Paper instructions:
Objective:
• Explain the general process, addressing the scope below.
• Point out the elements of the process that you consider well done, and why
• Point out the elements of the process that you consider open for improvement
• Recommend how the process can be improved
The case is on additional materials:
Case 8-1 page 227-228
Case 8-1
Sedgman Steel
Alice McKenzie, the production material control supervi- Steel tubing was supplied from a Sedgman tube manu-
sor at Sedgman Steel in Syracuse, New York, sat at her facturing facility in Michigan. Tubing arrived in standard
desk preparing fora meeting with her boss, Isaak Theissen. lengths of 24 feet and was cut to length on computer-
Isaak, the director of materials management at Sedgman, controlled cutting equipment. Tubing was loaded on
was concenied about the large amount of raw material in- customer-supplied containers and also shipped on a llT
ventory and had asked Alice earlier in the week to investi- basis.
gate the situation. It was now Wednesday, August 17, and Steel purchasing was an important activity at Sedgman
Alice had promised to provide a preliminary report to Isaak Steel Inc., and for the most part was handled at the plant
on Ffiday afiemoon_ level in the company. Steel and tubing purchases at the
Syracuse plant represented approx1mately $65 to $70 mil-
B D lion each year, and the purchasmg manager there worked
closely with sales to make sure that material costs were
Sedgman Steel Inc. wasa large diversified North Amenca- properly reflected in selling prices. Customer contracts
based manufacturing company, With annual Sales 01f a}: were negotiated in spring each year.
Proximatel $1.7 billion, The Syracuse operation emp oye
25 peopleind supplied cut-to-length steel tubing and Steel MATERIAL CONTROL
Sheets to aumefive and aumetive parts compames: The material control department was responsible for incom-
Customers provided Sedgman with the Speuficw . and outgoing transportation, inventory control, produc-
tions for the material, WhiCh ineluded the Fhemical iilogn lanning and scheduling, and customer order fulfill-
composition (e.g., carbon content) and matenal tillek- mentp Overall, the Syracuse plant had a dozen customers,
Bess, Cut-to-]ength tubing specifications included lnnfir to which it supplied approximately 350 different products.
and outer diameter conditions. Raw material was suP‘ Sed an routinely dealt with about 15 steel suppliers, while
Plied from one of two sources, Integrated steel 00”}- .t Sigstmer plant in Michigan was the sole supplier of tubing.
Mes supplied lat e steel coils which were placed in is P lie was to have raw material available at least two
leveling “d . g ‘ ‘ ’ m and cut to length. 0 ‘ y d cc of production. Raw material deliveries
The die; straightening equipme anets banded, weeks in a var:i led to accommodate fun truckload Ship
and _ were stacked on wooden P .uét-imfime also were sche £10 000 ounds.
to customers, usually on a J ments of about ,
228 Purchasing and Supply Management
Three years prior, Sedgman had contracted its ware- Earlier in tire day, Alfiesifcxiifg $1113? I: ViSit to the
housing and transportation services to a third-party lo- warehouse an was slurtpl full .th a_lS e 33W. The
gistics organization, Fehr Logistics Company. Fehr was warehouse was comp e e y _w1 cm s of steel and
responsible for providing inbound and outbound trans- buudles of I‘aW tUbeS- seVeral Wailers were parked outside
portation services and managing the 50.000-square-foot waiting to be unloaded. In addition, there appeared tobe I
warehouse adjacent to the manufacturing facility. a shortage of Staff at the wareheuse..The normal comple.
The contract with Fehr specified staffing levels and ment was eight, but Alice only identified five people.
hours of operation and provided the supplier with a profit
based on a percentage of its total costs. After some initial
problems. management was generally satisfied with its . . _ _ T
relationship with Fem AsAlice prepared for the Friday meeting, she made alist t
of issues that she would have to address with Isaak. Based
RAW MATERIAL INVENTORY on what she knew so far, Alice agreed that opportuni-
ties ex1sted to reduce the amount of inventory, but Isaak 79‘
Isaak “lt’hefissen hatd belc‘ome concerned regarding the large would want specific targets and the timing identified. Rm 1
he the
ml ion 0 inven- to levels coul ‘ ‘ ‘ 5
tory on-hand, and on Tuesday he had asked Alice to investi- orFZustomer sergilc): reduced Without affecting operations
gate, commenting that: “Our customers certainly don’t c
this amount Ofinvemmy Why Shouldwe? I wantyouto 1:21); b1 lifeggmzmg the importance of the protect, Alice had 3
into the situation and see what we can do to fix it” oC 6 Off the me“ two days- She wondered What Steps
she should take next. A
Case 8-2
Throsel-Teskey Drilling
On Wednesday June 12 Alison B
a , urkett purch
ager at Throsel-Teskey Drillin I ’ asmg man‘ and
Phoenix, Arizona, met with Jo}?n Bjeghrosel-Teskey) in ed Statdergl‘ound dI’lllmg ngs operating at Sites In the w
president. He said. “I am en. Ch, the company’s , es, Canada, Mexico, and South Amend?» The.
g “18 pressure fro Pally s custo . . . and p10“
to address our inventory variance It ha b m the board minin mers were top-net mulmnonal fl
given monihs sum the merger, and we aim more than tion otgccompamgs “wowed In the exploratwll’Ind .f
out: Szlnergies that we expected from purch eflot getting the co opper’ me: and gold. 75p:
8 es are Sllghtl hi ‘ … . . asmg- I kno , mpany s dril ‘1 :4: m” «t
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