CASE: ELECCOMP INC.

GROUP 6

D10201803 MAYKE
D9901003

E10321001 Stephan Jan Thome

M10301201
M10301806 QORINA MANDA RIKA
M10301807 LINH THI THUY NGUYEN

INTRODUCTION
Large

contract manufacturer of circuit boards and

other high tech parts.
Sells about 27,000 high value products with short
life cycles
Fierce competition: Time to the customer typically
shorter than Manufacturing Lead Times
Manufacturing process is quite complex.
=> High inventory of finished products for many of
its SKUs based on long-term forecasts => PUSH
STRATEGY
Huge financial
Shortage risks
Long

lead time => PULL STRATEGY was not

appreciate either.

INTRODUCTION

New supply chain strategy with objective

Reducing inventory and financial risks
Providing customers with competitive response times.

Achieved by

Determining the optimal location of inventory across the various

stages
Calculating the optimal quantity of safety stock for each component
at each stage

Focus on a hybrid strategy in PUSH AND PULL:

PUSH: make-to-stock, will be the locations where the company keeps
safety stock.
PULL: make-to-order, will keep no stock at all.

Challenge:
Identify the location where the strategy switched from a Pushbased to a Pull-based strategy.
Push-Pull boundary

Impact of the new push-pull supply chain strategy

Same customer lead times, safety stock reduced by 40 to 60 percent.
ElecComp can cut LTs to customer by 50% and still reduce in safety
stock by 30%

FIGURE 3-11

Reduce the committed service time from 80 days to 50 or 40

days => decrease finished goods inventory and start building
inventory in Montgomery.
ElecComps objective: Minimize systemwide inventory and
manufacturing cost.
A multistage inventory optimization technology: Inventory

TRADE - OFFS
Reduce

committed lead time in Montgomery to

13 days
No need stock finished goods in assembly
facility.
Any customer order will trigger an order for
parts 2 and 3:
Part 2 holds inventory to supply immediately.
Part 3 will be available in 15 days: 13days committed
response time and 2 days transportation lead time.

Another 15 days to process the order at the

assembly facility
Order is delivered within the committed service
time.
Assembly facility produces to order, that is, a
Pull based strategy

FIGURE 3-12: Current safety stock location

Pink

boxes represent outside suppliers

Black boxes represent internal stages within ElecComps
supply chain.
Response time is 30 days to customers
Keep inventory in assembly facility and Part 2.

FIGURE 3-13: Optimized safety stock

Response

time is 30 days to customers

Adjusting committed service time of various internal facilities
Assembly system produces to order, keeps no finish goods inventory
Raleigh and Montgomery need to reduce the committed service time
=> keep inventory
The

impact on the supply chain is a 39% reduction in safety

stock

FIGURE 3-15: Optimized safety stock with

reduced lead time

Reducing

quoted lead times to 15 days.

Inventory

was down by 28% while response

time to the customers was halved.

RESULTS
Summary of Results
Scenario

Safety
Stock
holding
cost
($/year)

Lead time
to
customer
(days)

Cycle time
(days)

Inventory
turns
(turns/year)

Current

74,100

30

105

1.2

Optimized

45,400

30

105

1.4

Shortened
lead time

53,700

15

105

1.3

A MORE COMPLEX PRODUCT

STRUCTURE

Figure 3-15:
Current Supply Chain

A MORE COMPLEX PRODUCT

STRUCTURE
Figure 3-16:
Optimized Supply Chain

Inventory cost
was reduced by
more than 60%

KEY POINTS
Identifying
Taking

the Push-Pull boundary

advantage of the risk pooling concept

Demand for components used by a number of finished

products has smaller variability and uncertainty than that
of the finished goods.
Replacing

traditional supply chain strategies that

are typically referred to as sequential, or local,

optimization by a globally optimized supply chain
strategy where the entire supply chain strategy is
integrated to maximize supply chain performance.

IMPACT OF THE NEW SUPPLY

CHAIN PARADIGM

Figure 3-17:Trade-off between quoted lead time and safety stock

CONCLUSION
Due

to optimally locating the push-pull boundary, implies

For the same lead time, cost is reduced significantly

For the same cost, lead time is reduced significantly
The

curve between cost and customer quoted lead time

representing:

Smoothing in the traditional relationship.

No smooth in the location of the push-pull boundary
with jumps in various places to achieve cost savings