Presented By: D . Swathi -1226210105 K. Divya Madhuri-1226210117 V . Kiran 1226210133 C .

Sandeep - 1226310109

Introduction
A manufacturing company, founded in 1980 by 3 brilliant

material scientists from MIT. Company employs 2500 at 5 different locations. It has two divisions :
 Specialty product  Custom Products

Annual sales $ 400 million in 1993. Sales are down by 30% & expenses are up to 25%. Lemming interviewed both the presidents to dig into the

facts.

Custom Products :
y Stephanie Williams , the president was interviewd y y y y

first. Our motto is customer comes first, second, third but never last , he says. They customize their products, for sale exclusively to that customer. They claim that they have best sceintists and engineers. Because of their efficient products , they aren t allowed to sell their products to anybody except original customer.

Custom Products
y It is an art to convince customer to allow them to sell y y y y

their products to others , he explained. He quotes Duraflex R23 example, sold in open markets. He explained the schematic of manufacturing system. 3 manufacturing units & 3 R&D centers that served West, Midwest & East. He explained Lemming why the inventory was so high saying that they don t want to make customer wait.

Specialty Products
y Mr . Barry White is the president of specialty products. y Their sales were hardly hit in recent months. y He says they are only making the business work. y He also points out that the problem is with

manufacturing unit. y He also blames that IS department do not understand business as per their recommendations.

Specialty Products
y The division has 3 manufacturing plants with 6 y y y y y

different product lines. General strategy is to exploit economies of scale. They rely on logistics to distribute the product nationally. Product families are almost manufatured in same plant Production was in rotating sequence. He explained that specialty also attempted to manufacture its products at single unit.

Analysis :
y Debby Klein s analysis: y Customs has lot of products & 90% are sold to only y y y y

one customer. Specialty have 130 customers with 120 products. Approximately 70% of orders are shipped within 48 hours. The rest are either cancelled or placed in backorder file. Lemming was confused than being convinced with Debby s reports.

Analysis :
y Lemming had production plan of specialty s Ohio unit y y y y

faxed to him. The plant manufactured Durabend and Duraflex product families. The plan seemed to be consistent with . But the forecasting expert, Maria was upset that 80% of products are highly volatile. She also pointed out that with standard deviations being that large, the demand forecasting tool may not be helpful.

Consultant s Recommendations :
1. Discontinue products that have low sales. 2. Use statistical forecasting to predict demand. 3 . Reduce number of warehouses, so as to reduce storage cost. 4. Continue exploring economies of scale as before to reduce manufacturing cost.

Problems :
y Stay in business! y Grow business? y Improve customer satisfaction? How? y Minimize inventory cost! y What are components of cost? y How measured? y Provide high level of customer service! y How high? y How measured?

Data in case tells us

specialty products

products c.v > 0.5

products c.v < 0.5

Exibit 1 :80% of products are highly volatile?

May be, but

LABEL DURABEND R10 DURABEND R12 DURABEND R15 DURAFLEX R10 DURAFLEX R12 DURAFLEX R15 DURAFLEX R23 MEAN 15.583 1008.000 2463.583 97.250 18.583 54.833 35.583 STD. DEV. 13.187 255.917 494.209 92.524 11.429 80.054 45.862 C.V. 0.846 0.254 0.201 0.951 0.615 1.460 1.289 % of Sales 0.4% 27.3% 66.7% 2.6% 0.5% 1.5% 1.0%

Then, Exhibit 1?
5 large customers (> $25 mill) 107 small customers (< $1 mill) All others 18 Is this a potential problem?