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The Exchange Presented to: Dr. Michael Umble Baylor University

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Management Consulting Project - Completed December 2010

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Page 1: AAFES - Power Point Presentation

The Exchange

Presented to:Dr. Michael UmbleBaylor University

Page 2: AAFES - Power Point Presentation

Overview of the Company

Army & Air Force Exchange Services

Governmental agency by U.S. Department of Defense

Support the MWR programs

Headquartered in Dallas, Texas

Managed by Major General Keith Lee Thurgood

Our Scope: Distribution Center in Waco, Texas

Page 3: AAFES - Power Point Presentation

Receiving

Page 4: AAFES - Power Point Presentation

Storage

Page 5: AAFES - Power Point Presentation

Picking

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Conveyor

Page 7: AAFES - Power Point Presentation

Staging

Page 8: AAFES - Power Point Presentation

Undesirable Effects

1. Net profits are not as high as expected (CRT, #154)2. The Exchange has a large percentage of expired goods (CRT,

#145)3. There is no real-time information monitoring (CRT, #137)4. The predicted forecast is inaccurate (CRT, #141)5. There is a large number of mistakes related to expiration dates

(CRT, #109)6. There is excessive money tied up in inventory (CRT, #118)7. The Exchange has a large percentage of products discounted

(CRT, #122)8. The Exchange has a large percentage of seasonal products in

inventory (CRT, #150)

Page 9: AAFES - Power Point Presentation

103: Data is entered into the warehouse

management system manually

102: There is no vendor standard for recording

expiration dates on goods

105: The buying department attempts to

be cost effective in ordering

108: Buyers order in large quantities

111: Exchange experiences shortages of

goods

104: Distribution center desires

sufficient IT system

116: There is loss sales

opportunities

110: Actual demand is often less than

forecasted demand

115: Warehouse has large percentage of products

discounted(UDE #7)

113: Warehouse has large percentage of expired

goods(UDE #2)

114: There is a large percentage of seasonal products in inventory

(UDE #8)

117: Net profits are not as high as expected (UDE #1)

112: There is excessive money tied up in inventory

(UDE #6)

109: The predicted forecast is inaccurate(UDE #4)

106: Large number of mistakes related to

expiration dates(UDE #5)

107: There is no way to monitor real time

information(UDE #3)

101: There are conflicting goals between buying

department and Distribution Center

(Critical Root Cause)

Executive Summary CRT

Page 10: AAFES - Power Point Presentation

Implement a new IT warehouse management

system

Use the current warehouse management system

Accurate real time information available

Stay within the allocated budget

Effective warehouse management

1.Real time information is the only way to effectively run a warehouse management system

2.Accurate data decreases rick of bullwhip through supply chain

3.Need real time data that is accurate for decision making

1.Money is a limited resource

2.All of the excess money is already allocated with the budget

3.One way of evaluating performance is how well you stay within the budget

1.Using the new system will not deplete the data integrity

2.Only way to have real time data is through the new system

3.Only the IT system will improve info availability

1.Employees are resistant to changes

2.Can’t rely on both systems at same time

Injection: A new system will initially cost more than our current system, but future savings will offset the cost of implementation

1.The current system is already within the budget

2.A new system will cost more than our current system

3.The current system does not require additional training

A B

C E

D

Evaporating Cloud

Page 11: AAFES - Power Point Presentation

Desired Effects

1. Real time information is available for decision making of distribution center and procurement (FRT, #208)

2. There are minimal expiration date errors in the receiving area (FRT, #209)

3. Less money is tied up in inventory (FRT, #104)4. There are a decreased percentage of perishable inventories (FRT,

#105)5. Procurement department and the warehouse are communicating

effectively to determine inventory levels (FRT, #210)6. Forecast accurately reflects the demands placed on items (FRT,

#211)7. The Exchange has less discounted products (FRT, #106)8. The Exchange achieves expected net profits (FRT, #107)

Page 12: AAFES - Power Point Presentation

109: Employees will not have to

manually enter data

112: Less labor is required for the same

tasks

111: Forecast accurately reflects

demand(desired effect #6)

105: Procurement department and warehouse

are communicating efficiently to decide inventory needs

(desired effect #5)

106: There are minimal expiration date errors

in receiving area(desired effect #2)

103: Upgrade current computer system

(Injection #2)

102: Have regular meetings between

procurement managers and the distribution

center(Injection #3)

107: The Exchange will have real time

information(desired effect #1)

101: Build new conveyor belt system (Injection #1)

108: Less money is tied up in inventory (desired effect #3)

110: There is a decrease in

perishable inventory (desired effect #4)

104: Increase velocity of items through

warehouse

113: Have less discounted products (desired effect #7)

116: Achieve expected net profits (desired effect #8)

115: The Exchange is more efficient

114: Exchange can reallocate employees to needed functional areas

within DC(Branch Trimming Injection)

Executive Summary FRT

Page 13: AAFES - Power Point Presentation

Obstacles to Implementation

High cost for new IT solution

Natural resistance by top management and employees

Knowledge, skill, and capacity of employees

Managerial implementation policy