What Steel Works Do
Steel Works is a United States company that deals in steel manufacturing. As noted in the case study, the company manufactures custom and specialty use steel. Consequently, the company has two major divisions based on these two product categories. Interestingly, these two divisions operate uniquely. The custom division, for instance, develops a significant portion of its products based on the customers’ desires. Precisely, this division produces products according to customers’ description. On the other hand, the specialty division contrasts the operations of the custom division. This division produces steel in bulk with the intentions of benefiting from economies of scale. The steel produced by the two divisions are then stocked in warehouses before being distributed to the clients.
The Business Problems or Challenges Faced by the Company
Despite its impressive size that accommodates over 2500 employees, Steel Work is experiencing several business challenges that are adversely affecting its revenue. Firstly, the company has a serious challenge of extremely high inventory levels. According to Hobbs (2003), high inventory makes a company to experience inventory management difficulties as well as high costs. In fact, these detriments of high inventory pointed out by Hobbs (2003) are confirmed by Steel Works senior management in the case study.
Moreover, the company faces a challenge in its customer service. In the case study, Steel Works Chief Financial Officer laments that the company has one of the worst customer service in the industry. This view implies that the firm’s customers are dissatisfied with the services that they receive from Steel Works. Consequently, this poor quality customer service has prompted some of the company’s customers to seek services from Steel Works’ competitors. In any business setting, the customers serve as an instrumental factor in influencing a company’s profitability (Hussain, Al Nasser, & Hussain, 2015). The failure to satisfy the needs of the customers results in adversities such as dwindling sales and profitability. As a result of high inventory and poor customer services, Steel Work’s sales have declined by 30% while its expenses have increased by 25%.
Proposed Solutions to the Problems
The logistics expert consulted by Mr. Lemming proposed several strategies to address the challenges facing Steel Works. Firstly, the expert suggested that the company should get rid of products with low annual sales to reduce the inventory levels. Secondly, the logistics expert recommended that Steel Works should utilize statistical forecasting package to estimate demand as a way of lowering the inventory levels. Finally, the expert pointed out that the firm should consider reducing the number of its warehouses. Besides, the company should consider applying demand-pull ordering strategy in its efforts to regulate inventory levels. In practice, regulating the inventory levels effectively enhances the quality of service offered to the customers.
Hobbs, D. P. (2003). Lean Manufacturing Implementation: A Complete Execution Manual for Any Size Manufacturer. J. Ross Publishing.
Hussain, R., Al Nasser, A., & Hussain, Y. K. (2015). Service quality and customer satisfaction of a UAE-based airline: An empirical investigation. Journal of Air Transport Management, 42, 167-175.