Lehigh Steel

3049 Words13 Pages

Managerial Accounting and Control-II

Case: Lehigh Steel

Date of submission: 16 December 2011

Sec: E Group: 4

Group Members:

Anand Muralidharan
Divay Manhas
Nallaballe Mayur
Dharmendra S
Sumit Kumar Saha
Susmita Lakra
Sangana Vinod Babu

Executive Summary:

Lehigh Steel is a company specialised in the production of specialty steels for high strength, high use applications. In 1988 the company experienced record profits, but then in 1991, it reported record losses due to the decreasing demand as a result of recession. After the crisis, the demand rose again, but Lehigh Steel could not transform its revenue into profits. Therefore the management at Lehigh decided to rationalize the product mix to address the
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Cost was a significant competitive weapon in determining share and profits. Efficient short production runs were required in order to avoid inventory build up of customized products. Industry profitability fluctuated widely ranging from -16.7% to 5.0%.

1.3 Market and Products:

Customers were classified into 33 market segments ranging from original equipment manufacturers to forge shops, distributors to metal workers.

Lehigh had 7 product lines – Alloy, Bearing, Conversion, Corrosion, Die Steel, High Speed and High Temp – of which three – Alloy, Die Steel and High Speed comprised 70% of sales.

• Die steel was steel strengthened for use in machine dies and molds.

• High speed products served endurance applications, such as mental cutting and punching, and were narrower in focus.

• Alloys were used in aerospace frames, landing gears, missile cases and fasteners.

• Lehigh also carried niche products lines - Bearing, Corrosion and High temp – whose volume fluctuated with market conditions.

Conversion process was also carried out which involved the processing the non Lehigh owned materials on the CRM. The company product hierarchy was in the following order: product lines, grades, shapes, SKUs.

1.4 Production Operations:

Scrap steel was the primary raw material which was recycled.

Production process involved 6 steps:

1. Melting: The scrap compound was melted in the Electric Arc Furnace, where

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