Business Intelligence Project proposal

ESEI INTERNATIONAL BUSINESS SCHOOL

REDUCING COSTS DERIVED FROM MACHINERY IN STOCK BUSINESS INTELLIGENCE TUTOR: Tim Cakir

Arnau Alarcรณn

Brimoresa Dhoro

Cem Gorer

Elvis Makazie

MAET EHT

ARNAU ALARCÓN

BRIMORESA DHORO

arnaualarcon.p@gmail.com

dhorandhoro@gmail.com

CEM GORER

ELVIS MAKAZIE

gorer.cem@gmail.com

makaziejasmine15@gmail.com

TNETNOC

1

2

3

Problem

Expected outcome

Dataset

Reconigtion of the problem that the company faces.

The hypothesis of the final solution that the company is aiming for.

Description of the data types and source where it comes from.

4 Process Steps taken to reach the different solutions

5

6

Dashboard

Solution

Visual representation of the situation to simplify the complex data set.

Proposal for strategic solutions to face the initial problems.

MELBORP EHT

MACHINES IN STOCK, FORGOTTEN FIELD Nowadays, the company has more than 400 machines stocked into an outsourced warehouse. The production needs to change over the year, including spear parts that are required, and some of them still play a role in the company. However, in a total of 5.523 active machines that the company owns, the amount of 414 does not go unnoticed.

IMPLICATIONS The machines, either used or not, as long as they are part of the company, need to be assured by law, and a yearly internal safety certificate in case they are being used by company policies.

On the other hand, the machines take a space that, even that implies a fixed cost, does not increase the productive layer. This way, the more appliances the company is not used, the more stock space is needed, and therefore higher costs.

A MATTER OF COSTS Due to the factors mentioned above, the company faces high fixed costs every year in the form of insurance, variable expenses like space rent, and indirect costs like the time and resources used for the safety checks.

Machines in stock 7.5%

656,32 m2

Machines in use 92.5%

Square meters used

99.243â‚Ź

2.953,44â‚Ź

Insurance yearly cost

Warehouse monthly bill

EMOCTUO DETCEPXE

STRATEGIC OBJECTIVES The main objective is to reduce the costs derived from the machines stock by setting an optimal and more efficient inventory of ready-to-use machines that can fill the real needs of production.

QUESTIONS In order to achieve that, the data must be transformed into information that answers a wide list of questions, such as: How many machines are in the proper conditions to be used?

Which families play the most part in the final costs?

How many units are a repetition of the same model?

What's the seniority of the machinery pool?

HYPOTHESIS AND ASSUMPTIONS In a previous stage of the assessment, there's some hypothesis of the results that will be obtained as well as some assumptions that will be taken into account for the final decisions: Most of the machines older than 10-year-old are already written off and may be outdated.

The machines will specially customised kits will remain in the stock.

The machines classified as "D" may account for the larger insurance cost.

There are families with a considerable number of units of the same machine model.

APPROACH The final proposes of business change will be endorsed by key numbers coming from a visual dashboard where both analysts and executives can go into a more deep knowledge of each field.

The data coming from the machinery management and inventory software will be cleaned up in Excel and analysed using the Google Data Studio tool to achieve this.

Approach

EXPECTED OUTCOME 1

Reduce the numbers of square meters round or under 500m2, so a smaller warehouse closer to the factories can be rent.

2

Keep the percentage of stock machines near or below 5% of the total.

3

The insurance cost must be reduced to below 75.000â‚Ź

RESULTS Specific questions

General objective

TESATAD

DATA The data used for the project is presented as a table of organised data with a header row of 16 fields and 414 records made by combining two tables with 17 and 4 header rows, respectively, and 414 records. Each record is a machine, and the fields contain diverse characteristics of them.

DATA SOURCE The data comes from an internal source: First is extracted from the machinery management software Agora and exported to an Excel format. However, before doing that, a filter was applied to show just the machines located in Transcano, the warehouse where machines are stored for an extended stay.

Not all the fields that were required for the assessment are displayed in the main site, so it has been needed to export the data in two tabs.

FIELDS DATA TYPES Despite most of the data used in quantitative, there are two fields filled with qualitative data: The risk classification, a nominal type of data, the status, a binary type, and the actual value of the machines. Concerning the other fields, they could be englobed in the following groups: 1.String's: The internal code of the machine The asset number The serial number Family and sub-family name Name of the machine Model Location Manufacturer's name Supplier's name Comments

2. Integer's Insurance cost Construction year 3. Float's: Power Space occupied 4. Date: Construction date

VALUE Although there is a wide range of fields, they can be organised by the value added to the analysis:

Prime importance: They give enough information to asses and evaluate possible solutions. These are the status, family, and sub-family name, the model, comments, space occupied, insurance cost, and construction date.

Second importance: In case the solution was approved, this data would be needed to identify the machines involved. The process could be completed either with the internal code or the asset number, and the serial number.

Non-relevant: The information that these data could offer is already known (the location) or can be known by other fields (name of the machine, manufacturer and supplier's name, and power consumption)

SSECORP

FIRST BLOC 1

Firstly, the team downloaded two Excel sheets from the machinery managing software: The first one responds to the basic daily information, and the second one relates to the actual value.

2

The data was combined into one only Excel by matching the internal machinery code.

3

The document was clenaed by deleting non project related fields and adding some that would create value, such as the constrion year from the construction date, or the yearly cost from the monthly cost.

SECOND BLOC 1

The second bloc consisted in displaying all the information in a visual way in order to simplify the decision making process.

THIRD BLOC 1

The third bloc took all the process of analizing the information to extract the most relevant information and design an strategy that drives the company to achieve the objectives, and therefore meeting the final goal.

FOURTH BLOC 1

Once the decision was developed, a new Excel sheet with the new proposed situation was made to be aware of the new pool.

FIFTH BLOC 1

The solution was displayed as a visual dashboard to show in a clearer way how that would affect the company.

DRAOBHSAD

KEY INFORMATION POINTS From the data displayed in the previous charts, the company gets some key points that will be the base for designing the final strategy:

1

The company has in stock 29 machines that are not useful for production, being 11 of them listed as impossible to repair.

2

The special or reserved machines mean a cost below 8.000â‚Ź

3

Most of the cost comes from the insurance, rather than the space rent. This, together with the fact that the more risk level a machine has, the more expensive is and that a 57,7% of the machines have the maximum risk level sets a high fixed costs environment.

4

Any machine before 2006 has a value, which means that the asset has been completely depreciated.

5

There are two big groups of machines that play the 50% of the both total space and insurance cost. Regarding to that, the most expensive family are the pesses, with 70 units, that presents a "D" risk level, which turns in 203,76 m2 used and a yearly insurance cost of 31.995â‚Ź

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1N N OI T U LOS

CONSERVATIVE SOLUTION The first solution that the team proposes aims a fast solution which can be implemented within less than a week from the aproval of the project. This way, it meets the stated objectives in the very simplest way, reaching the set values but not going furter it.

HOW WILL WORK? In order to achieve it, the company will take two steps: On the one side, all the broken and KO machines will be derecognised, assuming that the cost and time that must be spend to repair does not match with the company objectives, and furthermore, most of them are outdated models and therefore, impossible to find spare parts.

On the other side, since all the machines purchased before 2006 are depreciated and non of the special/reserved group machines are part of this time window, will be also derecognised.

TO-DO ACTIONS Once the solution is approved, the following actions must be followed:

1

Inform the accounting team to derecognise the assets from the database.

2

Book an appointment with an official waste operator (Ex: FCC Ă mbito)

3

Point the warehouse manager the machines to be prepared for the appointment

4

Sign the destruction contract

PROS

CONS

Meets the objectives High fixed costs

Machinery pool rejuvenation Big family groups

Flexibility to respond the needs

Fast implementation

Easy to be in the same situation in a short period of time

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2N N OI T U LOS

AGRESSIVE SOLUTION Taking a deeper look to the situation, the team proposes a more agressive solution that goes further in the problem solving, reducing in a great way the number of stocked machines.

HOW WILL WORK? In order to achieve it, the company will take three steps: The first two of them match with the conservative solution: retiring all the machines listed as KO/Need repair and the ones purchased before 2005. However, to equilibrate and rejuvenate the family groups, there will be only 3/5/7 units of each model. This way the big families will disappear,and only the newest machines of each model will remain in stock.

However, despite taking out the oldest ones, some of them still have value, what would mean that the company could execute a sale and get back the depreciation value to cover possible brand-new required models.

TO-DO ACTIONS Once the solution is approved, the following actions must be followed:

1

Inform the accounting team to derecognise the assets from the database.

2

Book an appointment with an official waste operator (Ex: FCC Ă mbito)

3

Point the warehouse manager the machines to be prepared for the appointment

4

Sign the destruction contract

4

Search for a third-party to purchase the machines that still have value

5

Sign a selling contract and send the purchasing party the machine and the legal and technique documentation

PROS

Goes beyond the objectives

Machinery pool equilibration rejuvenation Big cost reduction and upcoming revenue

CONS

Slower and multi-team process

Less avaiable units in case of trends change

LASOPORP S'MAET

GO HARD OR GO HOME Once the case has been studied, and based on the main goal of the company, which is reducing the costs related to the machines stocked, the team proposes going for the second solution based on the following reasons:

1

Even that the first solution meets the objectives, the second means a shocking reduction of a 42,03% of the number of machines, which implies not only a big cost reduction every year, but also a machine management mentality change: Any assembly without their needed machine, but any machine without working.

2

The total yearly cost reduction goes up to more than 50.000â‚Ź. Furthermore, by selling the excess the company will get a minimum revenue of 261.400â‚Ź, which could be saved for buying new machine in case it was needed.

3

On the other side, having less and more modern machines in stock would facilitate the organisational work and the transport between the warehouse and the factories.

4

However, should be taken into account that the family groups are reduced, and therefore there are less units of each model, what would imply some brand-new machine purchasing in case of trends change. Nevertheless, the cost of these machines could be covered by the credit obtained by the stock sale.

This way, the team considers that taking an agressive strategy would be the best solution, and even more now that due to the Coronavirus crisis the Company has ordered the biggest cost reduction possible.

ESEI INTERNATIONAL BUSINESS SCHOOL