Evaluating distribution centers in a global supply chain: a
case study at Cargotec Sweden, MacGREGOR Cranes

Abstract: This thesis has been carried out at Cargotec Sweden, MacGregor Cranes who
manufactures marine cargo cranes at production partners in China and South
Korea. MacGregor Cranes source components to their production partners from
both European and Asian suppliers. MacGregor Cranes has implemented a
distribution center in Germany. Today when the production has increased
five folded, the amount of Asian suppliers has increased and many European
suppliers have chosen to shift some production to China or South Korea.
This has led MacGregor Cranes to reconsider if a distribution center in Asia
could decrease the costs and increase the Supply Chain efficiency. Therefore
the purpose of this thesis is to evaluate MacGregor Cranes current Supply
Chain by mapping it and measuring performance metrics. A Supply Chain with
focus on a distribution center in Asia will be evaluated and then compared
against the existing Supply Chain.

Literature was collected about Supply Chain Management, Supply Chain
strategies, ways to evaluate a Supply Chain and a distribution centers role
in a Supply Chain. This literature search resulted in a theoretical frame
of references which thereafter were used as guidance when collecting the
empirical data and when performing the analysis. MacGregor Cranes Supply
Chain was mapped and quantitative data about the Supply Chain was collected
from the enterprise resource planning system SAP R/3. Interviews were
conducted in order to gather information about MacGregor Cranes Supply
Chain strategy and how they graded the importance of different attributes.
Primary and secondary information were collected about how other Nordic
companies had managed their distribution center in China.

The analysis of the empirical data revealed that the main advantages with
the current distribution center is that sea freight can be utilized for a
large share of the components sourced in Europe and that MacGregor Cranes
has a good Supply Chain flexibility since they are able to hold and stock
components from Europe that not is needed in the production. The
disadvantage is that MacGregor Cranes is relying on their Asian suppliers to
store components and some suppliers have limited storage capacities in terms
of space and a lack of systematic methods to monitor the stock levels. The
evaluation of the current Supply Chain let the authors to recommend
alternatives for how a Supply Chain with a distribution center in China
could be set up. This resulted in the recommendations that MacGregor Cranes
in the short term, 1-2 year, should continue to work towards increasing the
amount of suppliers in Asia before implementing a distribution center in
China.

The authors recommend MacGregor Cranes to develop the relationship between
the suppliers located in Asia with the main objective to use suppliers as
stock keeping units. A long term recommendation, 2 years or more, is to set
up a distribution center in China to supply components for all production
partners. A Vendor Managed Inventory, VMI, concept for selected components
should be implemented at the distribution center, which would give
MacGregor Cranes an opportunity to handle the duality of cost minimization
and maintaining a high service level.