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Case overview#

A Desktop PC manufacturer is re-evaluating their supply chain in advance of the release of a new product range. Their current supply chain involves centralized manufacturing of retail level PCs (Level 10) in China. Distribution to customers (distributor warehouses) differs according to geography. For the North American market, customers are served from China via a DC in Los Angeles. For the EMEA market, customers are served direct from China. A number of factors are causing the company to re-evaluate their supply chain, including rising shipping costs and Chinese labour rates, forecast inaccuracies requiring expedited shipments, and a desire for greater flexibility to enable quicker responsiveness to market needs.

In this tutorial you will build the company's existing supply chain, while also looking at a number of alternative solutions, across multiple criteria, to see the advantages or disadvantages of each, when compared to the current supply chain.


Goals, Objectives & Key Questions#

GOALS

  • "To determine the manufacturing and distribution strategy to serve the NAM and EMEA desktop PC markets"

OBJECTIVES

  • To develop various supply chain scenarios and identify their strengths / weaknesses
  • To demonstrate the capabilities of SimFlex

KEY QUESTIONS

  • Does a regional or centralized manufacturing strategy offer the best solution?
  • What level of manufacturing should be carried out at each site?


Assumptions#

General#

CUSTOMER & DEMAND
  • Customers are distributor warehouses in NAM and EMEA
  • Total demand in terms of COGS is about $6B
  • Demand is split by region
    • NAM - 10M product items
    • EMEA - 8M product items
  • NAM demand is split between 51 US States by population
  • EMEA demand is split between 30 largest EMEA countries by GDP
PRODUCTS
ProductCOGS, USDWeight, lbsUnits per Pallet
Level 10 PC$3303216
- Processor$100  
- Memory$40  
- HDD$50  
- Optical drive$35  
- Accessory kit$20  
- Consumer packaging$5  
- Level 6 PC$801748
  - Motherboard$602280
  - Level 5 PC$201548
OPERATIONS
  • Inventory
    • 1 week of supply of L10, L6 & L5 at assembly site
    • 1 week of supply of motherboards, CPU & memory
    • 2 weeks of supply of other components
  • Transportation
    • Based on indicative transport rates and times
COST & FINANCE
  • Total Cost is broken down by Material, Value-Add, Logistics Costs
  • Logistics Cost is broken down by inventory, warehousing & transportation
  • Inventory Rate of 15% which covers capital and non-capital costs (including obsolescence, mark-downs, depreciation, insurance)
  • Hubbing costs based on indicative rates

Product Structure#

Costs#


Warehousing costs#

ActivityHUCNUSMX
Dispatching Storage Unit$2.92$2.86$5.21$2.92
Monthly Cost per Storage Unit$9.97$7.27$13.22$9.97
Reception of Storage Unit$2.34$1.83$3.33$2.34

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