Aubakirov Jialu Huang Kenny Chong Pranav Gupta AIESECers Consulting AGENDA Analysis Alternatives Problem Statement Reccom Implementation Risks Future Plans 41714 GSCMI 2014 Case Competition ID: 634113
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Slide1
Eaton corporation
Askar Aubakirov Jialu Huang Kenny ChongPranav Gupta
AIESECers ConsultingSlide2
AGENDA
AnalysisAlternativesProblem Statement
Reccom
.
Implementation
Risks
Future Plans
4/17/14
GSCMI 2014 Case Competition
2
AppendixSlide3
Problem Statement
AnalysisAlternativesProblem Statement
Reccom
.
Implementation
Risks
Future Plans
4/17/14
GSCMI 2014 Case Competition
3
Appendix
How should
Eaton Electrical
Section choose to improve its supply chain network in the
short-run
?
Reduce premium freight frequency
Lower inventory level
Level the east and west coasts’
performance
How
can it
ensure a
sustainable growth in the
long-run
?
Promote Power Distribution Systems
Improve management efficiency
PranavSlide4
Key challenges
AnalysisAlternativesProblem Statement
Reccom
.
Implementation
Risks
Future Plans
4/17/14
GSCMI 2014 Case Competition
4
Appendix
Frequent stockouts at W87 in recent years
Orders from CMSC don’t necessarily get high priority
One employee manages both CDC & DBN
The current KB levels were determined six years ago
Three-day
rotation systems need to be updated
The western site: a. higher inventory levels & transportation costs;
b
. rely more on premium freight
Difficulty in
meeting delivery demand from growing high-tech companies
Difficulty in demand forecast for the new customers in the west coast sites
Problems
Long Lead
Times
Lack
of Market Understanding
Ineffective
Managerial processInefficient Order ProcessFrequent stockouts at W87
✔
✔
Orders from CMSC don’t necessarily get high priority
✔
✔
✔
The
western sites
rely more on premium freight and have
higher inventory levels
✔
✔
✔
Difficulty in meeting delivery demand from growing high-tech companies
✔
✔
✔Outdated KB Systems✔✔CDC & DBN are undermanned✔
PranavSlide5
Recommendations
4/17/14GSCMI 2014 Case Competition5AnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
1. Pareto your inventory
2.
Reduce replenishment lead times
3. Revise order cycles/quantities
4. Improve your forecasting
5. Eliminate obsolete stock
6
. Centralize your inventory
7. Lower your service level
8. Reduce SKU counts
9. Reduce variability of demand and supply
10. Align your metrics
PranavSlide6
Alternatives
4/17/14GSCMI 2014 Case Competition6AnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
PranavSlide7
CDC in Los Angeles, CA
4/17/14GSCMI 2014 Case Competition7Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
Reasoning:
W87 has only supplied $5.7mil worth of orders.
W87 in Los Angeles experiences frequent
stockouts
.
CDC in North Carolina supplied similar amount of orders as W87.
Doubling inventory capacity in Los Angeles will decrease lead time, inventory level and premium frequency in CSMCs at the west
Challenges:
Urgent orders might not be fulfilled
AskarSlide8
CDC site
4/17/14GSCMI 2014 Case Competition8Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
LA, CA
AskarSlide9
NEW warehouse
4/17/14GSCMI 2014 Case Competition9Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
High orders and high inventory levels in Los Angeles, Dallas, Houston and Denver
Currently 65% of all orders are from North and South Carolina regions
Denver and Houston order 66% and 78% from North Carolina
San Francisco orders 24% by premium shipping
Challenges:
Estimating an optimal location
High cost of establishing new major warehouse
AskarSlide10
new
WAREHOUSE& Three-day rotation4/17/14GSCMI 2014 Case Competition
10
Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
W60
Albuquerque, New Mexico
A
C
B
KennySlide11
new
WAREHOUSE AlbuquerqueCentral location determined based on premium shipping cost and weight.Located along major highway networks. (I-25 and I-40)Annual savings of $5mil in terms of premium frequency reduced.Investment of a $10mil warehouse would breakeven in 3.5 years.Provides flexibility with order delivery.
Three Day Rotation PlanThree routes : A (Denver – Seattle - Portland), B (Phoenix - Los Angeles - San Francisco), C (Dallas – Houston)Average travel time : ~ 19 hours Urgent request to Portland and Seattle could be fulfilled by W87.
4/17/14GSCMI 2014 Case Competition
11
KennySlide12
AssumptionsWarehouse saves 2/3 premium costsTax rate is at 10%
Standard shipping rate is 1/3 of premium shipping rateCentral coordinates of cities4/17/14GSCMI 2014 Case Competition12KennySlide13
Implementation
4/17/14GSCMI 2014 Case Competition13AnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
Reduce
Inventory Levels
Revise KB systems
Revise the three-day
rotation
New major plant in the west coast
Lower Premium Freight Frequency
Build new major warehouse
…and
upgrade managerial decisions
New CMSC sites
New CDC
JialuSlide14
4/17/14GSCMI 2014 Case Competition
14RISK EVALUATIONAnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
Growing gas price
High cost in insurance
Natural disasters (earthquakes)
Increase in base wage and taxes
Changing in government regulations/policies
JialuSlide15
4/17/14GSCMI 2014 Case Competition
15Future plansAnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
JialuSlide16
4/17/14GSCMI 2014 Case Competition
16Executive summaryAnalysisAlternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
JialuSlide17
Thank you!
Questions?4/17/14GSCMI 2014 Case Competition17Slide18
Appendix
4/17/14GSCMI 2014 Case Competition18Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
AppendixSlide19
Inventory level
4/17/14GSCMI 2014 Case Competition19Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
AppendixSlide20
Order proportion
4/17/14GSCMI 2014 Case Competition
20
Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
AppendixSlide21
Warehouse location (Weight)
4/17/14GSCMI 2014 Case Competition
21
Analysis
Alternatives
Problem Statement
Reccom
.
Implementation
Risks
Future Plans
Appendix
X (N)
Y (W)
Site Weight
X*W
Y*W
Dallas
SAT
32.7758
96.7967
2471930.99
81019516
239274763
Dallas
SVC
32.7758
96.7967
2112797.06
69248614
204511783
Denver
SAT
39.7392
104.9847
1985762.79
78912624
208474710
Denver
SVC
39.7392
104.9847
944737.711
37543121
99183005.1
Houston
SAT
29.7628
95.3831
1575230.67
46883275
150250385
Houston
SVC
29.7628
95.3831
2020297.61
60129714
192702249
Los Angeles
SAT
34.05
118.25
2902437.78
98828006
343213267
Los Angeles
SVC
34.05
118.25
1735502.62
59093864
205223185
Phoenix
SAT
33.45
112.0667
1561005.45
52215632
174936729
Portland
SVC
45.52
122.6819
1179996.14
53713424
144764169
San Francisco
SAT
37.7083
122.2803
1414542.96
53340010
172970738
Seattle
SAT
47.6097
122.3331
1432671.83
68209076
175263186
21336913.6
759136877
2310768168
X
35.57857
Y
108.29908Slide22
Warehouse Location (
P.Shipping)4/17/14GSCMI 2014 Case Competition22CMSC site
TypeTotal
N
W
N*W
W*W
Dallas-SAT
SAT
259,353
32.7758
96.7967
8500509.3
25104536
Dallas-SVC
SVC
1,580,908
32.7758
96.7967
51815512
153026641
Denver-SAT
SAT
562,668
39.7392
104.9847
22359971
59071518
Denver-SVC
SVC
253,499
39.7392
104.9847
10073851
26613526
Houston-SAT
SAT
370,551
29.7628
95.3831
11028636
35344306
Houston-SVC
SVC
565,078
29.7628
95.3831
1681831253898918Los Angeles-SATSAT 942,978 34.05118.2532108417111507203
Los Angeles-SVC
SVC
683,453
34.05
118.25
23271591
80818374
Phoenix-SAT
SAT
267,428
33.45
112.0667
8945483.2
29969829
Portland-SVC
SVC
396,898
45.52
122.6819
18066781
48692159
San francisco-SAT
SAT
1,208,252
37.7083
122.2803
45561144
147745467
Seattle-SAT
SAT
379,474
47.6097
122.3331
18066657
46422267
7,470,542
266616866
818214744
N
35.69
W
109.53
Slide23
Site analysis - Albuquerque
4/17/14GSCMI 2014 Case Competition23RouteCityDistance (M)
ETT (Hrs)
BDallas
643
9.3
A
Denver
445
6.25
B
Houston
841
12.6
C
Los Angeles
789
11.1
C
Phoenix
420
6.3
A
Portland
1360
20.6
C
San Francisco
1085
15.5
A
Seattle
1434
21.75
Route
Total Premium Cost
Distance
ETT
A
1592538.919
882
12.8
B
2775890.161
1932
28
C
3102112.844117317.2Average
19.33333Slide24
Economic Analysis of new warehouse
4/17/14GSCMI 2014 Case Competition24Annual Operational Cost1400000
Annual Savings
4980361.282
($13,572,386.18)
Rate
10%
3.436509004
Life time
5
Future Value
0
Estimated Cost
# of Employees
15
50000
750000
Electricity
20000
12
240000
Insurance
25000
12
300000
Maintenance
5000
12
60000
MISC
50000
1400000