Sustainable Growth through Network Optimization Team Name: ARBY’s Bayu Daryanto Ronaldo Rotua Yuji Sakakibara Aurélia de Larrard

GSCMI 2013 Case Competition 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

GSCMI 2013 Case Competition 3 Supply Chain Network (Aurélia de Larrard) Customer Manufacturing Solutions Center (CMSC) Plants Distribution Center Ware Houses

GSCMI 2013 Case Competition 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

GSCMI 2013 Case Competition 5 Pros and Cons of the other options (Aurélia)  Build a new CMSC (option 1)  Pros 1.Increase responsiveness 2.Reduce regional logistics costs  Cons 1.increase overall inventory 2.No reduction of air shipment 3.no improvement of warehouse capacity/high utilization rate  Extend plant storage of CMSC (option 3)  Pros 1.Lower investment cost 2.Improve local performance of close CMSCs  Cons 1.Limited capacity to reduce air shipment 2.Limited capacity to improve total inventory level

GSCMI 2013 Case Competition 6 Rationale to focus on the west (Yuji Sakakibara) West

GSCMI 2013 Case Competition 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)

GSCMI 2013 Case Competition 8 Analyzing Current Inventory (Yuji Sakakibara) EX) Los Angeles-SAT Air: 16% of total shipment SS = Inventory + (COGS/10cycle/2) Z = NORMSINV(SL(%)) σ = SS/Z (Standard Deviation/Month) COGS Inventory Safety Stock Standard deviation Los Angeles-SAT Los Angeles-SVC Phoenix-SAT Portland-SVC San francisco-SAT Seattle-SAT Standard Deviation of Demand in each city

GSCMI 2013 Case Competition 9 Pooling Inventory (Bayu Daryanto) W CMSC W Current System Pooling System Std. dev. demand at 1 location = σ Safety stock at each CMSC = z * σ Total safety stock at N RDCs = N z σ Std. dev. demand at W = √N * σ Safety stock at W = z * √N ∗ σ

GSCMI 2013 Case Competition 10 Cost Saving Benefits (Bayu Daryanto) *) Targeted Service Level based on other regions BeforeAfter Amount of Purchase Orders by Premium Shipping ($) 3,878,4852,401,522 Service Level89 %94 % *) Portion Purchase Order by Premium Shipping 11 %6 % Premium shipping saving cost (in %) DOH (days) - Reduce Holding Cost - Reduce Inventory Level

GSCMI 2013 Case Competition 11 Strategy & Action Plan (Ronaldo Rotua)  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

GSCMI 2013 Case Competition 12 Timetable (Ronaldo Rotua)

GSCMI 2013 Case Competition 13 Issue with New Warehouse (Ronaldo Rotua) Customer Relationship CMSC can focus more on customer Single Point of contact Responsiveness Trade off with Lower Inventory and long term sustainability growth Constant annual saving from holding cost Lower Transportation Cost Investment Cost Coordination 6 month before Launch Beta Project Periodic Monitoring, feedback and evaluation Information Control Migrating to pooling system Mitigation

GSCMI 2013 Case Competition 14 Q&A (Ronaldo Rotua) Any Questions ?