GSCMI Case Competition: Sustainable Growth through Network Optimization SCM Consulting Peter Jacobson Raudel Medina Javier Arguello Jin Guo.

GSCMI Case Competition:

Sustainable Growth through Network Optimization

SCM ConsultingPeter JacobsonRaudel MedinaJavier ArguelloJin Guo

GSCMI 2013 Case Competition 2

West CMSC’s struggle (Peter Jacobson)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

Supply uncertainty• Undeveloped external supply network

in west• Warehouses (W34, W87) interests not

aligned CSMCs• CDC interests aligned to CSMCs, but

located in east• Custom products require custom

components

Demand uncertainty• Customer orders are difficult to

forecast• Customers demand short lead times• Product nature is innovative (highly

customized)

Supply chain is misaligned with

goals of CSCMs in west

High shipping

costs

High inventory holding costs

GSCMI 2013 Case Competition 3

Reduce premium freight

frequency

Minimize overall

inventory level

Ensure sustainable growth

Short-term

Eaton’s goals in redesign (Peter Jacobson)

Long-term

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

GSCMI 2013 Case Competition 4

An agile supply chain (Peter Jacobson)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

Reduce supply uncertainty• Establish a dedicated

warehouse to serve Electrical Division in the west

• Collaborative replenishment: vendor managed inventory

• Improve information sharing (EDI)

• Review / redesign Kanban System

• Develop supply network in west

Reduce demand uncertainty• Coordination with customers• Postponement• Product design: Standardized

components/multi-functional parts

GSCMI 2013 Case Competition 5

The Solution (Raudel Medina)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

Leasing Warehouse

Standardized Components

Kanban System

Consignment

External Supplier

• Leasing a warehouse in the west coast

• Consignment parts

• Review/Redesign the Kanban System

• Broaden external supplier base

• Standardized components/multi-functional parts

GSCMI 2013 Case Competition 6

Solution Analysis (Raudel Medina)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

• W87 provides small amounts of parts to CMSC sites

• “Other” sites account for the inter-site CMSC inefficient product move

• Costs of leasing reduces the investment in a permanent site

GSCMI 2013 Case Competition 7

Warehouse Location (Javier Arguello)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

Lease in Phoenix

• 7 locations = 62% of Premium Shipments

• Los Angeles and Phoenix minimize transportation costs

• W87 is located at Los Angeles

• Phoenix has lower leasing cost

• Lower labor costs

• More opportunities to expand

62%Premium

GSCMI 2013 Case Competition 8

Eaton’s Success Plan (Jin Guo)

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

GSCMI 2013 Case Competition 9

Other factors (Jin Guo)Uncertain Economic Conditions

Economic slow-down will negatively impact the demand for Eaton’s services

Short-term Lease ContractProject Management Team

Wrong supply chain management team may make the problem worse even with a good supply chain strategy

Select the right team in charge of the projectCoordination

Coordination between implementing the new system and satisfying the demand from all sites

Well-designed process to execute the new strategy

Problem Recommendation

Analysis

Implementation

Risks & Contingencies

GSCMI 2013 Case Competition 10

Summary – Q&A

Reduce premium freight

Control Inventory

Long-term Growth

GSCMI 2013 Case Competition 11

Backup

GSCMI 2013 Case Competition 12

Transportation calculations

GSCMI 2013 Case Competition 13

Transportation calculations

GSCMI 2013 Case Competition 14

Warehouse leasing

Source: http://www.loopnet.com/

GSCMI 2013 Case Competition 15

Arizona vs California

GSCMI 2013 Case Competition 16

Shipment trends over year

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8,000,000 9,000,000

10,000,000 11,000,000 12,000,000 13,000,000 14,000,000 15,000,000

Orders from CSMC sites

Months (2013)

$

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -

200,000 400,000 600,000 800,000

1,000,000 1,200,000 1,400,000 1,600,000

Orders by premium ship

Month (2013)

$

GSCMI 2013 Case Competition 17

Eaton’s financials