How Cosmic Frog Transformed a Global Automotive Leader's Supply Chain with 11% Cost Savings

Cosmic Frog Helps Global Automotive Parts Leader Trim Supply Chain Costs by 11 Percent

A global tier 1 automotive parts supplier approached Optilogic for a holistic evaluation of their complex supply chain design. Working with the customer, the Optilogic team used the Cosmic Frog supply chain design solution to provide data-driven insights and actionable steps that helped the customer reduce spending by more than 11 percent.

Company OverviewThe customer is an electronic component provider servicing automotive and other industrial sectors. Their core competencies include:

• Advanced engineering skills in automotive electronic components

• Low-cost manufacturing model with significant operating leverage

• Flexible and adaptable technology building blocks configured for customized solutions

• Major industries include automotive, aerospace, and the energy sector

Challenge

The customer’s primary objective was to assess the feasibility of relocating production from China to Europe, considering both costs and capacities. If feasible, which products should be transferred? What will be the associated costs, and will additional capacities be required to support this transition?  

Solution

The study was in two phases:

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‍Phase 1: Strategic

• Network strategy
• Product flow
• Supply/demand balancing
• Risk and resiliency
• Sourcing optimization

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Phase 2: Tactical  

• Robust network testing
• Inventory strategy simulation
• Production simulation  

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The customer had no prior experience with supply chain design. Consequently, the team recommended that they assemble subject matter experts (SMEs) and form a steering committee. This initiative was aimed at engaging stakeholders from all departments to enhance the robustness of their supply chain design capabilities.  

Key structure, configuration, and cost considerations

When designing their network, the basic building blocks of the model consist of the company’s various facilities, customer locations, and other aspects of the supply chain. Below are some examples of the elements that were considered:

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‍Structure:

• Suppliers
• Production locations
• Warehouses
• Consignment locations
• Customers
• Products
• Work centers
• BOMs  

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Processes:  

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Transportation Modes:

• Truck load (TL)
• Less than truckload (LTL)
• Ocean
• Air

Units of Measure:

• Kilometer
• Miles
• Kilograms
• Pounds
• Grams
• Cubic Meters

Note: Cosmic Frog can handle all these units, which is essential for companies with a global presence. Cosmic Frog instantly converts differing units to uniform measurements, ensuring consistency and accuracy.

Costs:

• Procurement Raw Material
• Production
• Inventory
• Transportation

Modeling process

The Optilogic team identified the following executive metrics for comparison:  

• Total transportation cost (i.e., transporting raw materials from suppliers to manufacturing, finished goods from manufacturing to distribution centers, and from distribution centers to the customer)

• Total procurement cost (i.e., the cost of raw material)  

• Total production cost (i.e., in-transit inventory, starting inventory, and turn estimated inventory)  

• Lead time

Considering these factors, the team began running scenarios through Cosmic Frog.  

Scenario descriptions

1. Baseline: The focus of the baseline scenario included transportation, production flows, and costs derived from historical source data. The team discovered that the customer had a unique situation where 70 to 80 percent of customer freight was customer pick-up. If we were to relocate production from one plant to another, we needed to analyze the cost and volume of customer pick-ups.

2. Adjusted baseline: The adjusted baseline incorporated updated costs for missing flows and additional expenses, including those for customer pick-ups, raw material procurement, and inventory.

3. Product optimization: This scenario followed the baselines. The team assessed the feasibility of producing all products at a specific manufacturing facility. The customer, already operating a European plant, aimed to determine which products were suitable for production at this location. The model meticulously evaluated the optimality of manufacturing various products at the newly identified European site.

4. Supplier raw material optimized: In addition to adjusting production, the team investigated the implications of changing suppliers. We conducted various scenarios to evaluate different supplier options, including:

• Allowing all products to be made in all manufacturing locations
• Sourcing raw materials from the closest supplier  

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The model identifies optimal production locations by evaluating all associated costs and capacities, without being constrained by historical data. By the end of the supply chain assessment for this customer, Cosmic Frog executed approximately 40 scenarios, providing the customer with a comprehensive understanding of their production options.

Results

Cosmic Frog’s model revealed that the customer could achieve nearly 10 percent cost savings by relocating production to Europe. Additionally, by broadening supplier options, the customer identified unexpected insights and further savings potential, ultimately cutting costs by 11.6 percent.  Supplier optimization was not originally part of their considerations, but it was a scenario we recommended and executed seamlessly using Cosmic Frog. Because Cosmic Frog balances cost, risk, service, and sustainability metrics, and can run hundreds of scenarios simultaneously, customers can explore unlimited options for supply chain optimization. In this case, Cosmic Frog facilitated the discovery of unforeseen cost savings that the client had not initially considered during their supply chain design evaluation.