McKinsey Cup Winners Address Inventory Issue for Local Furniture Wholesaler

Thursday, February 2, 2017

Students from the Joseph M. Katz Graduate School of Business impressed the judges and their client, COE Distribution, Inc., during the 19th McKinsey Cup Competition. Katz MBA candidate Yvonne Makrucki, MAcc candidate Ahmed Amin, and Franz Schwarz, a student enrolled in the exchange program between the Katz Graduate School of Business and the University of Augsburg, worked together to solve a challenging inventory issue.  McKinsey Cup Winners Address Inventory Issue for Furniture Wholesaler

The team was selected as winner of the fall 2016 McKinsey Cup, a competition held exclusively for Katz Consulting Field Project teams. The teams complete a business consulting assignment for a sponsoring client organization and present recommendations to judges from industry. This year’s judges included Bill Besselman, consultant and former McKinsey principal; Joe Hurley, Sr., senior vice president for supply chain for Giant Eagle, Inc.; and Jason Wainstein, partner, Deloitte LLP. 

COE Distribution, Inc., a furniture wholesaler in Uniontown, Pa., has experienced enormous growth over the past three years. 

“Due to rapid growth, the company lost control over its reorder quantities, leading to an overstocking issue in the company’s warehouses,” Schwarz says.

In response, the company rented space in overflow facilities to manage the overstock. This drove up holding costs.

To address the issue, the Katz team created a classification system to determine which of the company’s products have the highest value, and recommended reducing the current stock of items with the lowest value. They also created a probability-based model that provides the optimal reorder point per item, the optimal order quantity per item, and the safety stock for every item.    

Edward Denton, president of Denton/Neely & Co. LLC, a management consultancy specializing in emerging and middle market B2B companies, was the team’s mentor. 

“He really helped us not only to focus on the inventory problem, but also to understand the whole business model of the company,” Schwarz says. “This was important because reducing the wrong items in stock can affect the company’s business negatively.”

Jennifer Shang, professor of business administration and area director for business analytics and operations, served as the team’s faculty advisor and aided them in developing theoretical methods. 

In addition to the COE Distribution project, Katz students completed Consulting Field Projects for a number of different companies, including Aitheras Aviation, Inc., BNY Mellon, GENCO-FedEx, MCC International, MSA, Peoples Natural Gas, Pittsburgh Filmmakers, and Rapid TPC, Inc. 

Read about the Spring 2016 McKinsey Cup winners.