Steel Works Case Study

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Introduction
Background

Steel Works Inc. is a manufacturer of custom and specialty use steels founded in 1980. Steel Works Inc. has earned a reputation as a high technology provider and within its two divisions, Specialty Products and Custom Products, the manufacture produces annual sales of around $400 million (1993 Figures) (Simchi-Levi, Kaminsky and Simchi-Levi 2008).
The company is facing the following issues and have appointment a new head of their logistics group, Gary Lemming to address the issues:
- Sales are down by 30%
- Expenses have increased by 25%
- Customers are leaving for other manufactures (loss in market share)
- Service levels are low and customer cancellations and backorders are increasing
- Inventory …show more content…

Lost sales from low service level which increases job cancellations is adding to the decreasing sales and revenue. Increasing expenditure is related to high inventory costs in some SKUs and supply chain inefficiencies, which will be discussed below.
In summary none of the CEO’s goals are currently being reached or forecasted to improve without change.

Operational Goals & Objectives
The operational goals, or day to day decisions for the Custom department and Speciality department are very different.

Custom Department (1/3 of total sales) [Operational Goals]:
- High level of customer service
- Daily research and development targets
- Reduce customer lead times

Speciality Department (2/3 of total sales) [Operational Goals]:
- High level of customer service
- Daily sales targets
- Target steel levels (inventory) to keep up with demand
- Optimal truck loading and routing to keep up with deliveries to 130 customers
- Scheduling steel inventories

Operational Challenges & Objectives

Gary Leeming faces several operational challenges if he is to achieve his goals specified above.

Custom Department Challenges:
- Keeping inventory levels low without reducing service levels. The custom department works only with a small number of customers so keeping service levels high are paramount to success.
- Consolation of warehouses to reduce cost and required inventory (risk pooling) without reducing customer service levels

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