FIGHT AGAINST THE VIRUS Managing Global Supply Chain Risk at GIDGET – The Coronavirus Impact
Who We Are? VIKRAM RASHI YISHAN RUIHAN GOLCHHA BAGADIA CHEN DING -MS in Global Supply -MS in Global Supply -MS in Global Supply -MS in Global Supply Chain Management Chain Management Chain Management Chain Management -Worked at Ford Motor -Worked at Unilever -Interned at Teradata, -Interned at Accenture, Honeywell PwC
TABLE OF CONTENT 1. Executive Summary 2. Base Model 3. Assumptions 4. Analysis 5. Recommendations 6. Risk Mitigation of Recommendations
EXECUTIVE SUMMARY Global widget manufacturer GIDGET Company ● The disruption of supply chain caused by the spread of the ● coronavirus Challenges The inability of chinese factory to meet the demand globally ● Resources allocation based on different scenarios ● Key Focus Whether to close factory in China permanently or temporarily? ● Optimizing the profit ● Goals Mitigation of the global supply risk due to Coronavirus ● GIDGET should discontinue its policy of meeting all demands. ● GIDGET should keep the facility in China despite production & ● Recommendations demand halt in China due to the virus GIDGET should sell off 25% of Chinese plant capacities ●
BASE MODEL Optimizing operation plan to maximize profits ● Background considering the uncertainties in 3-demand and 2- Case currency exchange. Multiple variables such as Capacity, Production ● cost, Exchange rate, Transportation cost Two stage linear programming ● Model Stage-One: Long-term decision ○ of opening/closing plants Stage-Two: 6 possible scenarios ○
ASSUMPTIONS A. The variables in the case phase 1 remains the same in conditions of with/without virus in China. B. After the virus, the demand and productivity would recover back to normal level. C. Every variables is uniformly distributed through the years. D. Selling the capacity would not generate extra cost.
Roadmap of Thinking Satisfying or Not Satisfying Demand? Close or Keeping the Plant in China? Keep the Plant in China Fully or Partially?
Quote from the case: “Bill Bowden continued to preach the benefits to not satisfying all demand” Without China being affected by Coronavirus ● From Location Y/N From Location Y/N PROFIT PROFIT Indianapolis, USA 1 Indianapolis, USA 1 Cholula, Mexico 1 Cholula, Mexico 0 Ankara, Turkey 1 Ankara, Turkey 0 $13,080,710 $24,293,210 Ningbo, China 1 Ningbo, China 1 not satisfying all demand satisfying all demand After China is affected by Coronavirus ● From Location Y/N From Location Y/N Indianapolis, USA 1 PROFIT PROFIT Indianapolis, USA 1 Cholula, Mexico 1 Cholula, Mexico 0 Ankara, Turkey 1 $(10,378,567) $20,152,377 Ankara, Turkey 0 Ningbo, China 0 Ningbo, China 0 not satisfying all demand satisfying all demand
Roadmap of Thinking Satisfying or Not Satisfying Demand? Not Satisfying Close or Keep the Plant in China? Keep the Plant in China Fully or Partially?
Expected profit of closing the plant in China Decision Production in China= 0 Production in China=0 End of Virus point Demand in China >= 0 Demand in China=0 Time From Location Y/N Indianapolis, USA 1 Cholula, Mexico 0 Ankara, Turkey 0 Ningbo, China 0 Annual Profit= $ 20,152,377
Expected profit of keeping the plant in China Decision Production in China > 0 Production in China=0 End of Virus point Demand in China > 0 Demand in China =0 Time From Location Y/N From Location Y/N Indianapolis, USA 1 Indianapolis, USA 1 Cholula, Mexico 0 Cholula, Mexico 0 Ankara, Turkey 0 Ankara, Turkey 0 Ningbo, China 1 Ningbo, China 1 $20,152,377 < < Annual Profit= $17,152,377 Annual Profit= $24,293,210 profit for closing plant
Profit Breakeven Analysis of close/open plants t= time taken for virus to ● end t’= time taken to reach the ● profit break even point t’ = 1.75 * t t=6 months, t’=6*1.75 = 10.5 months t=12 months, t’=12*1.75 = 21 months
Roadmap of Thinking Satisfying or Not Satisfying Demand? Not meeting Close or Keep the Plant in China? Open Keep the Plant in China Fully or Partially?
Expected profit of keeping China’s plant fully/partially Keep Ningbo plant fully Keep Ningbo plant partially From Location Y/N From Location Y/N Indianapolis, USA 1 Indianapolis, USA 1 Cholula, Mexico 0 Cholula, Mexico 0 Ankara, Turkey 0 Ankara, Turkey 0 Ningbo, China 1 Ningbo, China 0.75 < Annual Profit= $24,293,210 Annual Profit= $24,749,877 Selling 25% of Chinese plant will bring us higher annual profit
Shall we consider Carly’s suggestion, letting Ningbo only meet Chinese demand? Carly’s suggestion: Open partially with export Open partially without export From Location Y/N From Location Y/N Indianapolis, USA 1 Indianapolis, USA 1 Cholula, Mexico 0 Cholula, Mexico 0 Ankara, Turkey 0 Ankara, Turkey 0 Ningbo, China 0.75 Ningbo, China 0.75 < Annual Profit= $24,749,877 Annual Profit= $23,922,377 We shouldn’t consider Carly’s suggestions!
RECOMMENDATIONS 1. 2. 3. Sell off 25% of Chinese Keep the facility in Discontinue to plant capacities China despite meeting all the production & demand demand halt in China due to the virus
RISK MITIGATION Potential Risks: Mitigation Actions: 1. A cut to capacity cannot 1. Enhancing communications easily be reversed if demand to eliminate the bullwhip fluctuate. effect and facilitate the lead 2. Low working efficiency of time the employees since the long 2. Implementing Lean and Six time of unemployment . Sigma in production to 3. Reluctance of employees to optimize the productivity return to work since the 3. Launching short training to psychological fear of re-educate the employees coronavirus. 4. Providing incentives to employees for motivation
Thank you!
Appendix
Without Coronavirus – not satisfying all demands
Without Coronavirus – satisfying all demands
With Coronavirus – not satisfying all demands
With Coronavirus – satisfying all demands
With Coronavirus – Keeping facility in China
Without Coronavirus – Partially keeping facility in China with export
Without Coronavirus – Partially keeping facility in China without export
TWO-STAGE LINEAR PROGRAMMING FORMULATION CONSIDERING FUTURE SCENARIOS WHEN MEETING ALL THE DEMAND Constraints:
TWO-STAGE LINEAR DECISION OF SOURCING LOCATIONS PROGRAMMING From Location YES/NO Indianapolis, USA 1 FORMULATION CONSIDERING Cholula, Mexico 1 Ankara, Turkey 1 FUTURE SCENARIOS WHEN Ningbo, China 1 MEETING ALL THE DEMAND Indianapolis, Cholula, Ankara, Ningbo, Indianapolis, Cholula, Ankara, Ningbo, STATE IN FUTURE STATE IN FUTURE From / To USA Mexico Turkey China From / To USA Mexico Turkey China Indianapolis, USA 300,000 0 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 100,000 50,000 0 0 STATE 4 STATE 1 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 50,000 0 Ningbo, China 100,000 50,000 50,000 200,000 Ningbo, China 0 0 0 200,000 Indianapolis, USA 300,000 0 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 125,000 25,000 0 0 STATE 5 STATE 2 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 25,000 0 Ningbo, China 200,000 25,000 25,000 100,000 Ningbo, China 75,000 0 0 100,000 Indianapolis, USA 300,000 0 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 0 50,000 0 0 STATE 6 STATE 3 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 50,000 0 Ningbo, China 0 50,000 50,000 300000 Ningbo, China 0 0 0 300,000
TWO-STAGE LINEAR PROGRAMMING FORMULATION CONSIDERING FUTURE SCENARIOS WITHOUT THE POLICY OF MEETING ALL THE DEMAND Constraints:
RESULTS OF 2-STAGE LINEAR PROGRAM CONSIDERING FUTURE DECISION OF SOURCING LOCATIONS From Location YES/NO SCENARIOS WITHOUT THE POLICY OF Indianapolis, USA 1 Cholula, Mexico 0 MEETING ALL THE DEMAND Ankara, Turkey 0 Ningbo, China 1 Indianapolis, Cholula, Ankara, Ningbo, Indianapolis, Cholula, Ankara, Ningbo, STATE IN FUTURE STATE IN FUTURE From / To USA Mexico Turkey China From / To USA Mexico Turkey China Indianapolis, USA 250,000 50,000 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 0 0 0 0 STATE 4 STATE 1 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 0 0 Ningbo, China 0 0 50,000 200,000 Ningbo, China 0 50,000 0 200,000 Indianapolis, USA 275,000 25,000 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 0 0 0 0 STATE 5 STATE 2 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 0 0 Ningbo, China 0 0 25,000 100,000 Ningbo, China 0 25,000 0 100,000 Indianapolis, USA 250,000 50,000 0 0 Indianapolis, USA 300,000 0 0 0 Cholula, Mexico 0 0 0 0 Cholula, Mexico 0 0 0 0 STATE 6 STATE 3 Ankara, Turkey 0 0 0 0 Ankara, Turkey 0 0 0 0 Ningbo, China 0 0 50,000 300,000 Ningbo, China 0 50,000 0 300,000
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