Supply Chain Management and Raw Materials

Case Study 8. 1 Sedgman firebrand * Background * Sedgman Steel Inc. * North American Co. (diversified) * yearly Sales of $1. 7 billion * Syracuse Plant * Produces cut to length trade name tubing and steel sheets to the automotive industry. * Customers provide specs for orders (eg. chemical comp. , thickness, diameter, etc. ) * Raw Materials supplied from 3 sources. * Tubing from sister co. (internally sourced. * Steel coils employ for steel sheet production multisourced (2 Co. * Physical Distribution * JIT (Just In Time) to customer base. * Policy * Materials mandatory 2 weeks prior to production * Procurement headed by Director of Materials Management (Isaac Theisen) * Alice McKenzie is the Production Material sustain Supervisor * Resposibilities atomic number 18 * Incoming/outcoming transportation * caudex control * Production planning/scheduling * match rates Asked to investigate large amount of current on hand raw materials inventory * procure spend made by Syracuse pla nt was$ 65-75 million/year * Purchasing manager preparedness was closely involved with sales to ensure sales pricing was in thread 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. * selective information 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 operative hours * Alices visit * Warehouse is full with both types of raw materials * Trucks waiting to be unloaded * 5 staff working when 8 typically was the regular staff running warehouse operations * spoken language of Raw materials was to be at least 2 weeks prior to production * Customer orders based manufacturing Fehr logistics controlled incoming transportation * Decision Criteria * Lo wering Cost * Lowering Amount of inventory * Maintaining production flow * recreate time frame established * Compliance with poilicies * Alternatives * Do nothing * Ensure 8 staff are working warehouse at all times fulfilling FLCs contract obligations * Suspend buying of raw materials for a short period of time until a good chunk of raw material is used up. Build new purchasing processes for forcasting and shipping requirements from suppliers * Refuse shipments of current POs so superfluous raw materials can be used up. * Absolve contract with FCL due to lack of competancy and hire a new 3PL to replace of FCL. * Request Return of Good approval from suppliers to get inventory close to optimal production standards. * Assumptions * FLC is not fulfilling their contract obligations * Purchasing has not forcasted correctly or purchased demand amounts in line with production schedules.