Spartan Heat Exchange

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Spartan Heat Exchange

By | July 2012
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Case 2-1: Spartan Heat Exchangers Inc

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Situation:

1. SPARTAN HEAT EXCHANGERS IS FACING INCREASED COMPETITION FROM EUROPEAN & KOREAN COMPANIES. KOREAN COMPANIES OFFERED LOW COST AND EUROPEAN COMPANIES HAD LESS LEAD TIME & COST.

2. Spartan Heat Exchangers have formulated new business strategy to reduce customization of products, reduce lead time from 14 weeks to 6 weeks, and lower production costs.

3. Rick Coyne the materials manager needs to come out with plan to support new business strategy. Main objectives for this department are -

o Reduce customer lead time for finished products from 14 weeks to 6 weeks.

o Inventory turnover needs to be 20 times.

o Material stock-out needs to be eliminated.

o Reduce raw material cost by 10% over 12 months.

Basic Issues:

1. MATERIAL SHORTAGES & STOCK-OUTS IN MANUFACTURING OPERATIONS

2. Discrepancy in physical inventory on floor & in computer systems.

3. Huge inventory stored in plants resulting in less inventory turns and increased costs.

4. Large number (350) of raw material vendors

5. Lead time of raw materials vary from few days to 6 weeks

Tasks:

1. IDENTIFY ROOT CAUSE FOR MATERIAL SHORTAGES AND STOCK-OUTS. FIND OUT IF THERE ARE ANY PARTICULAR COMPONENTS THAT ARE USUALLY SHORT.

2. Identify incorrect processes which results in discrepancy in physical inventory on floor and in systems. Does physical inventory/cycle inventory need to be done more often?

3. Reduce the inventory stored in warehouse significantly.

4. Based on new product category, review the vendor list and reduce the number of vendors from 350. Especially in area of aluminum products.

5. Talk to the vendors about reducing the lead time to few days instead of weeks.

ACTIONS:

1. RICK IDENTIFIED THAT MATERIAL SHORTAGES &...