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  • Steelworks

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    Sourav Laik
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    This document provides background information on Steel Works, Inc. and discusses opportunities to improve inventory management and customer service. It outlines objectives, consultant recommendations that were rejected by staff, analysis of product demand data, questions about the proper inventory model, and recommendations for how Steel Works can validate assumptions and better manage customers. Key points of analysis include validating the choice of inventory model, measuring demand volatility, analyzing large vs small customers, and testing assumptions like normal demand distribution.

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    This document provides background information on Steel Works, Inc. and discusses opportunities to improve inventory management and customer service. It outlines objectives, consultant recommendations that were rejected by staff, analysis of product demand data, questions about the proper inventory model, and recommendations for how Steel Works can validate assumptions and better manage customers. Key points of analysis include validating the choice of inventory model, measuring demand volatility, analyzing large vs small customers, and testing assumptions like normal demand distribution.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Scarica in formato PPT, PDF, TXT o leggi online su Scribd
    Segnala contenuti inappropriati
    141 visualizzazioni10 pagine

    Steelworks

    Caricato da

    Sourav Laik
    This document provides background information on Steel Works, Inc. and discusses opportunities to improve inventory management and customer service. It outlines objectives, consultant recommendations that were rejected by staff, analysis of product demand data, questions about the proper inventory model, and recommendations for how Steel Works can validate assumptions and better manage customers. Key points of analysis include validating the choice of inventory model, measuring demand volatility, analyzing large vs small customers, and testing assumptions like normal demand distribution.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Scarica in formato PPT, PDF, TXT o leggi online su Scribd
    Segnala contenuti inappropriati
    di 10

    Steel Works, Inc.

    OM 783 Supply Chain Strategy and Analysis

    Background of Steel Works, Inc.


    Annual sales of $400 Million?
    Can this be possible given information in case? Conflicting data? What do we do about it?

    5 Locations Custom division


    Develop products for single customer

    Specialty division
    Sell custom products to other companies at higher price

    Inventory

    What is the objective?


    Stay in business!
    Grow business? Improve customer satisfaction? How?

    Minimize inventory cost


    What are components of cost? How measured?

    Provide high level of customer service


    How high? How measured?

    Consultant Recommendations
    1. Discontinue products that have low sales. 2. Use statistical forecasting to predict demand. 3. Reduce number of warehouses. Staff Reaction: Wont work! Why?

    What do data in case tell us?


    Exhibit 2: 80% of products have high volatility?
    Maybe, but
    LABEL DURABEND R10 DURABEND R12 DURABEND R15 DURAFLEX R10 DURAFLEX R12 DURAFLEX R15 DURAFLEX R23 MEAN 15.583 1008.000 2463.583 97.250 18.583 54.833 35.583 STD. DEV. 13.187 255.917 494.209 92.524 11.429 80.054 45.862 C.V. 0.846 0.254 0.201 0.951 0.615 1.460 1.289 % of Sales 0.4% 27.3% 66.7% 2.6% 0.5% 1.5% 1.0%

    What about Exhibit 1?


    5 large customers (> $25 mill) 107 small customers (< $1 mill) Is this a potential problem?

    What is proper model for this scenario?


    Are we in a continuous review or a periodic review inventory setting?
    Why? How do we know?

    What are proper parameters for model?


    Why? How measure in reality?

    Can we validate our choice of model and assumptions?


    How?
    Look at production batch sizes given in case

    How to analyze case?


    Model suggestions? Assume we use Periodic Review with r = 1 month and L = 1 week

    r E[ Inventory] z r L 2

    Calculate expected inventory and compare to Steel Works, Inc. actual inventory.
    What do we find?

    Recommendations?
    Why do divisions operate separately?
    Any economies to be gained by combining?

    How can Steel Works better manage their customer relationship process? How can Steel Works make sure that they are continuing to use right model, right parameters, etc.? Should we adjust production parameters by product? How?

    Questionable Assumptions?
    How confident are you that demand is normally distributed?
    How can you test?

    Are data accurate?


    How can you test?

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