Industrial Grinders Case

Problem Statement

Industrial Grinders have recently discovered that plastic rings have introduced to the market by their competitor, the French firm, Henri Poulenc. Plastic rings will serve the same purpose as steel rings. However, these steel rings much more cost less to produce and have longer life than steel rings. The problem is Industrial Grinders has a large quantity of special steel that used to make steel rings on hand and cannot be sold. Lawrence Bridgeman must decide what is the appropriate way to do with the huge inventory of steel rings. He must decide whether or not to continue steel rings and when is proper time to start producing plastic rings.

Background Information

Industrial Grinders is a well-established company that manufactures industrial machines and its parts has been in the market around nearly 70 years. The parts the company produces includes steel rings which the company keeps a big inventory of and can be sold separately or used in machines they produce for sale, as well as those produced by competitors as well. The inventory on hand valued at $93,000, made up of special steel worth $26,000 and manufactured steel rings valued at $66,000. Steel ring have a normal life of about two-months. Industrial Grinders faced a challenge with a French competitor, Henri Poulenc, that has recently introduced a new plastic ring to the market. It has a much longer life (four times the wearing properties of the steel rings) and much lower cost than the steel rings. It is, however, expected that the plastic rings would not be produced by any other company than Henri Poulenc. It meant that no more than 10% of Industrial Grinder’s market would be affected. Their response was to strategize to begin producing plastic rings as well which will serve the same purpose as the steel rings they manufacture. Moreover they cost less to manufacture and they last longer. However they are in a dilemma as to whether to use the last inventory of steel to...