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Sustainable Growth through Network Optimization

Sustainable Growth through Network Optimization. Team Name: ARBY’s Bayu Daryanto Ronaldo Rotua Yuji Sakakibara Aurélia de Larrard. Problem statement & Agenda ( Aurélia de Larrard ). Problem statement

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Sustainable Growth through Network Optimization

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  1. Sustainable Growth through Network Optimization Team Name: ARBY’s BayuDaryanto RonaldoRotua Yuji Sakakibara Aurélia de Larrard

  2. Problem statement & Agenda (Aurélia de Larrard) • Problem statement • On the short term, how can Eaton reduce the premium freight frequency as well as the overall inventory level? • On the long term, how can Eaton ensure a sustainable growth? • Agenda • Problem statement • Recommendation • Existing SC network • Rationale • Strategy & Action Plan • Timetable

  3. Supply Chain Network (Aurélia de Larrard) Customer Manufacturing Solutions Center (CMSC) Plants Distribution Center Ware Houses

  4. Recommendation (Aurélia de Larrard) • We recommend building a major warehouse in Los Angeles • Building a major warehouse will allow: • Reduced use of air shipment on the west coast • Lower inventory in regional (west) CMSCs • Lower utilization rate of current warehouses W34-W87 • Reduce the fluctuation of the whole supply chain • Increase Service Level

  5. Pros and Cons of the other options (Aurélia) • Build a new CMSC (option 1) • Pros • Increase responsiveness • Reduce regional logistics costs • Cons • increase overall inventory • No reduction of air shipment • no improvement of warehouse capacity/high utilization rate • Extend plant storage of CMSC (option 3) • Pros • Lower investment cost • Improve local performance of close CMSCs • Cons • Limited capacity to reduce air shipment • Limited capacity to improve total inventory level

  6. Rationale to focus on the west(Yuji Sakakibara) West West

  7. Reducing Air shipment Cost (Yuji Sakakibara) • 2 modes of transportation • Truck: majority of the shipment • Air: emergency shipment • If EATON can achieve 100% Service Level, they do not have to use air shipment • Service Level (SL)=1 – (Air shipment / Total shipment)

  8. Analyzing Current Inventory(Yuji Sakakibara) COGS EX) Los Angeles-SAT Inventory Air: 16% of total shipment SS = Inventory + (COGS/10cycle/2) Z = NORMSINV(SL(%)) σ=SS/Z(Standard Deviation/Month) Standard DeviationofDemand in each city

  9. Pooling Inventory (BayuDaryanto) Current System Pooling System Std. dev. demand at W = √N * σ Std. dev. demand at 1 location =σ Safety stock at W = z * √N∗ σ Safety stock at each CMSC = z * σ Total safety stock at N RDCs = N z σ

  10. Cost Saving Benefits(BayuDaryanto) *) Targeted Service Level based on other regions

  11. Strategy & Action Plan(RonaldoRotua) • Short term • Build New Warehouse in Los Angeles • Set Up Pooling System • Long term • Pooling system in other regions • Evaluate the CMSC network based on future demand

  12. Timetable(RonaldoRotua)

  13. Issue with New Warehouse (Ronaldo Rotua) Mitigation

  14. Q&A(RonaldoRotua) Any Questions ?

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