1. Pan American Advanced Studies Institute Simulation and Optimization of Globalized Physical Distribution Systems Santiago, Chile August, 2013 – Case #2 Case Study Developed By: Craig Vorse Principal, Supply Chain Strategy St Onge Company Dallas, TX

2. Case Description Large US based Consumer Packaged Goods (CPG) manufacturer with operations in the US, Canada, & Mexico Customers are retailers across Canada & USA in all channels (Grocery, Mass Merchant, Convenience Stores, etc.) Leases expiring on Western USA DC and Canadian DC within the next 18 months –3 DCs in USA (Tulsa, Allentown, Atlanta are locked-in and cannot be moved due to long term leases) –All western North American customers are serviced entirely from Salt Lake City DC today Steady growth forecasted through new product introduction Several DCs with storage capacity constraints, while others have excess capacity A handful of consolidated manufacturing locations in US & Mexico Increasing pressure to reduce total supply chain costs Increasing pressure from customers to reduce delivery times (be more responsive)

3. Supply Chain Description 2,500 SKUs; 3,000 ship-to locations; 6 key manufacturing locations –Demand will be expressed in pounds (lbs) of product Five (5) full-line distribution centers –1 in Canada: Toronto, ON –4 in USA: Allentown, PA; Atlanta, GA; Tulsa, OK; Salt Lake City, UT –2 candidate DC locations to consider: Los Angeles, CA and Oakland, CA Deliveries from Manufacturer’s DC to Customers DCs –Combination of Less-than-Truckload (LTL) and Truckload (TL) –Assume average of 25,000 lbs per shipment and TL pricing –Assume 100% of outbound freight paid by Manufacturer (actual is closer to 60%) Plant/Vendor to Manufacturer’s DC replenishments –Assume average of 40,000 lbs per shipment and TL pricing –100% manufacturer paid

4. Additional Supply Chain Details Demand, costs, and miles in Excel file ‘Supporting Data – Case #2’ Assume a truck can drive 500 miles in 1 Day DCs can average 11 square feet per pallet stored –Assume Toronto is 100% Utilized currently A pallet in inventory averages 1,500 lbs of product Inventory turns for average 9 per year for the network (40 Days of Supply) Peak Inventory levels are 12% over the average level Assume Candidate DC space costs (LA & Oakland) are as follows: –$6.25 per square foot for fixed –$0.095 per lb for variable cost Assume US customers must be serviced from a US based DC

5. Issues To Be Addressed Determine the single, optimal location (least total landed cost) for the Western most DC between Salt Lake City, Los Angeles, and Oakland For the optimal western DC location determine the following: –Rough sizing of optimal western DC (sized for peak inventory levels) –Impact to inventory levels and service area of western DC –Impact to all freight costs (inbound and outbound from the DCs) –Impact to transit time to customers –Impact to DC costs (fixed and variable) –If the changes to the network are financially justified based on a reasonable return-on- investment (ROI) For Western Canada customers, which DC should service them based on least total landed cost? –Salt Lake City (as in done today)? Toronto? New Optimal Location? –How much storage space in Sq Ft is needed to support Western Canada Customers?