2009 EMIL-SCS Students Complete Global Supply Chain Projects
In lieu of a traditional master's thesis, students enrolled in Georgia Tech's Executive Master's in International Logistics and Supply Chain Strategy (EMIL-SCS) undertake a Global Supply Chain Project to fulfill the requirements of this eighteen-month residence-based program. Participants use this project as an opportunity to gain knowledge through the academic curriculum and apply those resources to a critical supply chain concern specific to their sponsoring companies.
The sixteen students in the 2009 EMIL-SCS class, which graduated in August of 2009, made full use of the program's resources in designing and completing their global projects, extending beyond their current scope of responsibility and realizing significant savings for their companies. Forming teams comprising from one to five people, the students completed six projects, described below:
Demand Planning and Inventory Visibility across Europe
This project's objectives were to identify waste in the value chain; establish clear and simple metrics for measuring process efficiency in logistics; improve, standardize, automate, and increase the frequency of forecasting process; and establish better integration and visibility between distribution and factories. Through these objectives, the project reduced warehouse costs by $65 million (35%), increased inventory turns from 4.3T to 5.0T, increased service rate from 85% to 91%, and reduced part lead time and administration order process from 127 days to 73 days.
Demand Planning for a Major Commodity and Retail Channel in the Caribbean
The focus of this project was to ensure a strong liaison between demand and supply through a robust (but simple) demand planning process, reducing finished goods inventory by at least 10%, while maintaining at least 90% fill rate level. Divided into three phases, the project focused on SKU rationalization, the demand planning process, and supplier collaboration, respectively. Phase I yielded a 3.5% reduction in the number of SKUs across all the product categories. Phase II yielded inventory reductions of 15% and the elimination of warehouse rental for additional savings. Phase III, although still in development, has a potential to reduce inventories by an additional 10%.
Implementation and Roll-Out of a Demand and Inventory Planning System at a Major Convenience Store Retail Chain
In this project, the company must identify ways to increase the per-store revenue and at the same time reach efficiencies across the supply chain in order to reduce operational costs. Project design and implementation includes the evaluation of the Retek-Oracle Replenishment and Forecasting modules, a total investment of $10 million. In Phase I of the implementation, the level of lost sales decreased more than 50% and product availability at the store level increased more than 65%. Depending on certain categories, revenue is expected to increase 4% to 6% at the store level. The payback period of the project will be approximately three years.
Low Cost Supply Chain Project
The objective was to develop a business model to profitably deliver low-cost products at price points that target customers can afford through analysis of the benefits of a redesigned, Low Cost Supply Chain (LCSC) model versus the current state. The cost savings resulting from this project was $221 million over five years, or $124 million on a discounted (net present value) basis. The primary reasons for the cost savings are reductions in inventory purchasing costs (19% of the savings) and inventory carrying costs (79% of the savings). Inventory carrying costs and inventory purchasing costs were reduced by almost 80%.
Optimal Sourcing Strategy in Latin America
The company's current supply chain for key countries in Latin America is based on sourcing product out of the United States and Asia. The company has been moving from the single-channel, single-sourced, configure-to-order model to a multi-channel, multi-source model that will provide much greater flexibility and convenience to customers at different price points. With this transition and the availability of new sources and new supply chain capabilities, the question is to determine the optimal supply chain strategy to satisfy the customer needs in key Latin American countries -- Colombia, Argentina, and Chile. The recommendations of the project have the potential to achieve approximately $5 to $10 million in annualized savings over current status and to reduce cycle time for several destination countries by one to three days.
Supply Chain Network Optimization Project
The company currently outsources about 70% of its products to Asia and builds 30% in-house domestically in the United States. The project evaluates five separate finished goods assemblies, using a total landed cost model to determine the optimal geographic areas for sourcing and manufacturing against internal and local options. The model included dynamic conditions for currency fluctuation, volatile fuel prices, and variable labor conditions across the geographic areas to better achieve a solid understanding of the total landed-cost of the assembly. As a result of the project, the range of savings based on probability is $1.5 million and $1.9 million and the most probable total cost opportunity for implementing this optimized scenario is approximately $1.5 million annually.
As the 2010 EMIL-SCS class anticipates its fifth and final residence in March 2010, the 2011 class is currently forming, with an expected start date in spring 2010. To learn more about the EMIL-SCS program or read more about the 2009 Global Supply Chain projects, visit the EMIL-SCS website at www.emil.gatech.edu.