Case 2-1: Spartan Heat Exchangers Inc.

Student Assignment

If you were in the position of Rick Coyne, what would be your response to Max Brisco's request? What recommendations would you make and why?

Case:-

ANALYSIS

Senior management has decided on a wholesale change to the Spartan's corporate strategy. They intend to move the company from one that competes on customized products (flexibility of design and service) to a company that competes on low cost and fast delivery lead times (standardized products). It is not the selection of the new strategy that is at issue in the case, it is the execution of the strategy in operations and supply. Students, therefore, need to recognize the implications of the change in corporate strategy for company operations. Some examples are provided in Table TN-1.

TABLE TN-1

IMPLICATIONS OF CHANGE IN STRATEGY

FROM MAKE-TO-ORDER TO MAKE-TO-STOCK

Make-to-Order

Make-to-Stock

Basis of competition

Custom design

Availability/delivery lead time, cost

Margins

High

Low

Products

Custom

Standard

Production Scheduling

Flexible, custom orders

Level, fixed schedule

Finished goods inventory

Limited

Some inventory held in stock in anticipation of customer orders and used to smooth production

Demand

Highly variable

More stable across a limited range of products; production smoothed through the use of inventory

Labour

Variable in workforce size; flexible skills and cross trained

Stable in size and composition; less skilled

Supply

Many suppliers across a wide range of products and services

Narrower supply base and fewer types raw material requirements

Systems

Flexible and simple

More rigid, low cost and capable of handling repeat transactions

To the credit of senior management, they appear to recognize that appropriate changes will have to be made to operations and supply. Furthermore, certain deliverables have been built into the business plan and the tough part will be executing the strategy. Rick Coyne, the materials manager, needs a plan that will support a reduction in lead times, low supply costs and higher inventory turns.