Cheetah Running Shoes

Case Study
BANA6025001

Rajat Garewal
Swati Adhikarla
Manu Hegde

Background

Objective

Methodology

Model

Results

Background
Cheetah Running Shoes (CRS) continues to benefit from the increasing
popularity of trail running shoes
CRS has experienced dramatic growth over the last five years
CRS has rich data sources and information for costs involved incurred in
various streams for delivering the goods to the customer
CRS would like to analyze the required number of DCs and the best possible
locations
What does it mean for the business?
Better understanding of optimum locations and benefits of expensive air
transport
Understanding impact of using ground over air for transport on customer
satisfaction

Background

Objective

Methodology

Model

Results

Objective(s)
1

Analyze the right number of Advantages of using Next Day Trade-off between customer
DCs and the best locations
service and cost
Air

Background

Objective

Methodology

Model

Results

Methodology
1

Minimize the total cost using only ground

Minimize the total cost using only air

Analyze the additional costs for using Next Day Air

Express customer satisfaction as the speediness of delivery in days

Model 1: Minimize cost using only

ground

Minimize

Model 2: Minimize cost using only air

Minimize

Insights: Customer Satisfaction

Cumulative demand met using days

82% demand is me within 2 days by ground

99% of the demand is met within 3 days
Air transport should only be used in case of
emergency orders as the additional cost for 18%
unfulfilled demand cannot be justified with higher
costs

Insights: Cost Analysis

Per Shoe Cost Using Air Vs Ground

Per pound, Air delivery Costs 1.65$ while ground

only costs 48 cents
Since our supply chain passes 17 million pounds of
shoes, this difference is more than $20 million
Even the costing approach points to the redundancy
of Next Day Air
Perhaps Air Delivery should be maintained as a last
resort, for extremely critical or expensive items
which are also of an urgent nature

Let Xij be the pairs

of shoes shipped to customer
i from DC j
Model
Formulation
(Ground*)
where i = (10, 12, , ), j =(Atlanta, Charlston, )
Let Yij be pairs of shoes delivered to DCj from Plant I
where i=(Modesto, Camden), j=(Atlanta, Charlston)
Minimize : OutboundCostij*Xij + InboundCostij*Yij + HandlingCost*Xj
(DC-customer level)

(Plant-DC Level)

Subject to:
Modesto (or Camden) Demand=Modesto (or Camden) Supply
Modesto Production=Camden Supply
Customer Demand = Customer Supply (505 constraints)
Summation of Xij = Summation of Yij
Xij, Yij are integers.

*Exactly the same model is run for Air Data too.

(DC Level)

Model Constraints

Total Demand = Total Supply

Net Production at Camden = Net
Production at Modesto
Total production = Total Demand