Sustainable Growth Through Network Optimization Team Name: Q lean Yunyang Liu Jennifer Lu Hiroaki Tanaka Xueqing Wang

GSCMI 2013 Case Competition 2 Agenda  Company overview  Current situation  Recommendation  Alternatives analysis  Future outlook  Conclusion

GSCMI 2013 Case Competition 3 Overview Company highlight Domestic power Management company $22 billion of sales in 2012, 100 million employees, product exported to 175 countries Four main business sector: Electrical, Aerospace, Vehicle and Hydraulics Products SAT and SVC System structure 16 CMSCs Two plants Two warehouses 1 DBN 1 CDC (third-party) Electrical Sector

GSCMI 2013 Case Competition 4 Current Situation - Western sites struggle to achieve lean operations -Premium shipping cost is high at western sites -Procurement strategy needs to be updated -Redundant logistics mapping countrywide -W87 stocks out frequently -DBN has been inefficiently used

GSCMI 2013 Case Competition 5 Process Flow Order at CMSCs CMSC BOM System CMSC BOM System CMSC Inventory Internal Procurement DBN CDC Two Plants W87,W34 External Suppliers Order satisfied

GSCMI 2013 Case Competition 6 Current Situation - Western sites struggle to achieve lean operations - Premium shipping cost is high at western sites -Procurement strategy needs to be updated -Redundant logistics mapping countrywide -W87 stocks out frequently -DBN has been inefficiently used

GSCMI 2013 Case Competition 7 Premium Cost Problem

GSCMI 2013 Case Competition 8 Current Situation - Western sites struggle to achieve lean operations -Premium shipping cost is high at western sites - Procurement strategy needs to be updated -Redundant logistics mapping countrywide -W87 stocks out frequently -DBN has been inefficiently used

GSCMI 2013 Case Competition 9

10 Current Situation - Western sites struggle to achieve lean operations -Premium shipping cost is high at western sites -Procurement strategy needs to be updated -Redundant logistics mapping countrywide -W87 stocks out frequently -DBN has been inefficiently used

GSCMI 2013 Case Competition 11 Recommendation  Establish a West coast Specialized Warehouse (WSW)

GSCMI 2013 Case Competition 12 Alternatives overview Overall, there are two other alternatives that can potentially solve the problems  Create New CMSCs In West Coast  Build a Warehouse in West Coast

GSCMI 2013 Case Competition 13 Create New CMSCs In West Coast BenefitsCosts/Risks  Cost savings from logistics  Increased responsiveness to regional demand change  Enhancing market presence  Further enhancing the brand image and market share  Potential increase in setup and running costs  Highly networked and complicated supply chain  High market occupancy from existing local companies  Learning curve

GSCMI 2013 Case Competition 14 Build a Warehouse in West Coast BenefitsCosts/Risks  Help consolidate supplier orders  Shorten the distance of supply to some CMSCs  Alleviate the pressure of two highly utilized warehouses  Primarily serve Electrical Sector  Higher costs of investment  Higher costs of maintenance  Learning Curve

GSCMI 2013 Case Competition 15 Extend the Plant storage of CMSCs  Building a new WSW to serve exclusively for Electrical Sector will alleviate the pressure of existing warehouses. BenefitsCosts/Risks  Less investment in establishment and maintenance  Easier and faster to implement  Reduce the premium freight frequency from CMSCs in West Coast  Lower the inventory level in West Coast sites  Help other CMSCs and alleviate the load of W34  Capacity is smaller than normal warehouses  Impact is smaller than other alternatives

GSCMI 2013 Case Competition 16  Breakdown of POs from CMSCs to W34

GSCMI 2013 Case Competition 17 West Coast Specialized Warehouse  What Hybrid of DBN and Warehouse served exclusively for Electrical Sector  Where Near the CMSC in Los Angeles  How Expected Capacity: 638,050 Lbs / year (twice the size of DBN) Short term (As soon as possible)

GSCMI 2013 Case Competition 18 Total Dollar Amount of Purchase Order From CMSC 2013 ($) WSW

GSCMI 2013 Case Competition 19 Shipping Cost per ($/Lb) West to West

GSCMI 2013 Case Competition 20 DBN Inventory level

GSCMI 2013 Case Competition 21 Future Outlook Dallas Inventory level Los Angeles Inventory level Phoenix Inventory level

GSCMI 2013 Case Competition 22 Conclusion  We are going to build a WSW(westcoast specialized warehouse) that exclusively serve CMSCs at Los Angeles to solve the current challenges as well as support the rapid growth of western sites business.

GSCMI 2013 Case Competition 23 Back Up  Frequency of using premium shipping cost and days of on-hand inventory level in west coast Premium Shiping FrenquencyDOH west coast9.56%40.60 east coast5.73%37.86  DBN has been inefficiently used DBN serves only 3.55% SAT and 0.05% SVC in Dallas

GSCMI 2013 Case Competition 24