I.

EXECUTIVE SUMMARY

As an additional incentive for our customers to patronize our

steel products, we have chosen to provide them special
services, one of which is the cold-drawn steel. However,
certain equipments are necessary to be able to produce such
a product. At present, we have in our hands a 57-year old
draw bench which has a bad reputation of consuming too
much energy, of producing a lot of rejects and of needing too
many costly repairs.
While it may seem unnecessary for us to invest in a
department that we do not specialize on, we must also
consider that offering the Cold-drawn steel (CDS) is our
competitive advantage; it is our differentiation strategy from
our competitors. Giving up this service may displease our
customers and sever ties that took us years to build. You, as
president, have suggested buying from an outside and
reselling the CDS. However, based on the comparative
income analysis between these two alternatives, producing
the CDS ourselves will yield $5,000 more income per year. It
is then recommended that we continue our operations in the
CDS department.
Thus, we need to address the production inefficiency problem
of this department. As mentioned earlier, the roots of the
problem are the aging equipment. At this point, we have to
choose between repairing the equipment or replacing it with a
new one, once and for all. An evaluation of the Net Present
Value and Internal Rate of Return approach show that
investing money on the acquisition of a new draw bench will
yield greater returns than our cost of capital (10%). Moreover,
the payback period approach shows that we would be able to
gain back our initial investment at the end of 6 years and 2
months - a far cry from the equipment's total useable life of
more than 50 years.
We also need to take a look at the qualitative factors that have
an impact in our decision. First, we have to assess if the
purchase of a new draw bench will contribute to our firm's
 future plans. Our long-term goal is to build strong, profitable
customer relationships, and we can only do this by providing
customer solutions, which are cold-drawn steel. It is therefore
recommended that we purchase a new draw bench, as it is in
line with our strategy to develop the CDS department. After
all, we do not want to be branded as laggards in the industry,
we must keep up with practical improvements in technology,
for in the end, both our customers and our company benefit
from it.

In light with the modern industries, steel has been discovered to be the central supporting part of
most manufacturing industries or production industries. Steel is a relatively cheap and versatile
material used in the production of about every kind of good or machinery, and because of this
steel is vital in the modern style of living and for the economic well-being. Additionally, because
of the essential functions played by steel in general economic and infrastructural development,
the steel industry on the other hand has often been considered as an indicative for prowess of an
economy.
Steel can be categorised or called an alloy that is made up of mostly irons and has carbon content
with the weight ranging from 0.2% and 2.1% (C:1000–10,8.67Fe), though varies with the grade.
In line with this, an alloy is said to be an incomplete or complete solid solution of a single or
additional elements in a metallic matrix. Single solid phase microstructure are given by whole
firm solution of alloys, while the partial solution give two or more stages of development and
perhaps homogeneous in giving out depending on heat treatment (thermal) study of the past
events. Similarly, the properties of Alloy usually vary from that of the component elements and
the constituents of Alloys are usually measured by mass.
Jones and Michael (1986, 1992) in their research found that Carbon on the other hand, is the
most widely found or used alloying material for iron, though; manganese, vanadium, tungsten
and chromium are some of the various other alloying elements used in the production of steel.
The prevention of the displacements in the iron atom crystal lattice from moving by sliding past
one another is due to the action of the hardening agents, hence ...

... middle of paper ...

...nished product.
Consequently, the semi-finished products will either have or be shaped like a rectangle cross-
section which is called slab or it will have an equilateral rectangle shape cross-section known as
blooms or billets. Further to this, the slabs or the billets or blooms are now processed and shaped
to form the finished product, because the semi-finished products are undergoes a total process of
transformation, or they are rolled into stylish and graceful container or products. This process of
transformation is called hot rolling and it’s a way whereby they go through heat treatment.
However, the hot-rolled rectangular broad flat thin piece is afterwards, turning over and over at a
temperature that is ambient and this process is called the cold rolling. After, going through all
these processes, an anti-corrosion protective material will be used to coat it.