Case Study

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Steel Works, Inc

1. How do you characterize Steel Work’s products and customers? What are the problems faced by Gary Lemming?

2. How much inventory is Steel Works holding? How much inventory will you suggest?

Find average demand and standard deviation from the spread sheet Review= 1 week
Z = 1.8 (1- = 96.4%)
L = ¼ month

3. What are the opportunities are there for Steel Works?
Use pull system fro products that have zero demand, only produce when customers want it, dun need to hold inventory at all Put similar products together
Produce common parts first
VMI

Custom products:
* under contract for a single customer, for sale exclusively to that customer * aren’t allowed to sell the product to anyone expect the original customer * S.W operated several warehouses located near the plant

* Inventory levels are high cuz customers are not happy when they know they need to wait for 2 weeks in order to get their products

Specialty products:
- manufacturing is the problem that leads to high inventory
- customers are unsatisfied at the customer service representatives’ for not having any steel in the warehouse to ship - specialty attempted to manufacture its products in a single plant - division wants to exploit EOS in production and to rely on the logistic network to distribute the product nationwide (3 plants that produce 6 different production line)

* Too many products that cannot keep track of; 80% of the products are highly volatile category * Disconnect slow-moving products and focus on high margin, high volume products to max revenue not working cuz big customers buy these products * Use statistical forecasting package to predict demand and can lower inventory level (least squares regression) * Too many warehouse, need to reduce the amount to reduce inventory can only reduce the fixed cost, will rake longer time and cost more like transportation cost
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