Supply Chain Management

Assignment 03
Case 03: H. C. STARCK, Inc.

Question 1: Why are the lead times so long?

Answer:
There are some reasons causing the long lead times. The main reason for the lead times to
be so long in H. C. Starck, Incorporated, is the inaccurate scheduling made by operators.
The company uses SAP R/3, an Enterprise Resource Planning software, for recording all
accounting transactions (order creation and all material movements) but not for
scheduling and production planning, unfortunately.
Production planning is still done manually, as well as raw material ordering and shop
floor scheduling. Employees use paper based process to transmit the sales orders of
customers to the operations department (where the products start to be manufactured).
These tasks, done manually, take more time than using a software to accomplish them,
which causes the lead times to be so long. The company didn’t make full use of the
functions in SAP R/3.
In fact, schedule misses were mostly due to equipment failure. There is also an
“information black hole”, orders go to the mill, but the demand data doesn’t seem to
make it back upstream to the melt shop.
Finally, materials need to go through 3 process orders before ending up as the final
product. The previous step must be complete every time before moving on to the next
step of manufacturing. Therefore, scheduling the good timing for starting the first is very
important.

Question 2: How might Starck reduce or affect the lead times?

Answer:
In order for Starck to reduce lead times, the company may focus on rigorous data
collection and analysis. The company will have to make use of the other SAP functions
for scheduling, production planning, and more accurate data collection for forecasts, to
save time and resources (personnel).
Also, the changeover, converting the large mill between breakdown and finish takes a full
eight-hour shift. “Breakdown” is done on the large mill in a free-rolling mode, and brings
it to as thin as 1/8 inch. From 1/8 inch down is “finish” rolling, which is done in tension.
The company might have to invest in more large mills so that no changeovers need to be
done, which could save time for production. Another way to reduce lead times is to
reduce the product diversity offered by the company, so that it can focus on producing
what customers want and reducing stocks (in the warehouse).

Question 3: What are the costs from reducing the lead times? What are the benefits
from reducing the lead times?
Answer:
To reduce lead times, the company may need to invest in new equipments, such as mills
for the manufacturing process. Moreover, it will be beneficial for Starck to allocate some
money for personnel training (learning how to use SAP R/3). After receiving some
training, employees will be able to use SAP R/3 for scheduling and production planning.
The benefits from reducing lead times are:
 The advantage in the marketplace, the company may become the leader on
providing metallurgical products made from tantalum.
 The incremental sales volume, satisfied customers may order from the same
company again, become loyal afterwards and introduce other customers to the
company (word-of-mouth effect).