The Case for W 56 Team Name Team

The Case for “W 56” Team Name: Team 6_Tahiru Leo Fu Josh Lee John Upshaw Zach Tahiru

Agenda 1 2 3 4 5 6 7 8 (Leo Fu) • Recommendation • Problem Statement • Background Information • Solution • Alternative Solution • Conclusion • Q&A • Appendix GSCMI 2014 Case Competition 2

The Team (Leo Fu) John Upshaw MBA Class of 2015 Strategy, Finance Zach Tahiru MBA Class of 2015 Operations, Strategy Leo Fu MBA Class of 2015 Operations, Strategy Josh Lee MBA Class of 2015 Operations, Consulting GSCMI 2014 Case Competition 3

The Recommendation (Leo Fu) Build a new warehouse and Remove CDC ‘W 56’ in Kansas City, KS Discontinue CDC and Replace with ‘W 56’ & W 34 W 87 will primarily service West Coast customers & CMSC’s W 34 will primarily service East Coast Customers and CMSC’s W 56 will primarily service Texas and provide support to all other locations Reevaluate Inventory and Kanban levels at all facilities GSCMI 2014 Case Competition 4

Our Objectives Level the performance from West Coast to East Coast (Leo Fu) Reduce the reliance on premium freight Optimize West Coast CMSC’s onhand inventory GSCMI 2014 Case Competition Sustain Growth of Electrical Sector 5

The Where (Josh Lee) GSCMI 2014 Case Competition 6

The How Levels performance from WC to EC Reduces on hand Inventory at CSMC (John Upshaw) Reduces Premium Freight $11, 382, 074 vs. $8, 488, 349 Reduces Electric Sector priority issue GSCMI 2014 Case Competition 7

NPV and Sensitivity Analysis GSCMI 2014 Case Competition (John Upshaw) 8

The How Reduces frequent stock outs Reduces Inventory Costs (John Upshaw) Utilization issues GSCMI 2014 Case Competition 9

Implementation Timeframe – Short-term (Zach Tahiru) 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Timeframe – Construction Warehouse Pareto Analysis of all Inventories Pareto Analysis of Sales Data. (Especially WC) Implementation of Inventory reallocation Change over CDC to W 34/ Begin W 56 Begin Network reconfiguration Make adjustments as necessary GSCMI 2014 Case Competition 10

All Thing’s Considered (Zach Tahiru) q Additional CMSC’s q This method can be used to expand out West and should be your next move. q In Particular, an SVC Center in the Oakland, CA area would help balance the West Coast. q Would not solve the Inventory problem in the short term q DBN option q DBN’s were evaluated to be a short term solution q This solution would likely raise average inventory at each CMSC site. q Does not take care of the root of the Premium Freight problem q Dramatic Redesign q Potentially very costly to achieve q We believe that the current network can sustain future growth GSCMI 2014 Case Competition 11

In Summary (Zach Tahiru) § W 56 placed in St. Louis, MO § Replace CDC with W 34 and W 56 § Will reduce the average distance to warehouse from 1431 Miles to 553 Miles § 10 year NPV of 21 Million § Pareto Analysis to bolster forecasting accuracy of highest products by $$$ § Pareto Analysis to reduce total average inventory, targeting 20% of items in the short term § All items collectively will work to reduce Total Premium Freight cost GSCMI 2014 Case Competition 12

Questions & Answer Questions GSCMI 2014 Case Competition 13

Appendix- Assumptions • Assumptions • W 56 will take 50% of W 34 orders and will ship a volume equal to 50% of W 87 100, 000 Sq. Ft Warehouse = 3, 000 • GSCMI 2014 Case Competition 14

Appendix – The Other 20% q As time goes on and we gather more data on West Coast Suppliers, We can begin to develop more predictable Forecasting Models. Top 10 Sales Volume CMSC Sites C T Lo s An ge le le s- s- SV SA C An ge Lo s ou st H H ar tfo rd on - -S SV VC AT en ve r-S D la sal D sla al D SV SA C T C SV C hi ca go - -S nt a la At At la nt a -S VC AT $10, 000. 00 $9, 000. 00 $8, 000. 00 $7, 000. 00 $6, 000. 00 $5, 000. 00 $4, 000. 00 $3, 000. 00 $2, 000. 00 $1, 000. 00 $0. 00 CMSC SITES GSCMI 2014 Case Competition 15

Average Distance to Warehouse The Distance between CMSC Sites (in miles) Average Distance Atlanta 1429. 717 Atlanta Baltimore Chicago Cleveland Dallas Denver Hartford Houston LA NJ Orlando Phoenix Raleigh St. Louis SF Seattle 0 676 717 709 781 1406 978 793 2175 831 442 1846 410 555 2472 2638 Baltimore 676 0 702 373 1366 1671 303 1446 2653 156 885 2284 300 828 2817 2764 Chicago 717 702 0 345 925 1004 891 1084 2015 812 1157 1752 815 297 2131 2064 Cleveland 709 373 345 0 1183 1333 563 1299 2345 483 1037 2014 573 558 2460 2407 Dallas 781 1366 925 1183 0 790 1664 239 1436 1522 1092 1064 1191 630 1730 2200 Denver 1406 1671 1004 1333 790 0 1880 1026 1017 1780 1844 862 1678 850 1269 1331 Hartford 978 303 891 563 1664 1880 0 1743 2890 193 1187 2533 603 1077 3006 2952 Houston 793 1446 1084 1299 239 1026 1743 0 1546 1602 966 1174 1202 779 1925 2440 LA 2175 2653 2015 2345 1436 1017 2890 1546 0 2762 2511 373 2546 NJ 831 156 812 483 1522 1780 193 1602 2762 0 1040 2392 455 Orlando 442 885 1157 1037 1092 1844 1187 966 2511 1040 0 2135 594 Phoenix 1846 2284 1752 2014 1064 862 2533 1174 373 2392 2135 0 2178 Raleigh 410 300 815 573 1191 1678 603 1202 2546 455 594 2178 0 St. Louis 1825 382 1135 937 2926 2872 992 2886 3075 1475 751 1410 823 2839 2870 0 2054 2083 555 828 297 558 630 850 1077 779 1825 937 992 1475 823 SF 2472 2817 2131 2460 1730 1269 3006 1925 382 2926 2886 751 2839 2054 0 808 Seattle 2638 2764 2064 2407 2200 1331 2952 2440 1135 2872 3075 1410 2870 2083 808 0 GSCMI 2014 Case Competition 16

Average Distance With W 56 W 34 W 87 W 56 Atlanta (ATT) 166 555 Baltimore 493 828 Chicago 734 297 Cleveland 588 558 Dallas 630 Denver (DNT) 850 Hartford 813 Houston 779 Los Angeles MCC 0 Los Angeles P&S 0 New Jersey (NTT) 622 937 Orlando 531 992 Phoenix Raleigh 373 238 823 St. Louis 0 San Francisco 382 Seattle 1135 Portland 988 523. 125 479. 6666667 Average = GSCMI 2014 Case Competition 659 553. 931 17

Appendix – CSMC Locations GSCMI 2014 Case Competition 18

Appendix GSCMI 2014 Case Competition 19

Appendix GSCMI 2014 Case Competition 20

Appendix GSCMI 2014 Case Competition 21

Appendix Rate of Equity Rate of Debt Risk Free Rate Beta • 0. 11% • 1. 43 Market Risk Re • 5. 50% • 7. 82% GSCMI 2014 Case Competition 22