Spartan Heat Exchange Case Study

Case Elements

• For the past 10 years, Spartan made unique heat transfer products per their customers’ request providing a value-added service and gaining a competitive edge in developing and manufacturing.

• Spartan uses a job shop manufacturing operation.

• Buyers sourced all the components and raw materials for manufacturing and assumed the responsibility of planning, procuring, and managing inventories.

• Rick Coyne, the materials manager at Spartan, managed an in-house warehouse to keep raw materials and maintain buffer inventories.

• Raw materials were sourced from over 350 vendors.

• Some lead times for raw materials extended as long as 6 weeks.

• 35% of the plant’s purchases were for aluminum products.

• Raw material inventory account for about 40% of the total $3.5 million the plant had in inventory.

• Rick estimated the plant overturned inventory 4 times a year.

• Senior management wants to implement a new five business strategy.

SCM Issues

• Manufacturing regularly complained about experiencing material shortages and stockouts.

• The computer system was not keeping accurate records of the inventory on-hand.

• Each year, substantial amounts of inventory were obsolete, and in return, written off.

• Rick assumed the production staff was picking stock without documenting it correctly and that bills of material were not being followed as stated.

• Competition in the industry is increasing especially from Korea—based on price, and Europe—based on standardized product lines offering a few high-volume products as well as delivery lead time and price.

• European competitors were also using assembly-line manufacturing processes.

• Some of Spartan’s influential customers choose standardization over customization in order to benefit from lower cost and faster delivery.

SCM Goals

• Spartan wants to reduce delivery lead time from 14 to 6 weeks to lower production costs.

• Increase annual inventory turns from 4 to 20 and eliminate...