Sustainable Growth through Network Optimization

Afief BaasirBotao Shao Hery SofiajiPengyu Zhai

Team Name: Guerilla Consulting

GSCMI 2014 Case Competition 2

Team Overview Botao Shao

Hery SofiajiAfief Baasir Pengyu ZhaiBotao Shao

• MBA of 2015• MBA of 2014 • MSIA of 2014

• MSHRM of 2014

GSCMI 2014 Case Competition 3

Agenda Botao Shao

Current Condition & Challenges

Operation Analysis

Future Look

Recommendation

GSCMI 2014 Case Competition 4

Current Condition of Eaton Botao Shao

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

SC Network

2 production plants16 CMSCs2 major warehousesCDC & DBN

Eaton Overview

Power managementComprise of 4 sectors

Material flow

Kanban system2 modes of transportation

GSCMI 2014 Case Competition 5

Key Challenges Botao Shao

• High utilization of warehouses and DBN• High inventory level at CMSCs in the west and south

High Inventory Level

• High expense for air freight to the CMSCs in the west and south

High Frequency of Premium Freight

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 6

Operation Analysis Afief Baasir Air shipment mostly occur from west coast

CMSC

Atlanta

Baltim

ore

Chicago

Clevelan

d

Dallas

Denver

Hartford

Houston

Los A

ngeles

New Jerse

y

Orlando

Phoen

ix

Portla

nd

Raleigh

San fra

ncisc

o

Seattle

St Lou

is -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

• SF & LA contribute the biggest portion of air shipment in the west coast• Dallas DBN does not overcome the air shipment problem

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

Order by Premium Shipment

GSCMI 2014 Case Competition 7

Operation Analysis Afief Baasir There are a huge different between

the two warehouse capacity

Faye

ttevil

le, NC

Sumter, S

C

W34 (S

C)

W87 (C

A)

CDC & D

BN

Arden,

NC

Beave

r, PA

El Pas

o, TX

Raleigh, NC

Puerto

Rico N

COthe

rs -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

W34 (SC) has about 7 times bigger capacity compared to W87 (CA) Condition & Challenges Operation Analysis Future Look Recommendation Q & A

Order by Source

GSCMI 2014 Case Competition 8

Operation Analysis Afief Baasir

Air Shipment

Grounds Shipment

0 2 4 6 8 10 12

Shipping Cost ($/Lb)

Enormous differences between air and ground shipping cost

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 9

Operation Analysis Afief Baasir

Denver LA Phoenix SF Seattle -

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

160,000.00

Average shipping price from plant ($)

LA offer lowest distance to other CMSC in west coast

Denver LA Phoenix SF Seattle0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Distance to other west coast CMSC (miles)

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 10

Operation Analysis Afief Baasir Change into ground shipping would led into

significant cost reduction

Current Frieght Premium 2,694,892.34

OPTION from Plant to WH WH to CMSC TOTALWH in LA 133,422.74 45,030.42 178,453.17 WH in SF 148,556.57 47,454.34 196,010.91

WH in Seattle 145,667.33 88,518.83 234,186.15 WH in Denver 119,783.36 95,431.97 215,215.34 WH in Phoenix 121,455.62 69,306.69 190,762.31

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

Assumption if all item shipped by ground in west coast:

GSCMI 2014 Case Competition 11

CMSC Performance Comparison Hery Sofiaji

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 12

Eaton’s Options Hery Sofiaji

Options Benefits Drawbacks

Build new CMSC site

Build a major warehouse

Extending plant storage at CSMC

Increases responsiveness to demand’s changeImprove inventory turnoverEnhance market presence

Can consolidate supplier ordersShorten distance of supply to some CSMC siteReduce high utilization of W34 & W87

The least expensive investment and costsCan support local area

Need a lot of investmentsThe facility will need a lot of costs to be operated

Less responsive to support market fluctuation from farther location

Can not increase responsiveness to fluctuation of customer demand

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 13

Valuating the options Hery Sofiaji

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

Cost

Responsive-ness

Build new CSMC

High Low

Low

High

Build new warehouse

Extend plant storage of CMSC

GSCMI 2014 Case Competition 14

Building a new warehouses Hery Sofiaji

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 15

Recommendation Pengyu (Peter) Zhai

Short-term Objectives Leverage the performance

between the west and the east Improve the existing supply chain

network

Creating new CMSC sites

Building a major warehouse

Extending the plant storage of CMSCs

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 16

Recommendation Pengyu (Peter) Zhai

• From inventory level perspective, expand capacity of plant storage in LA, Houston, and Dallas.

• From future developmental perspective, also expand capacity of plant storage in LA, Houston, and Dallas.

• From transportation optimization perspective, build warehouse in Los Angeles

• New CMSCs are costly, but suitable for long term expansion

Four CMSCs with Highest Average Monthly Inventory Level

Los Angeles-SAT 1507 1523 1566 1669 1717 1710 1586 1602 1748 1743 1658 1624

Houston-SVC 1331 1582 1556 1415 1391 1340 1366 1424 1625 1790 1594 1397

Dallas-SAT 1102 1223 1071 946 938 1011 1186 1399 1461 1495 1518 1245

Los Angeles-SVC 1018 1068 1212 1214 1104 1152 1192 1098 1051 1004 1036 1100

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 17

Recommendation Pengyu (Peter) Zhai

Long-term Objectives Develop a sustainable network

for future growth within the entire distribution system

Promote Eaton Power Distribution Systems at every medium to large size city

Employing Efficient Technology(i.e.:ERP, Cloud Computing, RFID.etc.)

Comprehensive Valuation System

Principle of Lean

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 18

Recommendation Pengyu (Peter) Zhai

Efficiency&

Sustainability

Lean Principle

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 19

Recommendation Pengyu (Peter) Zhai

• Staff Training• Future Demand Forecasting

Condition & Challenges Operation Analysis Future Look Recommendation Q & A

GSCMI 2014 Case Competition 20

Q & A

Thank you!Guerilla Consulting

Condition & Challenges Operation Analysis Future Look Recommendation Q & A