $9,134,500 total start up with on-going expenses of approximately $11,377,200 annually. This will be explored further in ITanalysis.ILC proposes to bring ACME from their current efficiency rating of 21% to 78% over a three yearWarehousing/Distributionperiod by introducing multiple height stacking formulas and procedures (See Appendix 4-WhseLayout). The proposed ERP system will integrate inventory and warehouse managementsystems.ACME has a 20/1 store to distribution center (DC) ratio while Walmart and Target stand at 100/1,and 47/1 respectively. ACMEs average DC square footage of 258,000 compared to Targetsaverage DC square footage of 128,000 further illustrates the disparity between ACME and itscompetition.Page 5 6. EXECUTIVE SUMMARY 3 Import warehouses @ 282,000 square ft each ILC proposes reducing the number of DCs from 40 to 13: 9 regional DCs @ 282,000 square ft each 1 E-Commerce DC @250,000 square ft Import DC: Los Angeles, CA Dallas, TX - Chicago, IL E-Commerce DC: Louisville, KY Regional DC: Seattle, WA Atlanta, GA Hartford, CT Edison, NJ Little Rock, AK Charleston, SC Akron, OH Des Moines, IA Indianapolis, IN*Illustration 1: Final DC LayoutILC recommends the following changes to the transportation of home electronicsTransportation - Faster to Market for Less Money Renegotiate rates to LA/LB and Prince Rupert. Eliminate shipments to Baltimore Improve cubic foot capacity by changing from 40 DRY containers to 40 HC (High Cubic) Reduce suppliers to 3 (Shanghai, Hong Kong and Pusan). Nets same or lower rate. Reduce transportation costs by increasing CFT capacity - 40 HC containers into 53 trailersshipped to the Regional DCs. Reduce Ocean transit time; Distribution analysis will identify and explain how this affectsinventory carrying costs.o Apparel 13 to 12 dayso Home Electronics 23 to 17 days Page 6 7. EXECUTIVE SUMMARYThe rising environmental consciousness of Green operations significantly increased inEnvironmental - How big is ACMEs Carbon Footprint?ACME the last couple years. Unfortunately, such a concept has only reached the discussionstage. This awareness is compounded by the high upfront costs and lack of experience fromACME management. ILC will recommend and develop a sustainable EnvironmentalResponsibility Plan. These environmental improvements to ACMEs supply chain will cost$9,307,981, but are off-set by savings in the form of reductions in water and power use.See Green Initiatives analysis.ACMEs Strategic Logistics Plan will provide a state of the art IT system, efficient and costBottomlineeffective warehouse, distribution, and transportation model. ACME will see a first yearsavings of $42,210,473 and a total savings of $224,064,792 at full implementation. Page 7 8. EXECUTIVE SUMMARY *Table 1: 3-Year PlanACME has the opportunity to change. However, if ACME does not address the waste andCo