Transcript Slide 1

Pan American Advanced Studies Institute
Simulation and Optimization of Globalized Physical Distribution Systems
Santiago, Chile
August, 2013 – Case 1
Case Study Developed By:
Dave Wheeler
Principal, Supply Chain Strategy
St Onge Company
York, PA
Case Study 1
• US based retailer with operations in the US and Mexico
• Experiencing significant growth in stores, sales, and items
• SKU proliferation causing issues within the DC in terms of slotting
and inventory carrying
– Expected to accelerate due to industry
– Extremely long tail on item pareto. (i.e. large number of items
contribute small amount to sales)
• Several DCs with storage capacity constraints, while others have
excess capacity
• Currently 5% of product imported from Asia, expecting to grow to 12%
• Competition migrating to highly responsive supply chain
• Increasing fuel cost applies pressure to freight budget
US Supply Chain Description
•
•
•
•
•
•
4,616 stores in 2012, growing to 5,660 in 2018
8 Full-line distribution centers
– $4m annual fixed cost for each DC
Deliveries to stores from DCs
– via multi-stop truckloads (private fleet); ≈4 stops/load
– Stores receive 1 delivery/week
Vendor to DC shipments
– 90% of shipments from vendors paid for by vendor as component of
COGs
– 10% company paid, including all import
Imports shipped from vendors mainly in China, directly to each DC in full
FEUs
US DCs currently do not ship cross-border into Mexico
Stores
Stores
2018 vs. Current
AK
+15
+87
+65
+168
+197
+74
+72
+38
+75
+131
+121
PR
+7
DCs
Current Sourcing
Imports
Supporting Data – Store Growth
Strategic Plan
6,500
6,000
5,500
5,000
4,617
4,767
4,917
5,067
5,217
5,367
5,517
5,667
4,500
4,000
Current 2012
2013
2014
2015
2016
2017
2018
Supporting Data – Stores
ST Current
CA
NY
FL
MD
PA
TX
NJ
MI
VA
GA
MN
NC
OH
526
156
250
46
124
594
71
160
108
204
26
197
264
2018
Strat
Plan
167
91
72
64
61
51
45
30
30
28
27
27
21
ST Current
MA
AZ
IL
CT
WA
CO
LA
UT
AK
WI
IN
KY
MT
77
149
254
42
70
57
111
51
0
61
156
86
7
2018
Strat
Plan
20
19
19
18
18
15
15
15
15
14
13
13
11
ST Current
OR
AL
NV
KS
DE
OK
PR
WV
NE
SC
TN
ND
ID
41
94
65
37
9
78
29
30
9
80
170
0
12
2018
Strat
Plan
11
10
10
9
8
7
7
7
6
6
6
6
5
ST Current
MO
NM
MS
IA
ME
NH
AR
RI
SD
WY
VT
DC
NM
89
78
104
21
5
20
59
16
5
5
0
13
5
2018
Strat
Plan
5
5
4
3
3
3
2
2
2
2
1
0
0
Supporting Data - DCs
DC Metrics
# Stores
Capacity
# Routes
#
Deliveries/week
Miles per route
Deliveries per
route
$/mile
DELIVERY
$/mile
CA
577
623
154
GA
741
862
183
PA
533
1,051
151
TN
540
635
116
IL
553
571
142
TX
699
1,037
161
AZ
429
617
105
OH
566
794
128
612
523
778
669
564
450
569
596
612
494
749
571
472
1,031
595
468
4.0
4.3
3.7
4.9
4.3
4.7
4.5
4.6
$2.33
$1.97
$2.89
$1.66
$1.74
$1.87
$1.85
$1.91
US Issues to be Addressed
•
•
Determine if the current DC network is appropriate given the future store
growth, DC capacities, increasing fuel costs
If additional DCs are needed, determine the:
– appropriate location and relative size of each additional DC
– impact on the current DCs throughput, inventory, and service area
– impact to DC to store freight
– impact to transit time to stores
– impact to DC costs (fixed and variable)
– the impact to network inventory
– if the changes to the network financially justified based on a reasonable
return-on-investment (ROI)
US Issues to be Addressed
•
Given the migration to incremental import product
– How will inventory be impacted if current direct to DC approach is
continued
– What alternative import methodologies should be considered
– For each methodology considered, determine the:
• impact to inventory
• impact to facility costs
• impact to freight
• impact to store service
Mexico Supply Chain Description
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•
•
Full Line DC in Monterrey
− Monterrey DC has 360 store capacity
− Cross-docks located in Mexico City & Mexicali serviced from Monterrey DC
− 200 fast moving/high cube items stored at DC and both cross-docks
≈330 stores in 2012
− 220 direct from Monterrey
− 70 via Mexico City cross-dock
− 40 via Mexicali cross-dock
DC to Store freight
− Delivered via multi-stop common carrier truck of various size depending on
market
− On average a truck load from DC to a cross dock serves 8 stores
− On average a truck load from DC to stores serves 4 stores
− On average a truck load from a cross dock to stores serves 3 stores
− Stores receive 1 delivery per week
Mexico Supply Chain Description
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•
•
Vendor inbound freight
− Majority of product ships from vendors in US to Mexico via freight forwarder
in Laredo, TX
− ≈1500 loads/year; $285/load
− Product stored at cross-docks ships direct from vendors; vendor paid freight
Growth Plan
− 150 stores in Mexico (75% in Mexico City region)
− 46 stores in Central America
Product imported from China utilizes US ports and ships via Laredo, TX
DCs
1
2012 Current Sourcing
Growth
Mexico/CA Growth
600
500
Stores
400
300
200
100
0
FY12
FY13
FY14
CA
Mexico
330
370
410
FY15
FY16
FY17
FY18
7
11
15
46
440
460
480
480
Mexico Issues to be Addressed
•
•
•
Determine if the current DC network is appropriate given the future store growth, DC
capacities, increasing fuel costs
If an alternative DC configuration is to be considered, then determine the:
– appropriate location and relative size of each additional DC
– impact on the current DCs throughput, inventory, and service area
– impact to DC to store freight
– impact to transit time to stores
– impact to DC costs (fixed and variable)
– the impact to network inventory
– if the changes to the network financially justified based on a reasonable return-oninvestment (ROI)
If alternative DC configuration is not justified, then identify improvements to the current
configuration and flow of product from vendors through the DC and cross-docks to the
stores
Mexico Issues to be Addressed
•
•
Given the migration to incremental import product
How will inventory be impacted if current direct to DC approach is continued
– What alternative import methodologies should be considered
– For each methodology considered, determine the:
• impact to inventory
• impact to facility costs
• impact to freight
• impact to store service
– Should the Mexico and US methodology be synchronized?