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Tauber Students Optimize Supply Chain for Ametek Inc.; Estimate Annual Savings of $1.7 Million

9/25/2009 --

Tauber Institute's annual Spotlight! competition challenges business and engineering students to scope and solve real operations issues.

ANN ARBOR, Mich. — Ametek Inc. expects to save $700,000 in near-term costs, simply by implementing a strategy proposed by students from the Tauber Institute for Global Operations. Ametek, a leading global manufacturer of electronic instruments and electromechanical devices, also projects a 37 percent reduction in inventory, thanks to recommendations by Jialing Li, MSCM '09, and Claudia Uehara, MBA '10.

Li and Uehara (pictured at right with representatives from Ametek and Joel Tauber) represent just one of 25 teams who undertook projects coordinated by the Tauber Institute, which is a partnership between Ross and the University of Michigan's College of Engineering. Each summer, the institute places business and engineering students inside a sponsoring firm to tackle an operations challenge. And each September, teams present their respective solutions at Tauber's annual Spotlight! event, where they are judged by industry experts.

Winners Li and Uehara were charged with optimizing the supply chain for Ametek's printed circuit board assemblies (PCBAs), which are used in every product of the programmable power division. The Ross students performed a comprehensive make-versus-buy analysis and compared different sourcing options. The team built a cost model and identified the true cost for sourcing and manufacturing PCBAs. They also narrowed down suppliers based on quality, technology, supplier responsiveness, cost, and supply chain risk.

Based on their findings, Li and Uehara recommended and initiated Ametek's transition to a new supply chain configuration that utilizes both in-sourcing and outsourcing. To ensure a smooth transfer and realize savings, the team also developed a risk-mitigation and implementation plan.

"The students put forth a lot of time and effort into the deliverable they provided," says Brent Bolton, Ametek's global sourcing commodity manager. "We worked with them on how we wanted the potential future of Ametek to look, but we didn't know if we wanted it to be based on outsourcing or if we wanted to keep it all internal. We let them make that mathematical decision; we just gave them guidelines. They took all of our metrics into consideration and not only are they going to save us money, but they're also going to reduce inventory and free up floor space."

The potential long-term savings for the programmable power division based on Li and Uehara's plan is an estimated $1.7 million per year. The team's make-versus-buy model also could be used by other Ametek divisions.

As first prize winners, Li and Uehara will receive $10,000 in scholarship money. The team credits the win to Ametek's organization as well as support from their faculty advisers, Ross professor Hyun-Soo Ahn and engineering professor Shorya Awtar.

Though each of the 25 Tauber teams is assigned to a different company with unique needs, every project presents an operations-oriented challenge with engineering and business components. For 14 weeks during the summer, engineering and business students work together at the sponsor company's site. The projects can range from high-level strategic analyses to complex supply chain challenges to detailed plant layout and workflow issues for a specific product line.

"Our company was really focused on helping us do a good job," says Elizabeth Gillis, MBA '10, who worked for the Boeing Company in a project tied to its 777 assembly system. "We came into it and were able to hit the ground running because of their preparation."

Other companies provided students with a more general goal and allowed them to influence the direction and focus of the project.

"Steelcase gave us the very broad goal of optimizing their distribution network and gave us free range to take the project in whatever direction we wanted," says C. Jason Clark, MBA '10, who worked on a project called "Optimization of the Steelcase Regional Distribution Network."

Clark says he enjoyed taking ownership of the project. "Steelcase also gave us a pretty high level of exposure within the company and took it as a really high priority," he says. "It was great to see our recommendations come to fruition and be implemented."

Representatives from sponsor companies were just as thrilled to be able to implement those recommendations.

"We're impressed with not only the quality of students assigned to our project, but we're impressed with the quality of the students on all the projects and the results that occur," says Don Smith, CEO North America of Aramex, which sponsored "Strategic Insight into Customer Satisfaction and Operational Efficiency through Development of Key Performance Indicators." The project was Aramex's first exposure to the Tauber Institute. "We're interested in continuing to sponsor projects," Smith says. "We feel it is well worth it."

Other winning projects included teams working for PT. Sepatu Mas Idaman (Semasi), and the Boeing Company (tied for third place), as well as Exide Technologies Inc., BorgWarner TorqTransfer Systems, and Lockheed Martin Space Systems Company (tied for second place). All placing teams received scholarship funding.

Institute founder Joel Tauber points to the collaboration between Ross and the College of Engineering as the reason students are able to make such a significant impact at sponsoring firms.

"The reason we have been successful and will be successful in the future is because this institute demonstrates teamwork and partnership at the University level," Tauber says. "But there is one more component: the outstanding students. When you go out into the industry, it's recognized that you're a Tauber graduate."

—Leah Sipher-Mann



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu