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Spartan Heat Exchange

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Case 2-1: Spartan Heat Exchangers Inc

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Situation:

1. SPARTAN HEAT EXCHANGERS IS FACING INCREASED COMPETITION FROM EUROPEAN & KOREAN COMPANIES. KOREAN COMPANIES OFFERED LOW COST AND EUROPEAN COMPANIES HAD LESS LEAD TIME & COST.

2. Spartan Heat Exchangers have formulated new business strategy to reduce customization of products, reduce lead time from 14 weeks to 6 weeks, and lower production costs.

3. Rick Coyne the materials manager needs to come out with plan to support new business strategy. Main objectives for this department are -

o Reduce customer lead time for finished products from 14 weeks to 6 weeks.

o…show more content…
2. Discrepancy in Inventory – Rick reviewed at the manufacturing and warehouse operations. He found that floor workers did not record the defective components in the system correctly. He organized training classes for all workers and also increased the physical inventory count frequency from once in every 15 days to weekly. This will help to reduce the inventory discrepancy and increase order accuracy.

3. Inventory Turnaround & Vendor Lead Time – Rick found that inventory turnaround was tied to supplier lead times. Suppliers did not have insight in order forecast and inventory at hand for Spartan Heat Exchangers. He decided to share the order forecast & inventory with the suppliers.

4. Vendor consolidation – With new standard product line categories in place, he did not require 350 vendors to supply the raw materials. He reviewed the vendor categories, renegotiated contracts, and cancelled contracts. This exercise reduced the # of vendors to 200 from 350.

Results:

1. REDUCED VENDOR LEAD TIME, NO STOCK-OUTS RESULTED IN LEAD TIME FOR FINISHED GOODS TO REDUCE TO 6 WEEKS FROM 14 WEEKS. 2. FREQUENT PHYSICAL INVENTORY & CYCLE INVENTORY COUNT LEAD TO ACCURATE INVENTORY IN SYSTEMS. 3. RICK SHARED INVENTORY LEVELS AND ORDER FORECAST WITH VENDORS. THIS HELPED SUPPLIERS TO MANUFACTURE AND DELIVER COMPONENTS ON TIME AND REDUCE THE INVENTORY TO BE STORED IN SPARTAN WAREHOUSE. IT BROUGHT HIS INVENTORY COSTS
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