1. Identify location for multi-facility regional distribution center
December 3, 2009
Team Kim
H. Milton Stewart School of Industrial and Systems Engineering
Georgia Institute of Technology

2. Agenda I Initiate II Analyze III Envision IV Design V Recommendation
Appendix 1

3. I. Initiate > Project Members
Hamilton Sundstrand Project Representative
Dang Huynh – Global Logistics Manager
Marc A. Bartos – Global Logistics Analyst
ISYE 6203 Project Group ‘Team Kim’
Hangil Kim
Prabhkar N
Navjyot Kaur
Youngbin Park
Jungbin Yim 2

4. I. Initiate > Project Timeline
Overall Preview for what we have done and where are we, and what we are going to do
Project
Assignment
Class
Presentation
Final
Delivery
5th
Conference
Call(scheduled)
1st
Conference Call
2nd
Conference Call
3rd
Conference Call
4th
Conference Call W1 W2 W3 W4 W5 W6 W7 W8 W9
W10
Initiate
Analyze
Envision
Design
Project Objectives & Goals
Project Timeline
Best practice benchmark
Gaining reliable data
Consolidation Methodology
Net benefit calculation
Find optimal consolidation schedule and location
Sensitivity Analysis
Design Detailed To-Be Structure
Possible Scenarios
Future Scope
Timely Communication
Hamilton Sundstrand: 1. Have bi-weekly conference call (or ) if needed 2. Report Status
- four conference calls so far, fifth one is scheduled on Nov. 13th
- three presentations delivered so far
Quality Assurance: Dr. John Vande Vate 3

5. Agenda I Initiate II Recommendation III Analyze IV Envision V Design
Appendix

6. II. Recommendation > Result
Ship all shipments on the following routes on
Wednesday and Friday
SINGAPORE,ROCKFORD-Singapore
CO CLARE,MIRAMAR-Ireland
SINGAPORE,WEST HARTFORD-Singapore
WOLVERHAMPTON,SAN DIEGO-England
HALEY,ROCKFORD-Canada
FRACC IND B JUAREZ QUERETARO,SAN DIEGO-Mexico
LAVAL,ROCKFORD-Canada
SAINT-LAURENT,WINDSOR LOCKS-CANADA
HAMBURG,SAN DIEGO-Germany
RENFREW,SAN DIEGO-Canada
ZHUZHOU,SAN DIEGO-China
Top 11 frequent routes 5

7. II. Recommendation > Route Composition
In top 11 frequent routes, No. of Vendors on these routes: 22 No. of Hamilton Sundstrand Co. on the routes: 7
# of shipments

8. II. Recommendation > Implementation Recommendation
In top 11 frequent routes,
There are 7 routes that only have a single supplier
RENFREW,SAN DIEGO HALEY INDUSTRIES
ZHUZHOU,SAN DIEGO ZHUZHOU SOUTH AEROENGINE
HAMBURG,SAN DIEGO LUFTHANSA TECHNIK LOGISTIK (DE)
FRACC IND B JUAREZ QUERETARO,SAN DIEGO TURBORREACTORES SA DE CV
WOLVERHAMPTON,SAN DIEGO HS MARSTON AEROSPACE
CO CLARE,MIRAMAR Hamilton Sundstrand
HALEY,ROCKFORD HALEY INDUSTRIES
Single supplier routes
Can be implemented right away!

9. II. Recommendation > Detailed Implementation
LAVAL,ROCKFORD- Canada
HAMBURG,SAN DIEGO-Germany
COCLARE,MIRAMAR-Ireland
SINGAPORE,ROCKFORD
SINGAPORE,WEST- HARTFORD-Singapore
Routes run by DHL USA Inc.
SAINT-LAURENT, WINDSOR LOCKS-Canada
HALEY,ROCKFORD-Canada
RENFREW,SAN DIEGO-Canada
LAVAL,ROCKFORD-canada
SINGAPORE,ROCKFORD-Singapore
SINGAPORE,WEST- HARTFORD-Singapore
Routes run by UPS SPS
WOLVERHAMPTON,SAN DIEGO
HAMBURG,SAN DIEGO
FRACC IND B JUAREZ QUERETARO,SAN DIEGO
SAINT-LAURENT, WINDSOR LOCKS
Routes run by FedEx corp.
Possible Routes Consolidated
WOLVERHAMPTON,SAN DIEGO -England
HAMBURG,SAN DIEGO-Germany
COCLARE,MIRAMAR-Ireland
FRACC IND B JUAREZ QUERETARO,SAN DIEGO
Consolidate by DHL USA Inc.
SAINT-LAURENT, WINDSOR LOCKS-Canada
HALEY,ROCKFORD-Canada
RENFREW,SAN DIEGO-Canada
LAVAL,ROCKFORD-Canada
SINGAPORE,ROCKFORD-Singapore
SINGAPORE,WEST- HARTFORD-Singapore
Consolidate by UPS SCS 8

10. European carrier consolidation
II. Recommendation > Carrier Composition
European carrier consolidation
Canada carrier consolidation
UPS SCS
DHL USA INC

11. Reduction in Transportation Cost Reduction in No. of Shipments
II. Recommendation > Carrier Composition
Reduction in Transportation Cost
Reduction in No. of Shipments
# of shipment
Current
Wed-Fri Shipment
Reduction in CBF, MPF

12. Agenda I Initiate II Recommendation III Analyze IV Envision V Design
Appendix 11

13. III. Analyze
We analyze data with this procedure. In this phase, we firstly validate the raw data and make the basic consolidation model based on Hamilton Sundstrand’s suggestion
Initiate
Initiate
Initiate
Analyze
Analyze
Analyze
Envision
Envision
Design
Gaining
Reliable Data 1
Developing
Basic Consolidation
Model 2
Comparing
Net Benefit
of Consolidation 3 12

14. III. Analyze > 1. Gain Reliable Data
The raw data provided by HS had problems of the reliability - typos, lack of information, and weak linkages between files. Therefore, we cleaned raw data by following steps
1-1
Regularize the data
Shipper Company
BOMBARIDER AEROSPACE
BOWMILL ENGR
BRADKEN
BRUSSELS AIRLINES NV-SA …
C & D AEROSPACE CANADA CO
C &D AEROSPACE CANADA CO
Shipper Company
BOMBARDIER AEROSPACE
BOWMILL ENGR
BRADKEN
C&D AEROSPACE CANADA CO
Delete data whose supplier is Airline
Emergency orders (Mostly for repairs)
Infrequent shipments
Will be used for Macro
1. Delete Airlines
2. Identify Names (Correct Typo) 13 13

15. III. Analyze > 1. Gain Reliable Data
The raw data provided by HS had problems of the reliability - typos, lack of information, and weak linkages between files. Therefore, we cleaned raw data by following steps
1-2
Clean up the data
JMR, DGF (Carriers’ Data)
Reliable Data
DGF: 2,388 lines
JMR: 3,028 lines
Will be used to get
Current # of Shipments
Total Duty & Fees before and after Con-solidation
Bill Number
Weight, Pieces
Vessel Name
Supplier
Country Export
Total Duty/ Fee …
DGF: 6,632 lines / JMR: 5,187 lines
Delete data which are not matched with ‘USD YTD’ data
Delete data whose supplier is Airline
: Supplier Identifier with US YTD
: Duty + Custom’s Brokerage Fee 14

16. III. Analyze > 1. Gain Reliable Data
The raw data provided by HS had problems of the reliability - typos, lack of information, and weak linkages between files. Therefore, we cleaned raw data by following steps
1-2
Clean up the data (Cont.)
US YTD (HS’s Data)
Reliable Data
US YTD: 4,013 lines
Will be used to get
Latitude & Longtitude of Suppliers/Consignees
Traffic Route
Carrier Name
Client ID
Shipper Name
Shipper Address
Shipper City
Shipper Zip code
Consignee Address …
YTD: 4,036 lines
Delete data whose supplier is Airline
: Supplier Identifier with DGF/JMR
: Custom’s Brokerage Fee 15

17. III. Analyze > 2. Develop Basic Consolidation Model
2-1
Understand HS’s Basic Consolidation Concept
As-Is
As-Is
To-Be
To-Be 16

18. III. Analyze > 2. Develop Basic Consolidation Model
We run the Excel Macro to calculate the reduced number of shipment according to one to seven days consolidation strategy of identical supplier, country of origin and date of shipment
2-2
Develop the basic consolidation methodology
Index
Supplier Name
Country of
Origin
Date of Shipment
Visual Basic for Excel Macro
Consol.
Index
Shipment
Decision
233
A J WALTERS AVIATION CA
09-Jan-09
268
Don't Ship Separately
Ship
268
A J WALTERS AVIATION CA
09-Jan-09
293
A J WALTERS AVIATION CA
12-Jan-09
313
A J WALTERS AVIATION CA
13-Jan-09
314
314
A J WALTERS AVIATION CA
13-Jan-09
332
A J WALTERS AVIATION CA
14-Jan-09
338
338
A J WALTERS AVIATION CA
14-Jan-09
340
A J WALTERS AVIATION CA
15-Jan-09
367
365
A J WALTERS AVIATION CA
15-Jan-09
367
366
A J WALTERS AVIATION CA
15-Jan-09
367
367
A J WALTERS AVIATION CA
15-Jan-09
369
A J WALTERS AVIATION CA
16-Jan-09
412
A J WALTERS AVIATION CA
20-Jan-09
428
A J WALTERS AVIATION CA
21-Jan-09
430
430
A J WALTERS AVIATION CA
21-Jan-09
449
A J WALTERS AVIATION GB
22-Jan-09
451
450
A J WALTERS AVIATION GB
22-Jan-09
451
451
A J WALTERS AVIATION GB
22-Jan-09
524
A J WALTERS AVIATION GB
28-Jan-09
525
525
A J WALTERS AVIATION GB
28-Jan-09
530
A J WALTERS AVIATION GB
29-Jan-09
531
1. Same supplier
2. Same CoO
3. Same Date of Ship.
(1-7 days option) 17

19. III. Analyze > 3. Compare Net-benefit
Cost Reduction by Consolidation 1) * 2)
1) : $ per shipment
2) : shipments delay options
* : 1 implies shipment on the same day and 2 implies delayed by one day and so on.
It is possible to delay the shipments by no more than four days without losing net benefit under the assumption that
- delayed shipments imply the holding cost of vendor capital and reduce the net benefit of strategy 18 18

20. Agenda I Initiate II Recommendation III Analyze IV Envision V Design
Appendix 19

21. IV. Envision
We envision the detailed consolidation model based on previous analysis. We reflect possible and critical constraints into the basic model
Initiate
Initiate
Initiate
Analyze
Analyze
Analyze
Envision
Envision
Design 1
Reflect the Cost of Capital Investment 2
Reflect the Adjusted Fee of Carriers … 20

22. IV. Envision > 1. Cost of Capital Investment
We need to take into account the inventory holding cost to the model because of increased inventory at carrier’s place
Net Savings = (Reduced CBF + Reduced MPF) – Inventory Holding Cost (i=15%)
Delayed days
Same day
1 day
2 days
3 days
4 days
5 days
6 days
Total invoice spend ($)
56,267,348
Period (Days)
180
Total invoice spend/day
312,596
Holding cost ($) -
46,889
93,779
140,668
187,558
234,447
281,337
# of shipments in period
3,054
Holding cost/Shipment 15 31 46 61 77 92
Savings ($) over period
101,504
123,463
138,240
149,677
153,121
153,129
154,008
Savings ($)/day
564
686
768
832
851
856
Savings ($)/shipment 33 40 45 49 50 ` 21 21

23. IV. Envision > 1. Cost of Capital Investment Sensitivity Analysis
By Changing the value of interest rate, we get different net-savings shown as below, the conflict between the delay shipment strategy and cost of capital holding, would yield an upper limit on the interaction.
Case 1. Set i=15%
Case 1. Set i=15%
Case 1. Set i=15%
Case 2. i=10%
Case 3. i=20%
Case 3. i=20% 1) * 2)
: Savings/Shipment 2)
: Holding cost/Shipment
: Net Savings/Shipment
1) : $ per shipment
2) : shipments delay options
* : 1 implies shipment on the same day and 2 implies delayed by one day and so on.
Even if 7 days consolidation provides the largest saving, due to the holding cost, it is not the optimal period of consolidation 22

24. Agenda I Initiate II Recommendation III Analyze IV Envision V Design
Appendix 23

25. V. Design We locate the consolidation points in some country Initiate
Analyze
Analyze
Analyze
Envision
Envision
Design 1
Location of Consolidation Points 2
Example: Carrier Consolidation in Europe 3
Future scope for Consolidation of shipment 24

26. V. Design > 1. Location of Consolidation Points
In addition to the principles of the basic consolidation model, we firstly concentrate on establishing consolidation point to the country where the shipments occurs more often
Current shipper scenario
Top freight sources 55% of shipments
62% of invoice value are from
Canada
Europe
1. # of Shipments
Option 1. Consolidate Carriers
Focused on reduction of freight cost by increasing share of business to top carriers
Option 2. Find possible consolidation points for Cross dock
Focused on freight cost, MPF, and CBF
2. Invoice Value
Future scope 25

27. V. Design > 2. Example: Carrier Consolidation in Europe
In addition to the principles of the basic consolidation model, we firstly concentrate on establishing consolidation point to the country where the shipments occurs more often
Top 4 shipper countries in Europe
Top 2 carriers chosen for consolidation based on
# of shipments
Total invoice amount
Total duty/fees
Top 2 carriers chosen for consolidation
Federal Express
Lufthansa
The net increase in business for these carriers 20% of the current size of business with Hamilton Sundstrand 26

28. V. Design > 3.Futurescope for Consolidation of shipments
From the current consolidation strategy to delay shipments, the distribution of shipments over the week is still spread over all the seven days of the week. So there is still opportunity to improve the savings by consolidating the shipments days within the week. (i.e. ship only Monday or Tuesday or Monday & Tuesday)
The upper limit on the interaction is still four days as per our earlier analysis 27

29. Thank you 28

30. Agenda I Initiate II Recommendation III Analyze IV Envision V Design
Appendix 29

31. Appendix.
1. Macro codes 30

32. Appendix. 2. Excel works 31 1 DAY 4-DAY Row Labels
Sum of Invoice value 1 2 3 4 5 6 7
(blank)
Grand Total
2 DAY
5-DAY
3-DAY
6-DAY 31

33. Appendix. 2. Excel works 32 Shipper country MEX Shipper city SALTILLO
SANTA CATARINA
APODACA
ARVADA
CIDAD ZONA IND EL POTOSI
ESCOBEDO
FRACC IND B JUAREZ QUERETARO
MEXICO
MONTERREY
QUERETARO
SAN LUIS POTOSI
WINDSOR LOCKS
SAN SALVADOR
Latitude
25.36
39.88 23
22.15
13.7
longitude
-100.2
-102
Shipper name
No of shipments
Invoice value
Direction
PARKWAY PRODUCTS DE MEXICO S DE RL 5 N
FUNDICION AGUILAS SA DE CV 1
920.61
EZI METALES SA DE CV 87
359081
PROCESOS TERMICOS Y ESPECIALES 28
SUNDYNE CORP 2
TIGHITCO LATINOAMERICA SA DE CV
19275
TECNOLOGIA PROCESOS Y MAQUINAR
330.72
TURBORREACTORES SA DE CV
225409
METALIZADOS Y MAQUINADOS DE MX 6
HAMILTON SUNDSTRAND (MX)
479.43 12
HAMILTON SUNDSTRAND DOCK J BLD (MX)
578.14
OXIGENOS Y GASES DE
449.29 32