GSCMI Case Competition:
Sustainable Growth through Network
Optimization
SCM Consulting
Peter Jacobson
Raudel Medina
Javier Arguello
Jin Guo
West CMSC’s struggle
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)
Problem
Recommendation
Analysis
(Peter Jacobson)
Supply chain is
misaligned with goals
of CSCMs in west
High
shipping
costs
High
inventory
holding costs
Implementation
GSCMI 2013 Case Competition
Risks &
2
Contingencies
Eaton’s goals in redesign
Short-term
Long-term
Reduce
premium freight
frequency
Minimize
overall
inventory level
Problem
Recommendation
(Peter Jacobson)
Analysis
Ensure
sustainable
growth
Implementation
GSCMI 2013 Case Competition
Risks &
3
Contingencies
An agile supply chain
(Peter Jacobson)
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
Problem
Recommendation
Analysis
Implementation
GSCMI 2013 Case Competition
Risks &
4
Contingencies
The Solution
(Raudel Medina)
• Leasing a warehouse in the west
coast
• Consignment parts
• Review/Redesign the Kanban
System
• Broaden external supplier base
• Standardized components/multifunctional parts
Problem
Recommendation
Analysis
Implementation
GSCMI 2013 Case Competition
Risks &
5
Contingencies
Solution Analysis
(Raudel Medina)
• W87 provides small amounts of parts
to CMSC sites
• “Other” sites account for the intersite CMSC inefficient product move
• Costs of leasing reduces the
investment in a permanent site
Problem
Recommendation
Analysis
Implementation
GSCMI 2013 Case Competition
Risks &
6
Contingencies
Warehouse Location
• 7 locations = 62% of Premium
Shipments
(Javier Arguello)
62%
Premium
• 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
Problem
Recommendation
Analysis
Implementation
GSCMI 2013 Case Competition
Risks &
7
Contingencies
Eaton’s Success Plan
Problem
Recommendation
Analysis
(Jin Guo)
Implementation
GSCMI 2013 Case Competition
Risks &
8
Contingencies
Other factors
(Jin Guo)
Uncertain Economic Conditions
 Economic slow-down will negatively impact the demand for Eaton’s
services
 Short-term Lease Contract
Project 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 project
Coordination
 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
GSCMI 2013 Case Competition
Risks &
9
Contingencies
Summary – Q&A
Control
Inventory
Long-term
Growth
Reduce premium
freight
GSCMI 2013 Case Competition
10
Backup
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11
Transportation calculations
GSCMI 2013 Case Competition
12
Transportation calculations
GSCMI 2013 Case Competition
13
Warehouse leasing
Source: http://www.loopnet.com/
GSCMI 2013 Case Competition
14
Arizona vs California
GSCMI 2013 Case Competition
15
Shipment trends over year
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month (2013)
Orders from CSMC sites
15,000,000
14,000,000
13,000,000
$
$
Orders by premium ship
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months (2013)
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16
Eaton’s financials
GSCMI 2013 Case Competition
17