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APPLIED STEEL CASE STUDY OPERATIONS MANAGEMENT CASE STUDY QUESTIONS: Evaluate Applied Steel’s situation. What should Applied Steel do?

APPLIED STEEL CASE STUDY OPERATIONS MANAGEMENT CASE STUDY QUESTIONS: Evaluate Applied Steel’s situation. What should Applied Steel do?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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APPLIED STEEL CASE STUDY

OPERATIONS MANAGEMENT

CASE STUDY QUESTIONS:

  1. Evaluate Applied Steel’s situation.
  2. What should Applied Steel do?
CASE NUMBER 6: APPLIED STEEL availability to meet production schedules) and performance (i.e., reliability in meeting the promised delivery schedule). Applied Steel is one of two major producers of wide-flange beams in the United States. The other producer is USX. A number of small firms also compete, but they tend to Several years ago, Applied Steel's production schedules saw that they were going to have compete mainly on price in nearby markets where they can keep transport costs low. an excess of hot-rolled plate capacity in the near future. At the same time, development Typically, all interested competitors charge the same delivered price, which varies some of a new production technology allowed Applied Steel to weld three plates together into depending on how far the customer is from either of the two major producers. In other a section with the same dimensional and physical properties and almost the same cross words local prices are higher in more remote geographic markets. section as a rolled wide-flange beam. This development appeared to offer two key advantages to Applied Steel: (1) It would enable Applied Steel to use some of the excess Wide-flange beams are one of the principal steel products used in construction. They are plate capacity, and (2) larger sixes of wide- flange beams could be offered. Cost analysts the modern version of what are commonly known as l-beams. USX rolls a full range of showed that by using a fully depreciated plate mill and the new welding process it would wide flanges from 6 to 36 inches. Applied Steel entered the field about 30 years ago, be possible to produce and sell larger wide-flange beams at competitive prices-that is, at when it converted an existing mill to produce this product. Applied Steel's mill is limited to the same price charged by USX. flanges up to 24 inches, however. At the time of the conversion, Applied Steel felt that customer usage of sizes over 24 inches was likely to be small. In the recent years, Applied Steel's managers were excited about the possibilities, because customers usually however, there has been a definite trend towards the larger and heavier section. appreciate having a second source of supply. Also, the new approach would allow the production of up to a 60-inches flange. With a little imagination, these larger sizes might The beams produced by the various competitors are almost identical-since customer buy offer a significant breakthrough for the construction industry. according to standard dimensional and physical property specifications. In the smaller size range, there are number of competitors. But above 14 inches, only USX and Applied Applied Steel decided to go ahead with the new project. As the production capacity was Steel compete. Above 24 24 inches, USX has no competition. converted, the salespeople were kept well informed of the progress. They, in turn, promoted this new capability to their customer, emphasizing that soon they would be able All the steel companies sell these beams thought their own sales forces. The customer to offer a full range of beam products. Applied Steel sent several general information for these beams is called a structural fabricator. This fabricator typically buys unshaped letters to a broad mailing list but did not advertise. The market development section of the beams and other steel products from the mills and shapes them according to the sales department was very busy explaining the new possibilities of the process to specifications of each customer. The fabricator sells to the contractor or owner of the fabrication at engineering trade associations and shows. structure being built. When the new production line was finally ready to go, the market reaction was The structural fabricator usually must sell on a competitive-bid basis. The bidding is done disappointing. No orders came in and none were expected. In general, customers were on the plans and specifications prepared by an architectural or structural engineering firm wary of the new product. The structural fabricators felt they couldn't use it without the and forwarded to the fabricator by the contractor who wants the bid. Although thousands approval of their customers, because it would involve deviating from the specified rolled of structural fabricators compete in the United States, relatively few account for the sections. And as long as they could still get the rolled section, why make the extra effort majority of the wide-flange tonnage in the various geographical regions. Since the price for something unfamiliar, especially with no price advantages. The salespeople were also is the same from all producers, they typically buy beams on the basis of availability (i.e.,
Transcribed Image Text:CASE NUMBER 6: APPLIED STEEL availability to meet production schedules) and performance (i.e., reliability in meeting the promised delivery schedule). Applied Steel is one of two major producers of wide-flange beams in the United States. The other producer is USX. A number of small firms also compete, but they tend to Several years ago, Applied Steel's production schedules saw that they were going to have compete mainly on price in nearby markets where they can keep transport costs low. an excess of hot-rolled plate capacity in the near future. At the same time, development Typically, all interested competitors charge the same delivered price, which varies some of a new production technology allowed Applied Steel to weld three plates together into depending on how far the customer is from either of the two major producers. In other a section with the same dimensional and physical properties and almost the same cross words local prices are higher in more remote geographic markets. section as a rolled wide-flange beam. This development appeared to offer two key advantages to Applied Steel: (1) It would enable Applied Steel to use some of the excess Wide-flange beams are one of the principal steel products used in construction. They are plate capacity, and (2) larger sixes of wide- flange beams could be offered. Cost analysts the modern version of what are commonly known as l-beams. USX rolls a full range of showed that by using a fully depreciated plate mill and the new welding process it would wide flanges from 6 to 36 inches. Applied Steel entered the field about 30 years ago, be possible to produce and sell larger wide-flange beams at competitive prices-that is, at when it converted an existing mill to produce this product. Applied Steel's mill is limited to the same price charged by USX. flanges up to 24 inches, however. At the time of the conversion, Applied Steel felt that customer usage of sizes over 24 inches was likely to be small. In the recent years, Applied Steel's managers were excited about the possibilities, because customers usually however, there has been a definite trend towards the larger and heavier section. appreciate having a second source of supply. Also, the new approach would allow the production of up to a 60-inches flange. With a little imagination, these larger sizes might The beams produced by the various competitors are almost identical-since customer buy offer a significant breakthrough for the construction industry. according to standard dimensional and physical property specifications. In the smaller size range, there are number of competitors. But above 14 inches, only USX and Applied Applied Steel decided to go ahead with the new project. As the production capacity was Steel compete. Above 24 24 inches, USX has no competition. converted, the salespeople were kept well informed of the progress. They, in turn, promoted this new capability to their customer, emphasizing that soon they would be able All the steel companies sell these beams thought their own sales forces. The customer to offer a full range of beam products. Applied Steel sent several general information for these beams is called a structural fabricator. This fabricator typically buys unshaped letters to a broad mailing list but did not advertise. The market development section of the beams and other steel products from the mills and shapes them according to the sales department was very busy explaining the new possibilities of the process to specifications of each customer. The fabricator sells to the contractor or owner of the fabrication at engineering trade associations and shows. structure being built. When the new production line was finally ready to go, the market reaction was The structural fabricator usually must sell on a competitive-bid basis. The bidding is done disappointing. No orders came in and none were expected. In general, customers were on the plans and specifications prepared by an architectural or structural engineering firm wary of the new product. The structural fabricators felt they couldn't use it without the and forwarded to the fabricator by the contractor who wants the bid. Although thousands approval of their customers, because it would involve deviating from the specified rolled of structural fabricators compete in the United States, relatively few account for the sections. And as long as they could still get the rolled section, why make the extra effort majority of the wide-flange tonnage in the various geographical regions. Since the price for something unfamiliar, especially with no price advantages. The salespeople were also is the same from all producers, they typically buy beams on the basis of availability (i.e.,
bothered with a very common question: How can you take plate that you sell for about $460 per ton and make product that you can sell $460 per ton? This question came up frequently and tended to divert the whole discussion to the cost of production rather than to the way the new product might be used or its value in the construction process. 1. Evaluate Applied Steel's situation. 2. What should Applied Steel do?
Transcribed Image Text:bothered with a very common question: How can you take plate that you sell for about $460 per ton and make product that you can sell $460 per ton? This question came up frequently and tended to divert the whole discussion to the cost of production rather than to the way the new product might be used or its value in the construction process. 1. Evaluate Applied Steel's situation. 2. What should Applied Steel do?
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