Case Study : The Midwestern Steel Division Of Armco Inc.

1735 Words Jan 21st, 2016 7 Pages
Andrea Lau
10063324
COMM414 Section 1
January 21, 2016.

Case 1: Armco, Inc.: Midwestern Steel Division
Context
Armco is a producer of stainless steel, electrical and carbon steel and other steel products. Kansas City Works is a unit within the Midwestern Steel Division of Armco Inc. Kansas City Works produces two products. The first product is grinding media that is used for crushing ore in mining operations and the second product is carbon wire rods that are used in shopping carts, bed springs and other products. Armco is currently a leading supplier of grinding media in the market and produces carbon rods as a commodity product to help cover costs. Kansas City Works is not a low cost manufacturer in the steel industry. One of the contributing factors to costs is the union labour costs at Kansas City Works which are higher than those of its non-union competitors. In 1990, Armco Inc, generated approximately $1.7 billion in net revenue with Midwestern Steel Division generating $550 million in sales and Kansas City Works accounting for $250 million. Over the past 3 years, there has been signs of decline in the sales and operating profits of Armco Inc. In addition, there has been a downsize of employees by approximately 5000. In its previous year of operation, the organization struggled with its profitability as it reported a net loss.
There are three critical success factors in the manufacturing process: the melt shop, rolling and finishing, and maintenance. The melt shop…

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