Selecting the new location for Paul Reed Smith Guitars’ second distribution center
Value Proposition
The SE Guitar generates Paul Reed Guitars $75 million in sales and is one of the best guitars on the market at its price point. PRS approached our team to scale its SE transportation and storage operations strategically in a way that leverages geographic location and maintains product integrity so that the delivery time to retailers is reduced.
Skills Utilized
Research scoping and protocol development, expert interviewing, and Excel modeling using Solver.
When we were sent the initial client deck from PRS, we were excited to dive into the topic, start our research, and learn from experts, but it was important to us to first break down the challenge. Once we began to digest these questions - we were able to define a clear objective that would guide us throughout our work.
We conducted secondary and primary research to inform our recommendations. Our secondary research consisted of reading web-based articles and industry forums.
For our primary research we spent time interviewing industry experts.
All of this research informed a decision-making framework that we created for PRS to use moving forward. This decision-making framework is a clear strategy for moving forward while identifying trade-offs and pros and cons.
We first identified the strategic problem that PRS is trying to solve. The Strategic Problem is the big picture problem, and it’s usually centered around the mission and purpose of the organization. For PRS, the strategic problem centers around providing more value to retailers by reducing the delivery time. The Tactical Problem is how PRS plans to get the job done or achieve a particular strategic objective. We focused most of the scope of our recommendations on addressing the strategic problem because it needs to be answered before any of the tactical decisions can be made. The tactical decisions are dependent on the strategic decision.
To address the strategic problem and identify the location of PRS’s second warehouse, we wanted a way to be able to quantify the trade-offs that PRS would have to evaluate when making this a big decision. We realized that a business analytics solution could best address this problem. We created a business analytics model that would provide PRS with the quantitative framework to identify the optimal solution for the desired business objective.
We narrowed our possible locations down to Memphis, TN, and Long Beach, CA, based on the primary and secondary research findings. We included Maryland and compared how this cost varies from the present location and the new location. We identified the objective of the model to minimize the cost, we identified the decision variables that affect the objective, and we set the constraints. In this scenario, given the numbers we used and the assumptions we made are based on our research, the model shows Memphis as the optimal location for a second warehouse. It is important to note that the purpose of this model is to be used as a tool to aid your decision-making.
We didn't just want to leave PRS with a not-so-fun excel spreadsheet, so we translated all of this information into a clickable pdf map that PRS can interact with. Clicking on the potential warehouse locations makes the relevant information for each city appear.
The first location that we researched was Memphis. In addition to the quantitative data that Anu used as her inputs, we also wanted to identify the benefits and brand value adds of the city. Everybody knows Memphis as an influential music city. However, as we dug a little deeper, we realized an enormous business opportunity for establishing the second warehouse in Memphis. We found that the city’s largest industry is the transportation and warehousing industry.
The second location that we researched was Long Beach. As we all know, the weather is fantastic, which allows for less energy going to climate control. PRS products could more easily protect equipment integrity in warehouses here. The port of Long Beach, the second busiest container port in the US, is there. Space for industrial expansion with 92% of the city zoned for industrial uses.
Clicking through the pdf shows some of the resources that will help PRS start to make those tactical decisions that we outlined earlier. The purpose of these resources is once again to serve as a decision-making framework and to point PRS in the right direction to help their team ultimately make these decisions.
Next were the second and the third tactical decisions to be made. These decisions hinge upon how the inspection process would be handled. We learned that the inspection process is an important step in PRS’ manufacturing process because it provides significant value to the end customer. Simply put, PRS has a reputation of delivering a highly playable guitar to the end consumer, and it is important to maintain this quality in any inspection scenario: We looked at a few different scenarios to evaluate the role that the inspection process plays in trying to make the two tactical decisions. Evaluating these three scenarios through impact and feasibility is helpful in trying to deduce which solution is right for PRS
In addition to pointing PRS in the right direction to answer their tactical problems we also consolidated some of the other insights from our research.
We provided PRS with two actionable deliverables that they could share with the team to aid them in making their logistics decisions.