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Sustainable Growth of EATON’s Electrical Sector

Krannert School of Management. Sustainable Growth of EATON’s Electrical Sector. Optimization of the Distribution N etwork. Purdue University. What Are We Covering?. Purdue University. Tiepoint Consulting Team. Dane Snyder MBA 15 Operations and Finance. Ayush Goel MBA 15

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Sustainable Growth of EATON’s Electrical Sector

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  1. Krannert School of Management Sustainable Growth of EATON’s Electrical Sector Optimization of the Distribution Network Purdue University

  2. What Are We Covering? Purdue University

  3. Tiepoint Consulting Team Dane Snyder MBA 15 Operations and Finance Ayush Goel MBA 15 Operations and Business Strategy Nick Grady MBA 15 Operations and Finance Brian Fish MBA 15 Finance and Operations Purdue University

  4. Current Situation • 16 Customer Manufacturing Solution Centers • Over 10 Components Manufacturing Sites Nick Grady

  5. Problem Statement • High inventory level • Increased premium freight • Questionable sustainability Nick Grady

  6. Recommendation • Construct new warehouse in Wichita, KA • Decreased overall inventory • Decreased premium freight • Strategic placement for future growth Nick Grady

  7. Current Cost Analysis Shipping Modes as a Percentage of Total Orders for Selected Sites • Shipping Costs: • Standard Trucking • Premium Freight $5,189,791 $590,049 Nick Grady

  8. Current Cost Analysis 4 Sites Considered: Shipping Cost Calculation Total Annual Shipping Cost of Selected Sites: $2,385,434 Nick Grady

  9. Inventory Reduction Analysis Location-product combinations to pool • Chicago-SAT • Chicago-SVC • Dallas-SAT • Dallas-SVC • Los Angeles-SAT • Los Angeles-SVC • San Francisco-SAT • 50% • of Total Premium Orders Dane Snyder

  10. Inventory Reduction Analysis Dane Snyder

  11. Inventory Reduction Analysis Dane Snyder

  12. Cost Savings Analysis Assumptions: • Shipping cost is average of costs provided @ $0.304/1000 miles/Lb • After risk pooling LTL can be negotiated to FTL • Sensitivity analysis of the cost assessed by varying between 75% - 100% of the LTL cost Ayush Goel

  13. Cost Savings Analysis • Warehouse selection criteria: • 300K Population • A positive growth rate region • Near to CMSCs with 50% premium freight • Sensitivity Analysis: • Three locations shipping costs were calculated • Wichita, KS was lowest costing with highest growth rate in population Ayush Goel

  14. Cost Savings Analysis • Current Distribution Network • Shipping cost are $2.4M • Frequent stock outs • High Days-On-Hand (DOH) • New Warehouse at Wichita, KS • Shipping cost just $1.5M, half of older network • Low Days-On-Hand (DOH), uncertainty in demand is pooled • New growth region, opportunity for new CMSCs in central US Ayush Goel

  15. Financial Feasibility Analysis Brian Fish

  16. Summary Brian Fish

  17. Have Doubts!

  18. Appendix Shipping Cost Savings

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