Chapter 2:InventoryManagementand Risk Pooling2-1
2-1 Chapter 2:Inventory Management and Risk Pooling
CASE: Steel WorksBackgroundof caseand intentOverviewofbusinessWhat does data tell you about Specialty?How much inventory might you expect?Whatopportunities are there forCustom?Wrapup2-2
2-2 CASE: Steel Works ⚫ Background of case and intent ⚫ Overview of business ⚫ What does data tell you about Specialty? ⚫ How much inventory might you expect? ⚫ What opportunities are there for Custom? ⚫ Wrap up
Background & IntentAbstractionfromsummerconsultingjobIntentis to examinea realistic,butsimplified inventory context and perform adiagnosisofproblem-poorserviceandtoo much inventory2-3
2-3 Background & Intent ⚫ Abstraction from summer consulting job ⚫ Intent is to examine a realistic, but simplified inventory context and perform a diagnosis of problem – poor service and too much inventory
CustomProductsRapidgrowth,1/3oftotal sales($133MM)OnecustomerperproductVeryhighmarginsHighservicelevel3plants,co-locatedwithR&DcentenEachproductproducedatasingleplant2-4
2-4 Custom Products ⚫ Rapid growth, 1/3 of total sales ($133 MM) ⚫ One customer per product ⚫ Very high margins ⚫ High service level ⚫ 3 plants, co-located with R&D center ⚫ Each product produced at a single plant
Specialty ProductsRapidgrowth,2/3oftotalsales($267MM)6productfamilies3plants,eachproducing2productfamilies130customers,120productsFew big customersHighly volatile demandHighservice level2-5
2-5 Specialty Products ⚫ Rapid growth, 2/3 of total sales ($267 MM) ⚫ 6 product families ⚫ 3 plants, each producing 2 product families ⚫ 130 customers, 120 products ⚫ Few big customers ⚫ Highly volatile demand ⚫ High service level