Supply Chain Management and Raw Materials

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Case Study 8.1 Sedgman Steel
* Background
* Sedgman Steel Inc.:
* North American Co. (diversified)
* Annual Sales of $1.7 billion
* Syracuse Plant
* Produces cut to length steel tubing and steel sheets to the automotive industry. * Customers provide specs for orders (eg. chemical comp., thickness, diameter, etc.) * Raw Materials supplied from 3 sources.

* Tubing from sister co. (internally sourced. * Steel coils used for steel sheet production multisourced (2 Co.) * Physical Distribution

* JIT (Just In Time) to customer base.
* Policy
* Materials required 2 weeks prior to production * Procurement headed by Director of Materials Management (Isaac Theisen) * Alice McKenzie is the Production Material Control Supervisor * Resposibilities are

* Incoming/outcoming transportation
* Inventory control
* Production planning/scheduling
* Fill rates
* Asked to investigate large amount of current on hand raw materials inventory * Purchase spend made by Syracuse plant was$ 65-75 million/year * Purchasing manager @ facility was closely involved with sales to ensure sales pricing was in line with purchasing costs. * Inventory of raw materials on hand is $20 million * Issues

* Too much raw materials inventory on hand
* Inventory is piling up rather than beign used as constant rate of production. * Data Analysis
* $20 million in raw materials inventory
* Warehoused next to facility in 50,000 sq ft building * Fehr Logistics Company (FLC) contracted to run inventory and logistics (3PL) * Contract specified # of staff to be employeed and working hours * Alice’s visit...
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