Sedgman

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seSubject: Sedgman Steel nc.
Alice McKenzie, Material Control Supervisor
Summary: Sedgman Steel Inc. is a large North America based manufacturing company, with annual sales of approximately $ 1.7 billion. Customers would provide Sedgman with specification for special cut steel tubing and metal sheets. Sedgman out sourced there warehousing and transport operation to a third party by the name of Fehr Logistic Company. Isaak Theissen; the Director of Material Management was concerned about the large amount of raw material inventory. * The reason for outsourcing warehousing and transportation was to save money * The cost of holding this large amount of raw material is approx. $20 million. * It appears that the third party is not managing the warehouse and transportation operations efficiently Isaak Theissen asked Alice to investigate the situation. She paid a visit to the warehouse and was surprised with what she saw. Question: How much raw material inventory should Sedgman hold? It appears that the company is holding a very small amount of raw material at the plant, but there JIT process at the warehouse is not working The goal of JIT production are similar to those of MRP…providing the right part at the right place at the right time. Whereas MRP is computer based, JIT is industrial engineering based I think if Sedgman is going to use any lean processes they need to ensure there third party vendors are doing their part to support this process.

Question: What should be done about the relationship with Fehr Logistics Company? What changes do you think should be made to this relationship? It is clear that Fehr Logistics is not supporting Sedgman JIT concept. They may need to work on a Kanban Control System. keep in mind that Kanban system requires the small lot size features of JIT and discrete production units. The system is most useful for high-volume parts used on a regular basis I think a section of the contract with Fehr Logistics...
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