Chapter 2: Inventory Management and Risk Pooling
2-1 Chapter 2:Inventory Management and Risk Pooling
CASE: Steel Works Background of case and intent o Overview of business o What does data tell you about Specialty? o How much inventory might you expect? o What opportunities are there for Custom? ● Wrap up
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 Intent Abstraction from summer consulting job o Intent is to examine a realistic, but simplified inventory context and perform a diagnosis of problem-poor service and too much inventory
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
Custom Products Rapid growth, 1/3 of total sales($133 MM) e One customer per product ● Very high margins ● High service leve 3 plants, co-located with R&D center o Each product produced at a single plant
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 Products Rapid growth, 2/3 of total sales($267 MM) o 6 product families 3 plants, each producing 2 product families 130 customers, 120 products ● Few big customers ● Highly volatile demand High service level 2-5
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