Supply Chain

The LGO program has many ways to focus your MBA on supply chain management. There is a defined track within Civil and Environmental Engineering for students who want to dive deep into supply chain coursework. Students then have multiple companies who regularly offer internship projects on global supply networks, which allow students interested in supply chain management to work in the field before taking a leadership role after graduation.

High Velocity Supply Chain: Redesigning a Long Lead Time Short Shelf Life Supply Chain

Doug Witt (LGO ’21)

Engineering Department: Civil and Environmental Engineering
Company: Bell

Problem: Bell’s inbound composite material (carbon fiber) supply chain produces a high amount of scrap due to product expiration prior to use. Simultaneously, other materials stockout, causing costly work stoppages at upstream factories. Doug sought to reduce both scrap and stockouts by optimizing the material forecasting and ordering policies and processes.

Doug Witt Bell Thesis Image 2021
Doug with a Bell Cobra Attack Helicopter

Approach: Doug had 3 years of Bell’s historical data which had been used to conduct inventory analysis, make forecasts, and place orders. He was able to link this data to past inventory levels and order arrivals. Doug began with understanding the current state using a waterfall forecast to compare historical predictions with demand, segmenting materials by relative usage. He then built a base stock policy using standard base stock variables to optimize levels and was able to validate the model by testing historical data, Monte Carlo simulations, and MRP simulations.

Impact: The project was able to show that in a long-lead time situation, ordering as frequently as possible can reduce lead time and that high order minimums can have a dramatic impact on driving stockout risk. Small, frequent material delivery is more efficient than large infrequent deliveries, is better able to respond to changes in demand, and can reduce stockout events. Immediate savings were $200,000 in the first month of implementation, with an expected reduction of $500,000 worth of scrap annually.

Inventory Modeling for Active Pharmaceutical Ingredient Supply Chains 

Audrey Bazerghi (LGO ’20)

Engineering Department: Civil and Environmental Engineering
Company: AstraZeneca
Location: Manchester, United Kingdom

Bazerghi, AstraZeneca, 2020
Audrey made the most of her international internship location to travel around Europe while analyzing inventory optimization at AstraZeneca.

Problem: The Active Pharmaceutical Ingredient (API) is the small molecule that can be formulated into tablets and made into prescription drugs for therapy at AstraZeneca (AZ). AZ made the strategic choice to outsource close to 90% of its API production to focus capital investments on research and development. AZ’s current day success could be in part attributed to this shift in strategy; however, it has also locked API supply chains into long purchase lead times. 

Approach: Audrey used inventory modeling to explore the trade-off between the attractive purchase price, and hidden costs of outsourcing for two API supply chains at AZ. She assessed the inventory levels recommended by a base stock policy with deterministic purchase order lead times at each contracted stage of the supply chains. The single-echelon calculations revealed that safety stock levels are not systematically inflated at individual stages.   

Impact: Audrey demonstrated with a multi-echelon inventory optimization (MEIO) that a fully integrated supply chain would yield significant savings compared to a purely external supply chain. Today, AZ’s operating model allows it to partially coordinate with CMOs and capture up to 60% of the value left on the table by not being able to optimize the full chain. Audrey also proposed using cost premium frontiers to prioritize which contracts to renegotiate with CMOs in the future. 

Integration of Advanced Analytics and Engineering Automation Solutions into Target’s End-to-End Supply Chain Modernization and Optimization Transformation

Durgesh Das (LGO ’20)

Engineering Department: Electrical Engineering and Computer Science
Company: Target
Location: Minneapolis, MN 

Das, Target, 2020
Durgesh spent six months onsite in MN to learn about Target’s current supply chain process and develop a plan for optimizing inventory holding.

Problem: Target stores have been traditionally designed for a predominantly brick and mortar business fed by a push supply chain model. With the growing need for omni-channel sales fulfillment, supply chain engineering has become more complex. This project aimed to minimize backroom inventory and minimize in-store labor cost while meeting all customer demands and maintaining inventory above the presentation minimum.  

Approach: Durgesh’s project consisted of three phases: analysis of current state sales and capacity, modeling inefficiencies in the supply chain and optimizing the inefficiencies in the supply chain. Sales floor weeks of demand, replenishment spillover, peak on-hand inventory, and daily back room inventory were the key metrics Durgesh used to help determine the potential of his optimized units of measure. 

Impact: The outcome of the project revealed a large opportunity to optimize inventory holding along the axes of UOM, POG sizing and replenishment frequency. Durgesh also found that his study set the stage for a largerscale optimization exercise. He recommended that the next step should dive into building a business case for optimization through deeper cost modeling, by extrapolating labor estimations and using actual time study data.

Virtual Pooling Approximation Using Longest Path Network Optimization

Kevin Schell (LGO ’18)

Engineering Department: Mechanical Engineering
Company: Caterpillar
Location: Aurora, IL

Problem: Caterpillar sells its products through a network of independently-owned dealers which own their inventory. Given long factory lead times, highly variable demand across geographies, and complex configurations, dealers are forced to maintain high inventory on their sites in order to keep service levels up. Kevin’s project aimed at exploring pooling arrangements among dealers to address these challenges, while taking into account the dealers’ reluctance to unilaterally give up equipment they might eventually sell.

Schell, CAT, 2018
Kevin Schell (L) on site at Caterpillar during his internship, along with founding LGO director Don Rosenfield and Caterpillar supervisor Glenn Bergevin (LGO ’13)

Approach: Kevin proposed a model which Caterpillar dealers would maintain physical inventory in multiple locations and use a network swapping mechanism to create a virtual pool from which various dealerships could make and fulfill sales. He defined a commercial network model to simulate equipment ordering, inventory management, and sales across a sample dealer network, and ran the model to simulate results with and without network swapping implemented.

Impact: The baseline simulation results from Kevin’s model for a single class of Caterpillar vehicle suggest that network swapping could reduce inventory by over 12% and reduce customer back orders by over 17%. The net present value of the Caterpillar dealer network could be increased by over $3M. Kevin’s thesis addressed these results and outlined how this network swapping model could be further improved.