Sustainable growth of eaton s electrical sector
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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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Sustainable growth of eaton s electrical sector

Krannert School of Management

Sustainable Growth of EATON’s Electrical Sector

Optimization of the Distribution Network

Purdue University


What are we covering

What Are We Covering?

Purdue University


Tiepoint consulting team

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


Current situation

Current Situation

  • 16 Customer Manufacturing Solution Centers

  • Over 10 Components Manufacturing Sites

Nick Grady


Problem statement

Problem Statement

  • High inventory level

  • Increased premium freight

  • Questionable sustainability

Nick Grady


Recommendation

Recommendation

  • Construct new warehouse in Wichita, KA

    • Decreased overall inventory

    • Decreased premium freight

    • Strategic placement for future growth

Nick Grady


Current cost analysis

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


Current cost analysis1

Current Cost Analysis

4 Sites Considered:

Shipping Cost Calculation

Total Annual Shipping Cost of Selected Sites: $2,385,434

Nick Grady


Inventory reduction analysis

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


Inventory reduction analysis1

Inventory Reduction Analysis

Dane Snyder


Inventory reduction analysis2

Inventory Reduction Analysis

Dane Snyder


Cost savings analysis

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


Cost savings analysis1

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


Cost savings analysis2

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


Financial feasibility analysis

Financial Feasibility Analysis

Brian Fish


Summary

Summary

Brian Fish


Have doubts

Have Doubts!


Appendix

Appendix

Shipping Cost Savings


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