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Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: Concepts, strategies and case studies (3rd ed.). New York, NY: Richard D. Irwin, Inc. ISBN: 9780073341521.
This is the H.C. STARCK CASE STUDY:
H.C. Starck, Inc. Case Study
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BUSI 740 Strategic Supply Chain Management
H. C. Starck, Inc.
As expressed in Simchi-Levi, et al, p. 109-112 H.C. Starck background is rather complex. As an MIT’s Pioneers for Assembling System, Tom Carroll was sent to H.C. Starck on a six-month entry level position. H.C. Starck is the main primary provider of innovation metals, including tungsten, molybdenum, tantalum, niobium, and rhenium. Subsequent to meeting with Lee Sallade, Director of Operations, Tom was approached to decide how to diminish lead times (characterized as the time from when the client puts in the request until the item is transported) for all tantalum metallurgical items without expanding stock. The feeling: was that lead times were running roughly eight to fourteen weeks. Sallade’s objective was to decrease that lead time to only three weeks.
Accordingly, H.C. Starck has an extensive stock, purchasing more than should be expected, guaranteeing a continuous supply. The organization additionally reuses scrap from the sintering and wireframing activities. Tantalum is a dim, substantial, and exceptionally hard metal. It is utilized to make electrolytic capacitors, vacuum heater parts, careful machines, and camera focal points. Tantalum is costly and the supply is conflicting.
Metallurgical Items (MP) division includes two utilitarian zones – rolling and manufacture. The moving plant creates level shapes and manufacture shop takes the level stock and delivers increasingly complex completed items. Carroll additionally discovered that the normal bit of tantalum experiencing the moving plant for breakdown takes fifty-five minutes to process and two hours to finish get done with rolling. The changeover among breakdown and completion takes eight hours.
Toward the start of the year, the organization introduced another Enterprise Resource Planning (ERP) framework – SAP’s R/3. Now, in any case, the framework was just being utilized to record bookkeeping exchanges (arrange creation and material developments); it was not being utilized for generation arranging and planning. Amid his gathering with Mike Coscia, Chief of Marketing and Sales Carroll discovered that in spite of the fact that business volumes are multiple times what they were fifteen years prior, the procedure has not changed. He additionally discovered that Sales, Production Control, and Operations had as of late instituted day by day “drumbeat” meeting to survey the status of all shipments due inside the following week. Shipments distinguished to be in danger of being late were assisted through the plant. Thus, most occupations were avoided until they made it to the “drumbeat” list.
Why are the lead times so long?
The SAP R/3 framework was not being utilized for scheduling or planning, it was being utilized to record all the bookkeeping exchanges, including request creation and every single material development. Exchanges were recorded in real-time, as a rule within a few hours of when the physically happened, and often within minutes.
All the production order stacked up at Jim’s desk until it is time to release it to the production floor. If it is not due to 8 weeks, Jim might keep it for 4 weeks before releasing it, depending on the loading in the shop at the time. He did not have faith in the SAP R/3 framework. The SAP system was not used for scheduling utility.
The lead times are so long because the data that Starck has been using to do their analysis was not based on concrete facts but on industrial mythology. The leadership in that department was failing to adjust to newer and modern ways of effectively analyzing the data. They should use rigorous data collection which can be generated from computer analysis. Through analyzing this case it is clear that the personnel in this department just did not want to take the time out to learn the more improved method of data analysis and tool.
How might Starck reduce or affect the lead times?
Simchi-Levi (2008) Starck can reduce the lead times by reducing the size of the Tantalum which is vastly too big when being placed in the mill; the size should be broken down significantly and that should reduce the processing time. The average lead time from a customer perspective is under 7 weeks instead of the initial 12 weeks from manufacturing lead time, from ‘good issue’ to ‘good receipts.’ On an average, the final items are manufactured in just over two weeks, with 75 percent completed in three weeks. A discrepancy in space refers to the fact that the location of production activities and the location of consumption are seldom the same (Young, 2017). Below are additional activities Starck could do the reduce the lead times:
- Make full use of the new system SAP R/3 have engineers to solve equipment problems
- Remove the manual paper-based process used to transmit the orders from Sales to Operation
- Revised the Order of flow for processing and manufacturing orders
- Reduced the first step: creating sales order to one business day
- Process the second step: production control converts the sale order to print job ticket
- Minimize the problems between step one through three
- Have standard stocks between different sizes
- Items that are in demand should be manufactured and be available in stock
What are the costs of reducing the lead times? What are the benefits of reducing the lead times?
The primary advantage could be an expanded consumer loyalty because of quicker delivery time. This could be practiced by avoiding the decrease handling and holding up time. Likewise, client maintenance is expanded because of fewer requests that are dropped because of the long wait time or clients who may change to substitutes materials or providers because of the long lead-time. Moreover, it gives expedited delivery and subsequently preferences in littler fragments like heater parts and sputtering targets.
Second, by reducing the request to-conveyance time the organization additionally decreases the stock and the stock expenses. H.C. Starck is able to predict to all the more likely anticipate their interest for items if the waiting time is diminished, and this will decrease the required measure of required stock and the expense of the stock.
Finally, a limited order to delivery time would give an upper hand in the market and could help increment sales volume against developing competitors. Rick Howard referenced China as a potential competitor. Right now, China provides low quality yet are a lot less expensive, but could a leading competitor in the future.
Liberty University Custom: Young (2017). Supply chain management (Custom ed.). New York, NY: McGraw-Hill Create. ISBN: 9781309072783.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply
chain: Concepts, strategies and case studies (3rd ed.). New York, NY: Richard D. Irwin, Inc. ISBN: 9780073341521.
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H.C. Starck, INC: A lead time problem
Why are the lead times so long?
The potential issue with lead times varies depending on who Tom asked throughout the HC Starck organization. Lee Sallade, the Director of Operations, expressed that the sales group, which is outside of his organizational chain of command, was pressuring him to reduce lead times. Lead times, as defined by HCST as the time from when customers place order to when that order ships, were too long in the opinion of most, with the current estimated lead time being 8-14 weeks. It appears the sales group, along with others in the organization, attributed these longer than desired lead times to the lengthy manufacturing time for end products. Lee, who should be knowledgeable about all things operations, cautioned Tom that the focus should be on lead time AND cycle time. This is important, as we will discuss later.
HCST has also recently implemented a new ERP system; however, that system is not being utilized or accepted by everyone within the organization. The financial pieces are being uploaded into the SAP system, but Jim McMahon, the Supervisor of Production Control, refuses to use the SAP scheduling function and relies on paper and gut feeling to convert sales orders to production orders and production orders into finished product. He literally stacks the orders on his desk until the order is four weeks from due date, then he releases the order to be produced. Not only does this create a bottleneck and inefficiency within the production chain, it can create unreliable and inaccurate data on lead times and production capacities. It also leaves huge potential for human error as the work flow is decided by one person and “stacks of paper”. As we found out, hard data on lead times were non-existent and the general opinion on lead times was completely inconsistent with reality.
Lead times were also skewed by the ‘drumbeat’ meetings that several departments were involved. What started as a way to help compile and manage shipments ended up being a lazy way to track last minute orders, allowing everyone to just wait until last minute shipping needs were made known at the meeting then filling those specific orders. This constrained the entire operation and confined the teams into a specific way of thinking, rather than thinking of solution-oriented mechanisms and processes to reduce lead and cycle times. The Ta could have been processed in more efficient ways, with end products driving the flow of production rather than the operations being pulled by the need to fill emergency orders. It ‘appeared’ that production length and long manufacturing time was the reason for long lead times; however, it became clear from the SAP data the real issue was that lead times were protracted by internal operations and inefficient processing. Jim McMahon holding orders, drumbeat meetings, and a lack of cohesion with the SAP system all contributed to the longer than needed led times.
Tom also found that the production time was roughly 2-3 weeks, so why was the average lead time 7 weeks (which he found from the data-a lot lower than the general accepted 8-14 weeks)? It appears that the sales team would enter the sale into SAP fairly quickly, but that it would take nearly two weeks to create a production order. The majority of the lead time was efficient, with manufacturing taking 2-3 weeks and shipping getting the order out fairly quickly. It was the time between when the sales group entered the order to when the plant actually started manufacturing that was the problem. It appears that the “black hole of information” as well as the inconsistencies of reporting and systems between departments has helped create a lead time problem that is really an internal problem unassociated with the general belief that manufacturing times were increasing lead times.
How might Starck reduce or affect the lead times?
The first and obvious answer to help address the lead time issue with Starck is to unify their reporting system. Whether they continue with SAP and work out the issues is irrelevant to the fact that such disconnection between departments is lead to internal issues. Unifying the system used, especially with Engineered-to-Order products, can drastically reduce lead times and cut inefficiencies (Elfving 2003). Allowing the sales group to enter sales in real time into the SAP system while the Supervisor of Production Control uses a paper, unilateral system to control production creates mesh point problems within lead times. Unifying the entire lead time process into one system will also yield reliable data that Starck can then use to analyze, understand, and implement improvements within the lead and cycle processes.
Starck could also focus on the parts and products that are in high demand, eliminating such a wide and diverse assortment of products that create unpredictable and problematic demand forecasting and inventory issues. By focusing on products that are high volume and high demand, Starck can streamline demand forecasting and lead/cycle times while cutting back on inventory and waste,
What are the costs from reducing the lead times? What are the benefits from reducing the lead times?
The benefits from reducing lead times are fairly obviously. Improved customer satisfaction on delivery times could lead to fewer cancelled orders and better customer retention. Rick Howard, the HCST Controller, expressed his concern about Chinese competitors capturing some of the market if they were able to deliver their products with slightly higher quality. Mike Coscia, the Manager of Marketing and Sales, also mentioned the price of Tantalum and the available substitutes. He worried that if customers can get HCST’s product made of Ta in time, they may switch to another alloy. This would negate HCST’s competitive edge in the Ta scarp market and push away a ‘captured market’. These could all be addressed with higher customer retention through improved delivery and lead times. A shift towards TQM could have direct impacts on customer satisfaction and, consequently, improved and sustained customer retention (Choi 1998).
The costs of reducing lead times appear to be learned from past and shared experiences within the company. The President shared a story in which reduced lead and cycle times meant costs incurred by the manufacturer, but savings realized by the distributors. All inventory savings were absorbed by the regional distributors and the company paying for and implementing all of the effective changes did not benefit from those savings. Larry McHugh, President of Starck, warns and worries against this cost being borne by HCST, but is optimistic that if HCST can find ways to cut inventories, they can benefit. Another cost that could come from implementing lower inventory costs/supply, could be an opportunity cost where competitors buy the available Tantalum (a thinly traded market). This could leave HCST ill-prepared to produce through unpredictable demand periods and demand fluctuation.