sustainable growth through network optimization team name: q lean yunyang liu jennifer lu hiroaki...

Sustainable Growth Through Network Optimization

Team Name: Q leanYunyang LiuJennifer Lu

Hiroaki TanakaXueqing Wang

GSCMI 2013 Case Competition 2

Agenda Company overview

Current situation

Recommendation

Alternatives analysis

Future outlook

Conclusion


Overview

Company highlight

• Domestic power Management company

• $22 billion of sales in 2012, 100 million employees, product exported to 175 countries

• Four main business sector: Electrical, Aerospace, Vehicle and Hydraulics

• Products• SAT and SVC

• System structure• 16 CMSCs• Two plants• Two warehouses• 1 DBN• 1 CDC (third-party)

Electrical Sector


Current Situation-Western sites struggle to achieve lean operations -Premium shipping cost is high at western sites

-Procurement strategy needs to be updated

-Redundant logistics mapping countrywide

-W87 stocks out frequently

-DBN has been inefficiently used


Process Flow

Order at CMSCs

CMSC BOM

System

CMSC Inventory

Internal Procurement

DBN

CDC

Two Plants

W87,W34

External Suppliers

Order satisfied


Premium Cost Problem

Average % of premium per month

Atlant

a-SAT

Atlant

a-SVC

Baltim

ore-

SAT

Chicag

o-SAT

Chicag

o-SVC

Clevela

nd-S

AT

Dallas

-SAT

Dallas

-SVC

Denve

r-SAT

Denve

r-SVC

Hartfo

rd-S

AT

Hartfo

rd-S

VC

Houst

on-S

AT

Houst

on-S

VC

Los

Angele

s-SAT

Los

Angele

s-SVC

New J

erse

y-SAT

Orland

o-SAT

Phoen

ix-SAT

Portla

nd-S

VC

Raleigh

-SAT

San fr

ancis

co-S

AT

Seattl

e-SAT

St Lou

is-SAT

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Average amount of premium freight per month (pounds)


Atlant

a-SAT

Atlant

a-SVC

Baltim

ore-

SAT

Chicag

o-SAT

Chicag

o-SVC

Clevela

nd-S

AT

Dallas

-SAT

Dallas

-SVC

Denve

r-SAT

Denve

r-SVC

Hartfo

rd-S

AT

Hartfo

rd-S

VC

Houst

on-S

AT

Houst

on-S

VC

Los

Angele

s-SAT

Los

Angele

s-SVC

New J

erse

y-SAT

Orland

o-SAT

Phoen

ix-SAT

Portla

nd-S

VC

Raleigh

-SAT

San fr

ancis

co-S

AT

Seattl

e-SAT

St Lou

is-SAT

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Average DOH (month)


Recommendation

Establish a West coast Specialized Warehouse (WSW)


Alternatives overview

Overall, there are two other alternatives that can potentially solve the problems

Create New CMSCs In West Coast

Build a Warehouse in West Coast


Create New CMSCs In West Coast

Benefits Costs/Risks Cost savings from logistics

Increased responsiveness to regional demand change

Enhancing market presence

Further enhancing the brand image and market share

Potential increase in setup and running costs

Highly networked and complicated supply chain

High market occupancy from existing local companies

Learning curve


Build a Warehouse in West Coast

Benefits Costs/Risks Help consolidate supplier orders

Shorten the distance of supply to some CMSCs

Alleviate the pressure of two highly utilized warehouses

Primarily serve Electrical Sector

Higher costs of investment

Higher costs of maintenance

Learning Curve


Extend the Plant storage of CMSCs Building a new WSW to serve exclusively for Electrical

Sector will alleviate the pressure of existing warehouses.

Benefits Costs/Risks

Less investment in establishment and maintenance

Easier and faster to implement

Reduce the premium freight frequency from CMSCs in West Coast

Lower the inventory level in West Coast sites

Help other CMSCs and alleviate the load of W34

Capacity is smaller than normal warehouses

Impact is smaller than other alternatives


Atlant

a-SAT

Baltim

ore-

SAT

Chicag

o-SVC

Dallas

-SAT

Denve

r-SAT

Hartfo

rd-S

AT

Houst

on-S

AT

Los

Angele

s-SAT

New J

erse

y-SAT

Phoen

ix-SAT

Raleigh

-SAT

Seattl

e-SAT

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

11,977

8,731

5,178

11,188

Average amount of premium freight per month (pounds)

6%

9%

5%

6%

2%

4%

1%

2%

2%

2% 3

%3%

54%

Dallas-SATDallas-SVCHouston-SATHouston-SVCLos Angeles-SATLos Angeles-SVCPhoenix-SATPortland-SVCSan francisco-SATSeattle-SATDenver-SATDenver-SVCOthers

Breakdown of POs from CMSCs to W34


West Coast Specialized Warehouse

WhatHybrid of DBN and Warehouse served exclusively for Electrical Sector

WhereNear the CMSC in Los Angeles

How Expected Capacity: 638,050 Lbs / year (twice the size of DBN) Short term (As soon as possible) 　　


Total Dollar Amount of Purchase Order From CMSC 2013 ($)

Fayetteville, NC Sumter, SC

W34W87

CDC & DBN(2:1) CDC

DBN

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

WSW


Shipping Cost per ($/Lb) West to West

DenverHouston

LAPhoenix

SFSeattle

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6


DBN Inventory level


Future Outlook

Dallas Inventory level Los Angeles Inventory level

Phoenix Inventory level


Conclusion

We are going to build a WSW(westcoast specialized warehouse) that exclusively serve CMSCs at Los Angeles to solve the current challenges as well as support the rapid growth of western sites business.


Back Up Frequency of using premium shipping cost and days of on-

hand inventory level in west coast

　Premium Shiping Frenquency DOH

west coast 9.56% 40.60 east coast 5.73% 37.86

DBN has been inefficiently used DBN serves only 3.55% SAT and 0.05% SVC in Dallas

sustainable growth through network optimization team name: q lean yunyang liu jennifer lu hiroaki...

Documents

case competition

west coast slide

premium cost problem

w87 stocks

redundant logistics

plants w87

new cmscs

overview company