Development of a total landed cost and risk analysis model for global strategic sourcing
Author(s)
Feller, Brian (Brian C.)![Thumbnail](/bitstream/handle/1721.1/43828/262621381-MIT.pdf.jpg?sequence=5&isAllowed=y)
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Other Contributors
Leaders for Manufacturing Program.
Advisor
Donald Rosenfield and David Simchi-Levi.
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Total landed cost and supply chain risk analysis are methods that many companies use to assess strategic sourcing decisions. For this project, landed cost is defined as those costs associated with material movement from a supplier to a designated PerkinElmer, Inc. (PKI) manufacturing site. Tools or models that are available in the technology marketplace are often too cumbersome to incorporate with a company's existing technology architecture or are too simplistic to compute an accurate landed cost. For PerkinElmer, as their Analytical Sciences business continues to grow globally, they are continuously reviewing their supplier portfolio and assessing their procurement strategy. The landed cost and risk analysis tool consists of two components, a cost model and a risk analysis model. Both models were developed to allow PKI to better understand the savings opportunities associated with a supplier selection. When performing supply chain modeling and cost optimization, it was necessary to be able to evaluate multiple scenarios that can influence a sourcing decision. Therefore, by changing parameters such as transportation mode, lead time, inventory carrying cost, freight cost, order frequency, and order quantities in the dynamic cost model, PKI is able to understand supply chain cost trade-offs. The model developed for this project is dynamic to allow multi-variable scenarios to be assessed simultaneously, thus increasing the overall analysis efficiency. For the risk analysis model, approximately 20 different factors were considered as a part of a risk portfolio. This concept adapts traditional financial investment portfolio management theory by considering how much operational impact one factor may have on PKI. (cont.) The concept is to consider a diversified portfolio, so all of the possible risk incurred by a sourcing decision does not reside in any one "category" (logistics, inventory, etc.). The outcome of the model is an index and adjusted cost, providing PKI with an estimate of the potential cost of doing business with a supplier based on their risk profile.
Description
Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management; and, (S.M.)--Massachusetts Institute of Technology, Engineering Systems Division; in conjunction with the Leaders for Manufacturing Program at MIT, 2008. Includes bibliographical references (p. 122-123).
Date issued
2008Department
Leaders for Manufacturing Program at MIT; Massachusetts Institute of Technology. Engineering Systems Division; Sloan School of ManagementPublisher
Massachusetts Institute of Technology
Keywords
Sloan School of Management., Engineering Systems Division., Leaders for Manufacturing Program.