Spartan Case Study
1)
The company is a leading designer and manufacturer of specialized industrial heat transfer equipment. Spartan is owned by Krimmer Industries, a large privately held corporation headquartered in Denver, with over 10,000 employees worldwide. Spartan's
old business strategy focused on providing customized heat transfer products to meet the unique requirements of each customer. The company was willing to engage in trial and error on the shop floor, offering design and manufacturing services for any kind of heat transfer product required by the customer. The company had a wide supplier base with over 350 vendors for raw materials, especially aluminum products. The customization strategy necessitated multiple vendors to fulfill specific requirements. Spartan's inventory practices included maintaining approximately $3.5 million worth of inventory, with a significant portion in raw materials.
2)
Spartan was facing increased competition particularly form Korean and European firms. Customer expectations kept changing and there was a shift in the industry, customers preferred standard products instead of customized products. Standardization was the key objective; the goal was to reduce variety to 3 to 4 basic lines for each product category. No customized orders were accepted, delivery time was expected to be reduced from 14 weeks to 6 weeks with lower costs as well. The new objective for inventory turns was set at 20 times, a substantial increase from the previous rate. Raw material stockouts were to be eliminated. Product standardization was expected to provide opportunities to cut costs for purchased goods, with a target of reducing costs for raw materials and components by 10 percent over the next 12 months.
