Inventory Management Strategy for GD Energy Products

AMERICAN INDUSTRIAL PARTNERS - GD ENERGY

Inventory Management Strategy for GD Energy Products

STUDENT TEAM: Hitoshi Fuchigami – Master of Business Administration Joshua Kowalski – EGL (BSE in Data Science & MSE in Industrial and Operations Engineering Daniel Rodriguez Del Bosque – Master of Science in Industrial and Operations Engineering

PROJECT SPONSORS:

Lee Evangelakos – Partner Brett Walters – GDEP Supply Chain Director

FACULTY ADVISORS:

Izak Duenyas – Ross School of Business Brian Love – College of Engineering

American Industrial Partners (AIP) is an operationally focused middle-market private equity firm with an investment in GD Energy Products (GDEP), a leading equipment provider to the unconventional oil & gas industry.

The Tauber team was tasked with solving two items that are core to GDEP’s strategic plan. • The team’s first responsibility was disposing of obsolete materials which amounted to roughly 20% of the total inventory value, while simultaneously creating a process to prevent future accumulation of excess, inactive and obsolete (EIO) materials. • The team’s second responsibility was to increase the availability of fluid ends, a key revenue driver for the GDEP business, through improved inventory management practices. The updated inventory practices would prevent lost or delayed fluid end sales due to missing small components by optimizing the stocking strategy for these components given a desired service level while also minimizing small component inventory within these parameters. For the obsolete materials project, the Tauber team coordinated GDEP’s supply chain and finance teams to ensure on-time disposals (following accounting requirements) while developing a process to prevent future EIO inventory accumulation. The Tauber team also conducted a root cause analysis for the current EIO inventory to help inform the organization on what processes to evaluate to prevent such buildups in the future.

The disposal of obsolete materials was carried out on schedule, and recommendations to improve the EIO policy were provided based on scenario analysis along with an algorithm to ensure an efficient and reproducible execution. In addition, the Tauber team’s root cause analysis identified product lifecycle management as an opportunity to prevent further accumulation of EIO and passed that analysis and observation to the relevant stakeholders at GDEP to action.

For the fluid end small components project, the Tauber team worked closely with the Fluid End plant manager, supply chain manager and material buyers to devise an appropriate inventory stocking strategy, then created and integrated into the end users’ daily workstreams a set of tools that regularly designate action items to implement the agreed upon strategy. The Tauber team found that through optimal allocation of stocking levels, GDEP has the potential to improve fluid end availability and simultaneously reduce fluid end small component inventory. This comes from the segmentation of small components and associated desired service levels based on usage frequency, as well as improved visibility into optimal ordering policies. This value will be realized by diligently executing the designed inventory strategy using the tool developed by the Tauber team.