Gameplan Case

Jerry, the Supply Chain Vice president of ABC Inc., waited anxiously for Tom to get back to his office after the Q2 2016 business review discussion with the board. For many years, ABC Inc., a Fast Moving Consumer Goods Company based out of Atlanta-GA, was a market leader in the Snacks segment. However, Jerry was aware that the Q2 numbers weren’t looking good. In fact, ABC’s profitability had been trending downward

since early 2015! Jerry envisioned that Tom, the CEO of ABC Inc., would initiate a slew of measures to get them back on the growth path. As a precursor to this meeting, Jerry was prepared with a broad action plan for optimization of Supply Chain costs. Tom hustled back to his office post the board meeting and invited Jerry to his cabin. Tom began by coming straight to the point about the issues at hand. Tom: Well…this board meeting wasn’t the best I have had over quite some time. There was a general

concern raised by the board about our reducing profitability. Our 2016 Q2 numbers didn’t help either! Our rising YoY costs are an area of utmost concern. Jerry: Yes, based on the reports, we realized that the increase in costs is significantly higher than our

revenue growth. Tom: The board has identified 3 major focus areas for cost optimization – Logistics, Marketing and Capital. Jerry: Logistics cost is definitely the key area of concern for me and my team. Logistics as a % of revenue

for our company stands at 9%, while some of our best-in-class competitors are delivering at far better costs – roughly 5-6%

Tom: Great! So we already have a head start in identifying the root cause. What’s your action plan? Jerry: Since rising logistics cost has been a consistent trend, we would need a strategic review of our

logistics operations to realize immediate impact to our bottom-line. We need the support of external consultants to identify key areas to focus and also help us deliver results. We have had several rounds of discussions with major consulting firms over the last few weeks and have shortlisted GEP to run a pilot project for us. If successful, they will be awarded a long term partnership to help us optimize our complete logistics spend. In fact, we have a call later today with GEP to kick start the pilot project. I have also invited our Europe team so that we could provide GEP an overview of some of the challenges that we’re facing in the US and European markets. Tom: Oh yes! I remember meeting the GEP team during a recent business conclave and they did impress

me with their wholehearted focus on procurement and supply chain. Do keep me posted on the progress you make on this front.

GEP CASE STUDY COMPETITION – 2016

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Jerry: Sure Tom.

Jerry rushed back to his office for the discussion with GEP. He was prepared with a list of key points he wanted to discuss over the course of the meeting. Jerry: Hello everyone! Thank you for joining the call today. As you are aware, the primary objective of this

call is to kick-start our pilot project with GEP, who would help us tackle some of the problems we are facing on the logistics front. To help us on this engagement, we have Kim-GEP Project Lead for this assignment and Scott-GEP Subject Matter Expert (SME) for Logistics. To provide some context on the issues we face in the European market, we have Olivier-our French Warehouse Manager and Rita- Plant Manager for our German manufacturing unit. Let me quickly get started with some key areas where I see scope for cost savings. We currently have one of our warehouses located at De Lisle, MS which is serviced by our plants located at Atlanta, GA and Lufkin, TX. Both our plants manufacture and ship the same SKUs. De Lisle is our primary warehouse for salty snacks which services customer orders across the United States. This warehouse also serves the New Orleans Port in Louisiana, which is our primary port for exporting our products. Based on a recent network review, we are considering moving to a new warehouse location. We have identified four potential warehouse locations, namely Cedartown-GA, Wharton- TX, Park City- KS and Stryker- OH. We seek GEP’s help in reviewing our existing network and check if there are opportunities for cost savings by moving to any of these new warehouses. To enable this process, we will be sharing our Inbound and Outbound data for 2015 along with the distance data for our sites, warehouses and customer locations. It will also include some preliminary information around the warehousing costs for the new warehouses. You could consider all shipments within this report to be Full Truck Loads (FTLs). We would love to see a solution that provides us with the least annual costs- considering freight/warehouse operating costs and inventory carrying costs. Scott (GEP SME Lead): Sure Jerry. We have helped a number of our clients with their supply chain network

optimization and delivered good savings in the process. We could check whether the existing warehouse at De Lisle is ideally placed from an overall cost optimization standpoint or if moving to any of the new warehouses, completely or in conjunction with another warehouse, would be the better option. Before we get started, would ABC Inc. be willing to consider more than one warehouse location if that turns out to be a feasible option? Also, have you considered intermodal transportation for some of your longer transit shipments? That might be a cheaper option. Jerry: Those are very interesting suggestions. To answer your first question, Yes, we are open to using either

a single warehouse, or a maximum of two warehouses to serve our customers. But, please do note that the


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maximum output of each plant is 4000 Truckloads in a year without any additional investment. To your second question- we did consider evaluating the Intermodal option a few years back, but the trial runs were not really successful then. But, there is no harm in re-evaluating! The next area of concern for us is vehicle scheduling at our manufacturing plants at Atlanta and Lufkin. Our inland freight providers complain of high waiting time for their trucks especially in the mornings. This is because most of our vehicle schedules, both inbound and outbound, are skewed towards mornings. Is there some way we could work towards better scheduling of trucks at these plants? Kim (GEP Project Lead): We could consider implementation of a Yard Management Tool and a Slot Booking

Tool for these locations. We can conduct supply market research and recommend you the top 3 players in this category including some insights into the benefits from these tools and key parameters to further evaluate the suppliers. Jerry: That would be great. Thanks! Olivier and Rita, could we now discuss areas where you envisage you

would need GEP’s support to optimize costs in the European market? Olivier (French Warehouse Manager): France is one of our major markets in terms of net sales in Europe.

We currently promise our customers delivery within 3 days. We are proud to be hitting this target consistently, resulting in high levels of customer satisfaction. This is a phenomenal achievement from our supply chain team considering that our competitors in this market have a 5-day delivery commitment. We have achieved this target primarily by ensuring that we dispatch shipments from our warehouse on the same day that we receive the order. However, of late, the freight costs we incur have been on a rising trend. I have shared the shipment report for the month of July-16 with you. Can GEP analyze the data to help identify areas we need to work on? Also, lately we have seen an increase in product returns-which include ambient and refrigerated products. Based on your past experience, can GEP come up with a list of root causes for this issue and suggested actions to mitigate this? Scott (GEP SME Lead): We have strong data analytics capabilities and logistics experience. I ’m sure Kim can

help address both your concerns. Also, considering that ABC is primarily into the Snacks segment which has a longer shelf life compared to other perishable food products, I believe modifying the current service level commitment of 3 days would not significantly affect sales. Do you concur? Olivier (French Warehouse Manager): Well, that is a difficult one to answer. We take pride in our 3-day

delivery commitment and our customers greatly appreciate this. But having said that, I would like to see the potential cost savings opportunity.


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Rita (German Plant Manager): Another area of concern is the rising cost of ocean freight for outbound

shipments from our Berlin plant. We have pulled together the data for May-16, and seek your expertise in identifying areas of improvement and building potential cost mitigation strategies. Kim (GEP Project lead): We’d be happy to help! Jerry: I believe the discussion we ’ve had today will serve as a good starting point for this project. We look forward to recommendations from GEP in a couple of weeks’ time on the areas discussed today . Thanks

everyone for your time! Post the meeting, Kim quickly got onto a call with Scott to understand his recommendations on the way forward. Kim (GEP Project Lead): The warehouse positioning for the US market is an interesting challenge. We can

perform a detailed scenario analysis to evaluate whether ABC Inc. would need to shift to other warehouses. Scott (GEP SME Lead): Yes, but you might not readily know the costs of transportation to/from the new

warehouse locations. We can assume a freight rate of $10 per mile for shipments travelling 0-100 Miles, $ 7 per mile for 100-300 Miles, $4 per mile for 300-750 Miles, $3 for 750-1500 Miles and $2.4 for >1500 Miles to calculate the freight cost. We would also need to consider the additional costs of shifting to new warehouses based on the information Jerry has provided, so that we can compare the ongoing annual costs across various scenarios. Also, on the Intermodal transport model I proposed, could you provide a list of pros and cons of moving to an intermodal model and if it would be a good option for ABC Inc. based on the existing outbound shipments data only on the current scenario? Just make sure that the intermodal proposal is kept separate from warehouse positioning problem. Kim (GEP Project Lead): Sure Scott. Also, on the issues faced in the European market… Scott (GEP SME): Sorry Kim, I need to get onto another call. Apologies for not being able to discuss this

further. I leave it to your best judgement to provide recommendations based on the data shared and what we discussed before. Just remember, the devil is always in the details, so we’ll need to slice and dice the data in multiple ways to come up with insights! Could you help Kim review the concerns shared by ABC Inc., and provide recommendations based on the conversations above and the additional data provided?


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GENERAL CASE INSTRUCTIONS:

Putting yourself in the shoes of a consultant from GEP, review the scenario and address the concerns faced by ABC Inc. Round 1: 1. Format of Submission:

a. Please prepare a presentation of NOT more than 10 slides along with only one excel file containing backup calculations for the case solution. Include an extra slide stating your institute name, team name and team members’ names.

b. The submission must only be made as a ‘.ppt’ or ‘.pptx’ file for presentation and ‘.xls’ or ‘.xlsx’ for excel file. c. Name your files as ‘GEP Case__’ d. Submissions that do not follow the file format, slide limit or the naming convention will not be considered for evaluation 2. Content of Submission:

a. The slides should clearly capture possible & reasonable solutions to the problems faced by ABC Inc. b. Please clearly indicate the assumptions made while proposing the solutions along with references/sources used 3. Date of Submission:

a. Submission documents (presentation and excel file) are to be emailed to [email protected] latest by 11:59:59 PM, Sept 18, 2016 b. No submissions received after the deadline would be considered for evaluation. A timely submission would hence be appreciated.

Final Round:

Based on Round 1 responses, one team per campus will be selected as the Campus Winner. The winning teams from all campuses will have a final presentation at the GEP office in Mumbai, wherein they would be required to present their recommendations to the evaluation committee and the senior leadership at GEP. Further instructions for final round will be shared with selected teams. The winning team will receive a cash prize worth INR 1,00,000 and all the Campus Winners shall receive PPIs* *Internship interview for first year students, Pre-Placement Interviews for final year students – as per institute placement committee’s approval


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Gameplan Case

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