CHAPTER 2

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Inve Doli

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Steel Works, Inc.

BACKGROUND

Gary Lemming sat in his new corner office and tapped his pencil on the desk. Lemming had just been named head of Steel Works, Inc.'s new centralized logistics group. After a decade of experience imple­ menting MRP (Materials Requirements Planning) systems throughout the company's manufacturing facilities, Lemming was confident he could handle the job. Until this morning. "Our inventory levels are ridiculous!" barked Jean Du Blanc, the company's Chief Financial Officer. "Our customer service is the worst in the industry, and getting worse," grumbled Kirk Callow, the CEO. Lemming started to explain, "You see, I've already set up a team to look at all of that. ..." But before he could finish, Callow stood up. "Sales are down 30 percent and expenses are up 25 percent. Our best customers are calling me and telling me they're going to our competitors, and at the rate we're losing market share we won't be in business in a year. I don't want to hear about teams; I want you back in here in a week telling me how you're going to fix this thing." Lemming looked over the list of people he'd asked to meet with him this week. He shook his head-how do I lower expenses and improve per­ formance? How will I ever find the right answer?

Steel Works, Inc., is a manufacturer of custom and specialty use steels with annual sales of $400 million in 1993. Founded in 1980 by three brilliant material scientists from MIT, the company now employs more than 2500 people at 5 different locations. With its first product, DuraBend™, the company earned a reputation as a high technology provider and quickly established a niche position in what is typically regarded as a commodity market. Its two divisions, Specialty Products and Custom Products, are very separate and distinct businesses.
CUSTOM PRODUCTS

Lemming's first