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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