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STRATEGIC MODELING AND ANALYSIS OF SERVICE PARTS DISTRIBUTION

STRATEGIC MODELING AND ANALYSIS OF SERVICE PARTS DISTRIBUTION. Global Concepts Inc. Don Stuart , Frank Forbes University of Oklahoma Tom Landers, Simin Pulat, Jerry Dechert Shein-Loong Yap, Santosh Parameshwaran, Yvonne Splinter. Accomplishments.

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STRATEGIC MODELING AND ANALYSIS OF SERVICE PARTS DISTRIBUTION

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  1. STRATEGIC MODELING ANDANALYSISOFSERVICE PARTS DISTRIBUTION Global Concepts Inc. Don Stuart, Frank Forbes University of Oklahoma Tom Landers, Simin Pulat, Jerry Dechert Shein-Loong Yap, Santosh Parameshwaran, Yvonne Splinter

  2. Accomplishments • Location and cost study of the parts flow over the existing supply chain network • Definition of scenarios for changes/expansion of the current practice • Market coverage analysis as a function of number of warehouses and service level requirements • Comparison of total costs (transportation, warehouse, and inventory investment) • Recommendations

  3. Scenario Definitions and Evaluations • Baseline scenario and 4 new scenarios defined by the steering committee • Optimal location of each warehouse determined while considering the entire supply chain • Baseline model validated and compared to the 4 new scenarios in terms of total cost • Transportation Cost • Warehousing Cost • Inventory Investment Cost

  4. Scenario 2 Results – One National and 7 Regionals Regionals: NYC, Tallahassee, Akron, SF, Chicago, Dallas, Greensboro

  5. Inventory Simulation • Randomly generate customer demand at Part Centers. • Track inventory and order weekly. • RDCs/NDC order weekly from suppliers. • Collect statistics on in-stock rate, fill rate, and average inventory at PCs and RDCs/NDC.

  6. Inventory Modeling Results

  7. Market Coverage Analysis : 2-day coverage : 1-day coverage

  8. Market Coverage with One National and 5 Regionals • Red: Covered by 1-day UPS ground • White : Not covered by 1-day UPS Ground • Blue: Regional RDCs

  9. SCENARIO 2 ADVANTAGES: 1.   Parts directly shipped from suppliers to regionals (stock replenishment) 2. Local stores close to regionals (min. transit time) DISADVANTAGES: 1.   Result is high in-bound freight costs for regionals. 2. Two freight bills will be generated as part of the order will ship from the regional and part of the order from where the slow moving is held. 3.  It is necessary to duplicate the process to package and label parts (WIP at all regional locations.

  10. Impact • Market Coverage and Location Study Results • Pros and Cons of Each Scenario • Multimillion Dollar Savings • Outsourcing options – pros and cons • Implementation Phase

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