Eaton corporation Askar - PowerPoint Presentation

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✔Outdated KB Systems✔✔CDC & DBN are undermanned✔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