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    Case 1 - Steel Works - Group 3

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    Rahul Kumar
    Steel Works Inc. produces custom and specialty products. Custom products are developed exclusively for single customers and involve working closely with them from product development through the end of its life. Inventory levels are kept very high to minimize wait times for customers. Specialty products are produced in three plants for 130 customers and 120 products. There is high demand variability across different SKUs. The document recommends segmenting SKUs based on demand variability and assigning different service levels. It also recommends using a periodic review model for inventory replenishment to reduce costs and unnecessary stock-ups. Opportunities identified include combining production of similar products, coordinating warehouses, and regularly reviewing stocking policies and integration between divisions.

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    Case 1 - Steel Works - Group 3

    Uploaded by

    Rahul Kumar
    129 views9 pages
    Steel Works Inc. produces custom and specialty products. Custom products are developed exclusively for single customers and involve working closely with them from product development through the end of its life. Inventory levels are kept very high to minimize wait times for customers. Specialty products are produced in three plants for 130 customers and 120 products. There is high demand variability across different SKUs. The document recommends segmenting SKUs based on demand variability and assigning different service levels. It also recommends using a periodic review model for inventory replenishment to reduce costs and unnecessary stock-ups. Opportunities identified include combining production of similar products, coordinating warehouses, and regularly reviewing stocking policies and integration between divisions.

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    Case 1_Steel Works_Group 3

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    Steel Works Inc. produces custom and specialty products. Custom products are developed exclusively for single customers and involve working closely with them from product development through the end of its life. Inventory levels are kept very high to minimize wait times for customers. Specialty products are produced in three plants for 130 customers and 120 products. There is high demand variability across different SKUs. The document recommends segmenting SKUs based on demand variability and assigning different service levels. It also recommends using a periodic review model for inventory replenishment to reduce costs and unnecessary stock-ups. Opportunities identified include combining production of similar products, coordinating warehouses, and regularly reviewing stocking policies and integration between divisions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    129 views9 pages

    Case 1 - Steel Works - Group 3

    Uploaded by

    Rahul Kumar
    Steel Works Inc. produces custom and specialty products. Custom products are developed exclusively for single customers and involve working closely with them from product development through the end of its life. Inventory levels are kept very high to minimize wait times for customers. Specialty products are produced in three plants for 130 customers and 120 products. There is high demand variability across different SKUs. The document recommends segmenting SKUs based on demand variability and assigning different service levels. It also recommends using a periodic review model for inventory replenishment to reduce costs and unnecessary stock-ups. Opportunities identified include combining production of similar products, coordinating warehouses, and regularly reviewing stocking policies and integration between divisions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 9

    STEEL WORKS INC.

    SUPPLY CHAIN
    MANAGEMENT
    Group A3
    Kevin Mathew PGP/17/087
    Manash Hazarika PGP/17/091
    Pooja Punjabi PGP/17/102
    Sreekanth S PGP/17/115
    Sweta Satapathy PGP/17/118
    Ipsita Acharya PGP/17/210
    Custom Products
    Develops products under contract for a single customer, exclusive

    Works from before product is invented till the end

    Negotiate after product loses technology edge

    3 manufacturing sites- specific plant and R&D division

    Inventory levels very high to keep customers happy no wait

    Cut back by 20% - unhappy customers

    Product Characterization: One customer per


    product, Very high margins, High service level,
    Rapid Growth
    Specialty Products
    67% revenues of Steel Works Inc. come from Specialty Products

    Products are manufactured in a single plant

    Three plants manufacturing 6 different product lines

    Products were produced in rotating sequence

    General Strategy: Exploit economies of scale in production

    The division does not want centralized computer system

    Has 130 customers for 120 products

    Product characterization: Few big


    customers, Highly volatile demand, High
    service level
    Coefficient of Variation
    SKUs AVERAGE STANDARD CV
    DEVIATION

    DURABEND R10 15.58333333 13.1871723 0.84623566

    DURABEND R12 1008 255.9172451 0.253886156

    DURABEND R15 2463.583333 494.2094621 0.200605945

    DURAFLEX R10 97.25 92.52432113 0.951406901

    DURAFLEX R12 18.58333333 11.42929516 0.615029336

    DURAFLEX R15 54.83333333 80.05433761 1.459957525

    DURAFLEX R23 35.58333333 45.86235995 1.288871943

    Coefficient of variation gives the variability in demand relative to average


    demand for each of the SKUs of Duraflex and Durabend
    Segmenting SKUs
    CV<0.5 CV (0.5-1) CV(>1)

    DURABEND R12 DURABEND R10 DURAFLEX R15


    DURABEND R15 DURAFLEX R10 DURAFLEX R23
    Assuming Service Level= DURAFLEX R12 Assuming Service Level=
    95% Assuming Service Level= 85%
    90%

    Service Level Optimisation by SKU


    As per the bubble chart
    for Service Level
    Optimisation, we can
    form three clusters and
    Annual Sales

    offer different service


    levels on the basis on
    volatility

    Coefficient of variation
    Periodic Review Model for
    Inventory Replenishment
    =r*mean =z*std*
    /2 sqrt(r+L)
    Review Period= 1
    week, Lead time=
    2 days (0.25 Mean Standard Cycle Expected Actual Savings in
    weeks) Demand Deviation Stock Safety stock Inventory Inventory Inventory Cost
    Increase
    Service Level in
    =95%, z=1.65 inventory
    DURABEND R12 1008.00 255.92 504.00 472.11 976.11 740.805 -235.30 stock up
    DURABEND R15 2463.58 494.21 1231.79 911.70 2143.49 1875.06 -268.43 will be
    required
    Service Level
    =90%, z=1.29
    DURABEND R10 15.58 13.19 7.79 19.02 26.81 72.785 45.97
    DURAFLEX R10 97.25 92.52 48.63 133.44 182.07 604.98 422.91
    DURAFLEX R12 18.58 11.43 9.29 16.48 25.78 55.59 29.81 Decrease
    in

    Inventory
    Service Level
    stockup
    =85%, z=1.03
    will lead
    DURAFLEX R15 54.83 80.05 27.42 92.19 119.60 388.58 268.98
    to
    DURAFLEX R23 35.58 45.86 17.79 52.81 70.61 190.66 120.05 savings
    Since most of the products have highvolatility, order size will not remain constant

    So we use periodic review model, in which at fixed intervals, inventory will be replenished based on
    existing inventory levels thus savings on costs and reducing unnecessary stock-up
    Opportunities for Custom
    Products
    Combine production of similar products with specialty division to
    save on manufacturing costs for eg. DF R23 which is also sold on
    commercial level can be outsourced to other division
    Inventory storage of similar products in same warehouses; this will
    save on logistics expenses

    Divide products on their priority and reduce safety stock for


    products not sold to major customers

    Review period should be around 1 week


    Recommendations
    Customs products & Speciality products have different operational goals-
    establish performance measures for complete supply chain

    Provide customers with timely and accurate status of orders

    Enhance information systems by linking databases of different departments


    w.r.t inventory, backlogs, production plans

    Consider impact of uncertainties arising from variability of supplier and


    distributors performances

    Inventory stocking policies should be periodically adjusted as per variances


    of demand of various products

    Establish an integration team to improve coordination between Customs and


    Speciality Products divisions
    THANKYOU

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