Free Essay

Spartan Heat Exchangers Inc.

In: Business and Management

Submitted By niladri
Words 1117
Pages 5
SPARTAN HEAT EXCHANGERS INC.
On June 10, Rick Coyne, materials manager at Spartan Heat Exchangers Inc. (Spartan), in Springfield, Missouri, received a call from Max Brisco, vice president of manufacturing: “What can materials department do to facilitate Spartan’s new business strategy? I’ll need your plan in next week.”
SPARTAN HEAT EXCHANGERS
Spartan was a leading designer and manufacturer of specialized industrial heat transfer equipment. Its customers operated in a number of industries such as steel, aluminium smelting, hydroelectricity generation, pulp and paper, refining, and petrochemical. The company’s primary products included transformer coolers, motor and generator coolers, air-cooled heat exchangers, and transformer oil coolers. Spartan’s combination of fin-tube and time-proven heat exchanger designs had gained wide recognition bot in North America and internationally.
Sales revenues were $25 million and Spartan operated in a 125,000-square-foot plant. Spartan was owned by Krimmer Industries, a large privately held corporation with more than 10,000 employees worldwide, head-quartered in Denver.
Rick Coyne summarized the business strategy of Spartan during the past ten years: “We were willing to do anything for every customer with respect to their heat transfer requirements. We were willing to do trial and error on the shop floor and provide a customer with his or her own unique heat transfer products.” He added, “Our design and manufacturing people derived greatest satisfaction making new and customized heat transfer products. Designing and research capabilities gave us the edge in developing and manufacturing any kind of heat transfer product required by the customer. Ten years ago, we were one of the very few companies in our industry offering customized services in design and manufacturing and this strategy made business sense, as the customers were willing to pay a premium for customized products.”
MANUFACTURING PROCESS
The customized nature of Spartan’s product line was supported by a job shop manufacturing operation with several departments, each of which produced particular component parts, feeding a final assembly area. Each job moved from work center to work center, accompanied by a bill of material and engineering drawing. The first process involved fitting a liner tube (in which the fluid to be cooled passed) into a base tube. This base tube, made of aluminium, was then pressure bonded to the inner liner tube through a rotary extrusion process that formed spiral fins on the base tube. The depth of the fins and the distance between them determined the amount of airflow across the tubes, and thus the cooling efficiency and power of the unit.
MATERIALS DEPARTMENT
Spartan’s buyers sourced all raw materials and components required by manufacturing and were responsible for planning, procurement, and management of inventories. Rick managed an in-house warehouse used for housing the raw material inventories, maintained adequate buffer inventories, and executed purchase contracts with vendors, ensuring specifications were met while achieving the best possible price. Rick’s department included two buyers, a material control clerk, an expeditor, and tow shippers/receivers.
It was common for Spartan to have multiple vendors for raw material supply, and the materials group used more than 350 vendors for its raw materials, with current lead times ranging from a few days to six weeks. This wide supplier base was necessitated by the customization strategy adopted by the company. Rick noted that approximately 35 percent of Spartan’s purchases were for aluminium products, mainly tubes and sheets. On average the plant had $3.5 million worth of inventory, in the form of both raw and work in process. Raw material inventory constituted approximately 40 percent of the total. Rick estimated that Spartan had inventory turns of four times per year, which he believed was comparable to the competition.
Manufacturing operations regularly complained about material shortages and stockouts and regular inventory audits indicted significant discrepancies with inventory records on the company’s computer system. Furthermore, a significant amount of stock was written off each year due to obsolescence. Rick suspected that production staff regularly removed stock without proper documentation and that workers frequently deviated from established bill of material.
NEW BUSINESS STRATEGY
Competition in the heat exchanger industry had increased dramatically over the past decade, with much of the new competition coming from Korea and Europe. Korean firms with their low cost base competed primarily on price, while European firms focused on standardizing their product lines to a few high-volume products and competed on delivery lead time and price. Spartan’s competitors in Europe used assembly line manufacturing processes, rather than batch or job shop operations.
Senior management viewed the competition from Europe and Korea as an imminent threat. Many of Spartan’s customers had recently developed aggressive expectations regarding pricing and delivery lead times and some key customers had decided to opt for standard product design, sacrificing custom design for lower cost and faster delivery.
The changing nature of its industry forced senior management to re-examine their business strategy. As a result, in January, a multidiscipline task force representing engineering, manufacturing, and sales was formed with the mandate to formulate a new five-year business strategy.
The new corporate strategy was finalized in May and reviewed with the management group on June 1st in an all-day meeting. The central theme of the new strategy was standardization of all product lines, in terms of both design and manufacturing, reducing variety to three or four basic lines for each product category. The sales department would no longer accept orders for specialized designs. The aim of the new strategy was to reduce the delivery lead time from 14 weeks to 6 weeks and to lower production cost dramatically.
NEW CHALLENGES FOR MATERIAL DEPARTMENT
Max Brisco indicated that he expected the materials department to play a major role in support of the new corporate strategy and needed to know by next week the specifics of Rick’s plan. The task force set a number of ambitious targets. First, customer lead times for finished products were to be reduced to six weeks from the current average of 14 weeks. Second, the new objective for inventory turns was 20 times. Meanwhile, Raw material stockouts were to be eliminated. Third, Max believed that product standardizations also would provide opportunities to reduce costs for purchased goods. He expected that costs for raw materials and components could be cut by 10 percent over the next 12 months.
Rick fully supported the new direction that the company was taking and saw this as an opportunity to make major changes. He knew that Max would want the specifics of his plan during the meeting in a week’s time.If you were Rick what plans would you have for presenting during the meeting?

Similar Documents

Premium Essay

Spartan Heat Exchangers Inc.

...Group Case Study Spartan Heat Exchangers Inc.   Current State Spartan Heat Exchangers Inc. has been a leading designer and manufacturer of specialized industrial heat transfer equipment for more than 10 years. The company’s primary products are transformer coolers, hydro generator coolers, air-cooled heat exchangers and transformer oil coolers. Their USP are Fin tube type heat exchangers and long lasting products. “… A heat exchanger is a device that is used to transfer thermal energy (enthalpy) between two or more fluids, between a solid surface and a fluid, or between solid particulates and a fluid, at different temperatures and in thermal contact. …” The company is into highly customized heat equipments. Presently, due to entry of new competition from European and Korean companies they have changed their corporate policy, which emphasize on reducing the variety and standardizing the product. The new business policy also aims at reducing the current lead time from 14 weeks to 6 weeks. Problem Statement The Materials Department headed by Rick Coyne has to take many initiatives internally to incorporate the various implications of the new strategy, and submit his report to his boss Max Brisco with the changes suggested by him within a week. The major challenges that Rick faces include: • Change from responsive to anticipatory model of production. • Increase inventory turns from present 4 times to 20 times. • Eliminate material shortages and stock outs.......

Words: 2190 - Pages: 9

Free Essay

Spartan Heat Exchangers Inc

...ESCUELA DE POSTGRADO DE LA UNIVERSIDAD PERUANA DE CIENCIAS CASO: Spartan Heat Exchangers Inc. PROGRAMA: MAESTRIA EN DIRECCION DE OPERACIONES Y LOGISTICA CURSO: GESTION DE COMPRAS Y ADQUISICIONES PROFESOR: MIGUEL SHINNO PARTICIPANTE: OSWALDO DANTE RAMIREZ ALVARADO 2011 LIMA-PERU Spartan Heat Exchangers Inc. DESARROLLO DEL CASO La nueva estrategia de Spartan´s era la siguiente “Reducir la variedad de tres o cuatro líneas básicas para cada categoría de producto. El departamento de ventas  ya no aceptaría pedidos de diseños especializados. El objetivo de la nueva estrategia se he reducir el tiempo de entrega de 14 semanas a 6 semanas y menores costos de producción considerablemente” Spartan´s está actualmente con lo siguiente en inventario: Inventario Total | $53,500,000 | Inv. Materia prima | $21,400,000 | Inv. PP y PT | $32,100,000 | Esto se genera porque la cantidad de compradores que tiene, precisamente para mantener esta personalización del producto, que era parte de la estrategia anterior, generaba que esta gestión de compras estaba hecha de acuerdo al pedido (tal comprador para atender tal pedido), los materiales restantes se almacenaban y no volvían a ser tocados para otros pedidos, pues no hay una gestión de control de materiales en stock , el proceso de fabricación muestra una idea de producción que puede ser modularizada (procesos generales al inicio y procesos personalizados al final), las compras deben ser agrupados por tipo de......

Words: 1106 - Pages: 5

Free Essay

Spartan Heat Exchange Inc

...partan Heat Exchangers Inc. Group Case Study Spartan Heat Exchangers Inc.   Current State Spartan Heat Exchangers Inc. has been a leading designer and manufacturer of specialized industrial heat transfer equipment for more than 10 years. The company’s primary products are transformer coolers, hydro generator coolers, air-cooled heat exchangers and transformer oil coolers. Their USP are Fin tube type heat exchangers and long lasting products. “… A heat exchanger is a device that is used to transfer thermal energy (enthalpy) between two or more fluids, between a solid surface and a fluid, or between solid particulates and a fluid, at different temperatures and in thermal contact. …” The company is into highly customized heat equipments. Presently, due to entry of new competition from European and Korean companies they have changed their corporate policy, which emphasize on reducing the variety and standardizing the product. The new business policy also aims at reducing the current lead time from 14 weeks to 6 weeks. Problem Statement The Materials Department headed by Rick Coyne has to take many initiatives internally to incorporate the various implications of the new strategy, and submit his report to his boss Max Brisco with the changes suggested by him within a week. The major challenges that Rick faces include: • Change from responsive to anticipatory model of production. • Increase inventory turns from present 4 times to 20 times. • Eliminate material......

Words: 312 - Pages: 2

Premium Essay

Heat Transtrator

...PROC5000/Anthony Vatterott/SPARTAN HEAT EXCHANGERS, INC/Dalton 1 SPARTAN HEAT EXCHANGERS, INC. Rick Coyne is the Materials Manager at Spartan, Inc. Until recently, the company has benefitted from excellence in customization and specialized research & development of design with full-service custom unit fabrication. This has historically allowed Spartan to maintain a positive rapport with clients, as their approach allowed for meeting the client’s specific needs. However, the industry trend has changed and competition from international sources has pressured Spartan’s Executive Management to revise the fiveyear development plan to compete with Korean and European firms. The standard for the industry has shifted from customized solutions to a low-price, highly-standardized market. This is not in line with Spartan’s current initiatives and Max Brisco, vice president of manufacturing, has solicited Rick to provide a detailed plan on how to achieve savings and efficiency in a transition to a more competitive manufacturing structure. The most critical step in this reformation is to redesign workflow and job order processing from a job order/job ticket method to a more streamlined and standardized process. This will require re-engineering the workflow of the manufacturing workforce, and offers an opportunity for the research & design component to redirect their efforts away from customized products and toward a working internal manufacturing process. The use of job shop......

Words: 529 - Pages: 3

Premium Essay

Favd

...PROC5000/Anthony Vatterott/SPARTAN HEAT EXCHANGERS, INC/Dalton 1 SPARTAN HEAT EXCHANGERS, INC. Rick Coyne is the Materials Manager at Spartan, Inc. Until recently, the company has benefitted from excellence in customization and specialized research & development of design with full-service custom unit fabrication. This has historically allowed Spartan to maintain a positive rapport with clients, as their approach allowed for meeting the client’s specific needs. However, the industry trend has changed and competition from international sources has pressured Spartan’s Executive Management to revise the fiveyear development plan to compete with Korean and European firms. The standard for the industry has shifted from customized solutions to a low-price, highly-standardized market. This is not in line with Spartan’s current initiatives and Max Brisco, vice president of manufacturing, has solicited Rick to provide a detailed plan on how to achieve savings and efficiency in a transition to a more competitive manufacturing structure. The most critical step in this reformation is to redesign workflow and job order processing from a job order/job ticket method to a more streamlined and standardized process. This will require re-engineering the workflow of the manufacturing workforce, and offers an opportunity for the research & design component to redirect their efforts away from customized products and toward a working internal manufacturing process. The......

Words: 532 - Pages: 3

Premium Essay

Spartan Heat Exchange

...Case 2-1: Spartan Heat Exchangers Inc _________________________________________________________________________________________ Situation: 1. SPARTAN HEAT EXCHANGERS IS FACING INCREASED COMPETITION FROM EUROPEAN & KOREAN COMPANIES. KOREAN COMPANIES OFFERED LOW COST AND EUROPEAN COMPANIES HAD LESS LEAD TIME & COST. 2. Spartan Heat Exchangers have formulated new business strategy to reduce customization of products, reduce lead time from 14 weeks to 6 weeks, and lower production costs. 3. Rick Coyne the materials manager needs to come out with plan to support new business strategy. Main objectives for this department are - o Reduce customer lead time for finished products from 14 weeks to 6 weeks. o Inventory turnover needs to be 20 times. o Material stock-out needs to be eliminated. o Reduce raw material cost by 10% over 12 months. Basic Issues: 1. MATERIAL SHORTAGES & STOCK-OUTS IN MANUFACTURING OPERATIONS 2. Discrepancy in physical inventory on floor & in computer systems. 3. Huge inventory stored in plants resulting in less inventory turns and increased costs. 4. Large number (350) of raw material vendors 5. Lead time of raw materials vary from few days to 6 weeks Tasks: 1. IDENTIFY ROOT CAUSE FOR MATERIAL SHORTAGES AND STOCK-OUTS. FIND OUT IF THERE ARE ANY PARTICULAR COMPONENTS THAT ARE USUALLY SHORT. 2. Identify incorrect processes which results in discrepancy......

Words: 606 - Pages: 3

Free Essay

Case

...Case 20-1 Spartan Heat Exchangers Inc. Aaron Nelson Summary Spartan, who was a leading designer and manufacturer of specialized industrial heat transfer equipment earns sales revenues of $25M. The company has prided themselves on creating a Make-to-Order system that allows customers the option of customizing their orders to their needs. Customization is what gives Spartan the competitive edge over their competitors. Meanwhile, however, countries like Korea and Europe are currently changing industry standards. Korean firms have a low cost base and compete primarily on low cost. European firms have begun to focus on standardizing their product lines to a few high-volume products and compete on delivery lead times and price. Rick Coyne, Materials manager for Spartan, is faced with a proposal of “renewing” Spartans business strategy. Spartan would like to reduce customer lead times for finished products from 14 weeks to six weeks. Second, Spartan would like to move from an inventory turnover rate of 4/year to 20/year. Third, Spartan would like to include some form of standardization in hopes of lowering costs for purchased goods. Quantitative Analysis Inventory Turnover (Purchasing $14M of inventory/year or 56% of revenues) - (Spartan) 4 turns/year: Holding costs of $875,000/year. (3.5M * 25% inventory carry costs) - (Competitors) 20 turns/year: Holding costs of $700,000/year (2.8M * 25% inventory carry costs) Raw Materials - (Spartan) $3.5M * 40% = $1.4M Qualitative......

Words: 590 - Pages: 3

Premium Essay

Case

...Case 2–2 Sabor Inc. In mid-April, Ray Soles, vice president of supply chain management at Sabor Inc., had become increasingly concerned about the potential shortage of supply of marconil, a new high-tech raw material for air filtration. Sabor Inc.’s three suppliers, during the last two weeks, had ad- vised Ray Soles to sign long-term contracts and he was trying to assess the advisability of such commitments. SABOR INC. Sabor Inc. of Cleveland, Ohio, produced high-quality consumer and industrial air-conditioning and heating units. An extensive network of independent and company-owned installation and sales centers serviced customers throughout the North American market. Total company sales last year totaled $800 million. AIR FILTRATION AND MARCONIL Sabor Inc. for decades had sold air humidification and air filtration units along with its prime units in air heating and cooling. Until three years ago, air filtration had accounted for about 7 percent of total corporate sales and had been sold primarily as add-ons to a new air cooling/ heating system. However, with the advent of marconil, air filtration had started to increase significantly as a percentage of total sales. Marconil, a new high-tech product developed as part of the U.S. space effort, had a range of unique properties of high interest to a variety of industries. In the case of air filtration, when processed by a Sabor Inc. developed and patented process, marconil could be transformed into a thin, very light...

Words: 5493 - Pages: 22

Premium Essay

Book

...The fourteenth edition of Purchasing and Supply Management focuses on decision making throughout the supply chain. Based on the conviction that supply managers, in concert with suppliers and distributors, have to contribute to organizational goals and strategies, this edition continues to focus on how to make that mission a reality. Fourteenth Edition Highlights of the Fourteenth Edition: More than 40 real-life supply chain cases afford the opportunity to apply of the acquisition process. Criteria for supply decisions have been organized into three categories: (1) strategic, (2) operational, and (3) additional. In this third category, new factors such as balance sheet and income statement considerations, dimensions of risk, and environmental and social considerations are considered. Visit the text’s Online Learning Center at www.mhhe.com/Johnson14e Michiel R. Leenders, D.B.A., PMAC Fellow Professor of Purchasing Management Emeritus Richard Ivey School of Business The University of Western Ontario Anna E. Flynn, Ph.D., C.P.M. Formerly Clinical Associate Professor Supply Chain Management Thunderbird School of Global Management Formerly Associate Professor Institute for Supply Management TM Johnson Leenders Flynn Purchasing and Supply Management Johnson Leenders Flynn MD DALIM #1093963 06/05/10 BLUE GREEN P. Fraser Johnson, Ph.D. Leenders Purchasing Management Association of Canada Chair Associate Professor, Operations......

Words: 188430 - Pages: 754

Premium Essay

Purchasing and Supply Management

...The fourteenth edition of Purchasing and Supply Management focuses on decision making throughout the supply chain. Based on the conviction that supply managers, in concert with suppliers and distributors, have to contribute to organizational goals and strategies, this edition continues to focus on how to make that mission a reality. Fourteenth Edition Highlights of the Fourteenth Edition: More than 40 real-life supply chain cases afford the opportunity to apply of the acquisition process. Criteria for supply decisions have been organized into three categories: (1) strategic, (2) operational, and (3) additional. In this third category, new factors such as balance sheet and income statement considerations, dimensions of risk, and environmental and social considerations are considered. Visit the text’s Online Learning Center at www.mhhe.com/Johnson14e Michiel R. Leenders, D.B.A., PMAC Fellow Professor of Purchasing Management Emeritus Richard Ivey School of Business The University of Western Ontario Anna E. Flynn, Ph.D., C.P.M. Formerly Clinical Associate Professor Supply Chain Management Thunderbird School of Global Management Formerly Associate Professor Institute for Supply Management TM Johnson Leenders Flynn Purchasing and Supply Management Johnson Leenders Flynn MD DALIM #1093963 06/05/10 BLUE GREEN P. Fraser Johnson, Ph.D. Leenders Purchasing Management Association of Canada Chair Associate Professor, Operations......

Words: 188430 - Pages: 754

Free Essay

Nit-Silchar B.Tech Syllabus

...NATIONAL INSTITUTE OF TECHNOLOGY SILCHAR Bachelor of Technology Programmes amï´>r¶ JH$s g§ñWmZ, m¡Úmo{ à VO o pñ Vw dZ m dY r V ‘ ñ Syllabi and Regulations for Undergraduate PROGRAMME OF STUDY (wef 2012 entry batch) Ma {gb Course Structure for B.Tech (4years, 8 Semester Course) Civil Engineering ( to be applicable from 2012 entry batch onwards) Course No CH-1101 /PH-1101 EE-1101 MA-1101 CE-1101 HS-1101 CH-1111 /PH-1111 ME-1111 Course Name Semester-1 Chemistry/Physics Basic Electrical Engineering Mathematics-I Engineering Graphics Communication Skills Chemistry/Physics Laboratory Workshop Physical Training-I NCC/NSO/NSS L 3 3 3 1 3 0 0 0 0 13 T 1 0 1 0 0 0 0 0 0 2 1 1 1 1 0 0 0 0 4 1 1 0 0 0 0 0 0 2 0 0 0 0 P 0 0 0 3 0 2 3 2 2 8 0 0 0 0 0 2 2 2 2 0 0 0 0 0 2 2 2 6 0 0 8 2 C 8 6 8 5 6 2 3 0 0 38 8 8 8 8 6 2 0 0 40 8 8 6 6 6 2 2 2 40 6 6 8 2 Course No EC-1101 CS-1101 MA-1102 ME-1101 PH-1101/ CH-1101 CS-1111 EE-1111 PH-1111/ CH-1111 Course Name Semester-2 Basic Electronics Introduction to Computing Mathematics-II Engineering Mechanics Physics/Chemistry Computing Laboratory Electrical Science Laboratory Physics/Chemistry Laboratory Physical Training –II NCC/NSO/NSS Semester-4 Structural Analysis-I Hydraulics Environmental Engg-I Structural Design-I Managerial Economics Engg. Geology Laboratory Hydraulics Laboratory Physical Training-IV NCC/NSO/NSS Semester-6 Structural Design-II Structural Analysis-III Foundation Engineering Transportation Engineering-II Hydrology......

Words: 126345 - Pages: 506

Free Essay

Test2

...62118 0/nm 1/n1 2/nm 3/nm 4/nm 5/nm 6/nm 7/nm 8/nm 9/nm 1990s 0th/pt 1st/p 1th/tc 2nd/p 2th/tc 3rd/p 3th/tc 4th/pt 5th/pt 6th/pt 7th/pt 8th/pt 9th/pt 0s/pt a A AA AAA Aachen/M aardvark/SM Aaren/M Aarhus/M Aarika/M Aaron/M AB aback abacus/SM abaft Abagael/M Abagail/M abalone/SM abandoner/M abandon/LGDRS abandonment/SM abase/LGDSR abasement/S abaser/M abashed/UY abashment/MS abash/SDLG abate/DSRLG abated/U abatement/MS abater/M abattoir/SM Abba/M Abbe/M abbé/S abbess/SM Abbey/M abbey/MS Abbie/M Abbi/M Abbot/M abbot/MS Abbott/M abbr abbrev abbreviated/UA abbreviates/A abbreviate/XDSNG abbreviating/A abbreviation/M Abbye/M Abby/M ABC/M Abdel/M abdicate/NGDSX abdication/M abdomen/SM abdominal/YS abduct/DGS abduction/SM abductor/SM Abdul/M ab/DY abeam Abelard/M Abel/M Abelson/M Abe/M Aberdeen/M Abernathy/M aberrant/YS aberrational aberration/SM abet/S abetted abetting abettor/SM Abeu/M abeyance/MS abeyant Abey/M abhorred abhorrence/MS abhorrent/Y abhorrer/M abhorring abhor/S abidance/MS abide/JGSR abider/M abiding/Y Abidjan/M Abie/M Abigael/M Abigail/M Abigale/M Abilene/M ability/IMES abjection/MS abjectness/SM abject/SGPDY abjuration/SM abjuratory abjurer/M abjure/ZGSRD ablate/VGNSDX ablation/M ablative/SY ablaze abler/E ables/E ablest able/U abloom ablution/MS Ab/M ABM/S abnegate/NGSDX abnegation/M Abner/M abnormality/SM abnormal/SY ab......

Words: 113589 - Pages: 455